Snowden ex rel. Snowden v. Lumbermens Mut. Cas.

• Decision Date: 07 January 2003
• Docket Number: No. 1:00 CV 35MMP.,1:00 CV 35MMP.
• Citation: 358 F.Supp.2d 1125
• Parties: Vita SNOWDEN as Personal Representative of the ESTATE of Charles C. SNOWDEN, and Vita Snowden, individually, Plaintiffs, v. LUMBERMENS MUTUAL CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Florida

Page 1125

358 F.Supp.2d 1125

Vita SNOWDEN as Personal Representative of the ESTATE of Charles C. SNOWDEN, and Vita Snowden, individually, Plaintiffs, v. LUMBERMENS MUTUAL CASUALTY COMPANY, Defendant.

No. 1:00 CV 35MMP.

United States District Court, N.D. Florida, Gainesville Division.

January 7, 2003.

Richard W. Slawson, Esq., Fred A. Cunningham, Esq., Slawson Cunningham Whalen etc., Palm Beach Gardens, FL, for Plaintiffs.

Wayne T. Gill, Esq., Walton Lantaff Schroeder etc, West Palm Beach, FL, John Patrick Joy, Esq., Walton Lantaff Schroeder & Carson, Ft. Lauderdale, FL, for Defendant.

ORDER

PAUL, Senior District Judge.

Defendant Lumbermens Mutual Casualty Company's Renewed Motion for Judgment as a Matter of Law and Alternative Motion for New Trial is before the Court. This case was tried before a jury between June 18 and July 22, 2001. In the action, Plaintiff alleged that Defendant Lumbermens Mutual Casualty Company (Lumbermans) breached its fiduciary duty to its insured by failing to attempt to settle a negligence claim stemming from an automobile accident that occurred on December 25, 1996. In the accident, the Snowdens' (the insureds) granddaughter, driving the Snowdens' automobile, collided with a vehicle driven by Mr. Eddie Smith. The accident killed the granddaughter and caused Eddie Smith multiple, grievous injuries. Following the accident, Eddie Smith remained in intensive care in a comatose state.

The loss was reported to Lumbermans on December 26, 1996, but Lumbermans did not initiate contact with Mr. Smith's family. On December 31, 1996, Mr. Smith's brother contacted Lumbermans and informed them of the full scope of the injuries to Mr. Smith. Lumbermans then conducted some internal investigation and verified the scope of the injuries and the liability of Jennifer Snowden in causing the accident. Lumbermans even put the policy limits in reserve and sent an excess letter to Mr. Snowden. Despite these actions, Mr. Smith's wife testified that by January 15, 1997, no one from Lumbermans had contacted her regarding payment of the policy limits. She testified that she would have accepted the limits if they had been offered because $100,000 at that time and without attorney's fees would have meant a great deal to her.

On January 15, 1997, Mrs. Smith contacted counsel. The next day, counsel for the Smith family sent a letter to Lumbermans, complaining that Lumbermans had not initiated settlement discussions with the Smiths and indicating that he had filed suit against the Snowdens on behalf of Eddie Smith. The letter also indicated that the Smith family would not accept any offer of settlement from that point on. Mrs. Smith testified, however, that despite the posturing language in the letter, she would have entertained an offer for the policy limits even after the letter was sent. Lumbermans did not offer to settle the case for the policy limits until May 6, 1997.

Mr. Smith and his family sued the Snowdens. As a result of the lawsuit and subsequent settlement agreement, on October 29, 1999, a state court entered judgment against the Snowdens in the amount of $3,750,000, far in excess of the $100,000 policy limit. Following that award, the insured sued Lumbermans, alleging that Lumbermans's failure to tender policy limits to the Smiths immediately following the accident constituted bad faith. At that trial, the jury agreed that Lumbermans breached its duty to act in the fiduciary interest of its insured, and awarded damages accordingly. At the close of Plaintiff's case, and again at the close of all evidence, Lumbermans moved for judgment as a matter of law. The Court denied both motions at trial but directed the defendant to file a renewed motion. Having reviewed the renewed motion, the responses and the entire record, the Court again finds no legal justification for disturbing the jury's verdict.

Defendant offers three reasons why this Court should set aside the jury's decision. First, Defendant points out that the Smiths failed to submit an offer to settle within policy limits to Lumbermans and argues that this failure per se entitles Defendant to judgment as a matter of law. It is true that previous Florida cases had held that an insurance company may not be held liable for bad faith failure to settle within its policy limits if an offer to settle within policy limits was never communicated to the insurer, and Defendant cites two of these early cases in its motion: Chastain v. Federal Insurance Co., 338 So.2d 214 (Fla. 3d DCA 1976) and Beck v. Kelly, 323 So.2d 667 (Fla. 3d DCA 1975).

However, although Florida courts once adhered to this rule, more recent cases show that they have relaxed the talismanic requirement of an offer to settle, imposing a "totality of the circumstances" test instead. See, e.g., Thomas v. Western World Ins. Co., 343 So.2d 1298. 1301-2 (Fla. 2d DCA 1997) (settlement offer not an "essential element" to excess liability); Powell v. Prudential Prop. & Cas. Ins. Co., 584 So.2d 12, 14 (Fla.App. 3d DCA 1991) ("The lack of a formal offer to settle does not preclude a finding of bad faith. Although an offer of settlement was once considered a necessary element of a duty to settle ... an offer to settle... is merely one factor to be considered.") (citations omitted); Caldwell v. Allstate Ins. Co., 453 So.2d 1187 (Fla. 1st DCA 1984); Gen. Accident Fire & Life Assurance Corp. v. Am. Cas. Co., 390 So.2d 761 (Fla. 3d DCA 1980); Ranger Ins. Co. v. Travelers Indem. Co., 389 So.2d 272, 277 (Fla. 1 st DCA 1980) ("under some circumstances the offer of settlement is not a prerequisite to excess liability"); see also Davis v. Nationwide Mut. Fire Ins. Co., 370 So.2d 1162, 1163 (Fla. 1st DCA 1979).

These later cases instruct that the presence or lack of an offer to settle is merely one of many circumstances to consider in determining whether the insurance company adequately represented the interests of the insured. See, e.g., Thomas, 343 So.2d at 1302; Florida Farm Bureau Mut. Ins. Co. v. Rice, 393 So.2d 552, 556 (Fla. 1st DCA 1980). In this regard, the duty of an insurer is to "investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so." Government Employees Ins. Co. v. Grounds, 311 So.2d 164 (Fla. 1st DCA 1975). In other words, [Florida courts have long since replaced the offer-of-settlement requirement with a totality of the circumstances approach, using the presence or absence of an offer to settle as one of the appropriate criteria.] Therefore, the absence of an offer to settle for policy limits is not necessarily fatal to the Plaintiff's case. Instead, we must examine whether considering all the facts shown to the jury, the jury could reasonably conclude that Lumbermans breached its fiduciary duty to the insured.

The Powell case is particularly instructive. In that case, no formal offer to settle was made by the injured party, but several letters where sent informing the insurer of the scope of injuries and expenses involved. The insurance company set the amount of the policy limits in reserve but simply failed to respond to the injured party and to follow through with any kind of initiation of settlement discussions, much like Lumbermans in the instant case. Eventually, the insurer in Powell offered the policy limits, but it was too late. Suit had been filed and the offer was therefore rejected, The insurer in Powell tried to raise the lack of an offer to settle but the Third DCA rejected that defense. The Court held:

Bad faith may be inferred from a delay in settlement negotiations which is willful and without reasonable cause. 46 C.J.S. Insurance §§ 1408 (1946). Where liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations. Farmers Ins. Exchange v. Schropp, 222 Kan. 612, 567 P.2d 1359 (1977).

In the instant case, liability was clear from the outset and known to Lumbermans. Moreover, the severe scope of the injuries was also known to Lumbermans. Therefore, the jury was entitled to infer bad faith from the delay in initiating settlement negotiations.

Perhaps sensing the weakness in the offer to settle argument, Defendant attempts to achieve the...