State Farm Mut. Auto. Ins. Co. v. Laforet

• Decision Date: 20 April 1995
• Docket Number: No. 83537,83537
• Citation: 658 So.2d 55
• Parties: 20 Fla. L. Weekly S173 STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v. Veronica Ann LAFORET, et vir, Respondents.
• Court: Florida Supreme Court

Page 55

658 So.2d 55

20 Fla. L. Weekly S173

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v. Veronica Ann LAFORET, et vir, Respondents.

No. 83537.

Supreme Court of Florida.

April 20, 1995.

Rehearing Denied July 24, 1995.

Betsy Ellwanger Gallagher, Law Offices of Kubicki Draper, Miami, for petitioner.

George H. Moss, Moss, Henderson, Van Gaasbeck, Blanton & Koval, P.A., Vero Beach, Jane Kreusler-Walsh, Jane Kreusler-Walsh, P.A., West Palm Beach, for respondents.

George A. Vaka, Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, amicus curiae for Florida Defense Lawyers Ass'n, Nationwide Ins. Companies and Nat. Ass'n of Independent Insurers.

Louis K. Rosenbloum, Levin, Middlebrooks, Mabie, Thomas, Mayes & Mitchell, P.A., Pensacola, amicus curiae for Academy of Florida Trial Lawyers.

James K. Clark, Clark, Sparkman, Robb & Nelson, Miami, amicus curiae for Government Employees Ins. Co.

OVERTON, Justice.

We have for review State Farm Mutual Automobile Insurance Co. v. LaForet, 632 So.2d 608, 609 (Fla. 4th DCA 1993), in which the district court certified the following question as one of great public importance:

WHETHER AMENDED SECTION 627.727(10), FLORIDA STATUTES (SUPP.1992), IS A REMEDIAL STATUTE AND HAS RETROACTIVE APPLICATION.

We have jurisdiction under article V, section 3(b)(4), of the Florida Constitution. Because section 627.727(10) is not an "amended" statute but is a newly created subsection that alters section 624.155, a previously enacted statute, we reword the question as follows:

WHETHER NEWLY CREATED SECTION 627.727(10), FLORIDA STATUTES (SUPP.1992), WHICH ALTERS THE DAMAGES AVAILABLE IN A BAD FAITH ACTION BROUGHT UNDER SECTION 624.155, IS A REMEDIAL STATUTE THAT HAS RETROACTIVE APPLICATION.

This question concerns the validity of retroactively applying a penalty to insurance companies for bad faith conduct in failing to settle uninsured motorist claims. It involves a review of three separate legislative acts: (1) a 1982 statute (section 624.155); (2) a 1990 amendment to the 1982 statute; and (3) a 1992 statute (section 627.727(10)), which alters the damages recoverable under the 1982 statute. Section 627.727(10) provides that the damages recoverable from an uninsured motorist insurance carrier in a bad faith action brought under section 624.155 and the 1990 amendment thereto shall include the total amount of a claimant's damages including any amount in excess of the claimant's policy limits awarded by a judge or jury in the underlying claim. The chapter law under which section 627.727(10) was enacted provides that it is to apply retroactively to 1982. Ch. 92-318, Sec. 80, Laws of Fla. For the reasons expressed, we find that section 627.727(10) must be applied prospectively rather than retroactively. Consequently, we answer the question in the negative and quash the decision of the district court.

The facts of this case are as follows. In 1986, Veronica Laforet was traveling as a passenger in a car driven by her husband when they were struck from the rear by another motorist (the tortfeasor). After the accident, Mrs. Laforet incurred more than $40,000 in medical expenses for the treatment of her injuries. The Laforets were insured through State Farm, which paid Mrs. Laforet's medical bills up to the policy limits of her personal injury protection and medical payments coverage ($20,000). In 1988, the Laforets sued the tortfeasor to recover the additional cost of Mrs. Laforet's medical treatment and other damages. The tortfeasor's insurer, Travelers Insurance Company, then tendered its policy limits of $10,000. Thereafter, the Laforets unsuccessfully sought to recover out of court the remainder of their damages from State Farm, with whom they carried uninsured motorist coverage in the amount of $200,000.

In 1989, the Laforets filed suit against State Farm. Subsequently, State Farm made an offer to settle the case in the amount of $40,000. The Laforets refused the offer and the case proceeded to trial, at which a jury awarded the Laforets $400,000 in damages. The trial court reduced this verdict to $200,000 based on the available limits of uninsured motorist insurance afforded to the Laforets by State Farm. Although State Farm did eventually pay the $200,000 policy limits to the Laforets, it did so only after "dup[ing] appellees into signing a [satisfaction of judgment] altogether different from that reasonably anticipated to have been sent." State Farm Mut. Auto. Ins. Co. v. LaForet, 586 So.2d 479, 480 (Fla. 4th DCA 1991) (LaForet I ). The satisfaction precluded the Laforets from proceeding with a bad faith cause of action. The trial court, however, granted relief to the Laforets under Florida Rule of Civil Procedure 1.540 by vacating the satisfaction, and the district court affirmed. See LaForet I.

In 1990, the Laforets initiated this bad faith action under section 624.155, asserting that State Farm had acted in bad faith in failing to settle the uninsured motorist insurance claim. During the course of the proceeding, two separate appeals were initiated and completed before trial. See Laforet v. State Farm Mut. Auto. Ins. Co., 578 So.2d 910 (Fla. 4th DCA 1991) (Laforet II ) (reversing dismissal of suit); State Farm Mut. Auto. Ins. Co. v. LaForet, 591 So.2d 1143 (Fla. 4th DCA 1992) (LaForet III ) (quashing discovery order). Eventually, however, the case proceeded to trial. At the trial, the jury returned a verdict in favor of the Laforets in the amount of $24,000. Punitive damages, which are permitted under section 624.155(4), were not awarded. On that same date (July 7, 1992), section 627.727(10) became law. That statute provides that the damages recoverable from an uninsured motorist carrier in a bad faith action filed under section 624.155, such as the one at issue here, are to include the total amount of the claimant's damages, including any amount awarded in the underlying claim in excess of the claimant's policy limits. In the chapter law under which section 626.727(10) was enacted, the Legislature directed that the statute applied retrospectively to 1982, the effective date of section 624.155. Ch. 92-318, Sec. 80, Laws of Fla. Thus, under the retroactive application of the new statute, State Farm was liable for the entire excess judgment awarded to the Laforets in their original case against State Farm. Based on section 627.727(10), the Laforets filed a motion for additur, asking the trial judge to award them the entire amount of the excess judgment as a matter of law. The judge granted the motion and awarded the Laforets a total of $416,280, which included the excess judgment amount of $200,000, plus $65,753 in interest; $141,753 in attorney's fees; and $8,774 in costs.

On appeal, the Fourth District Court of Appeal affirmed in part and reversed in part. First, the district court reduced the judgment by $15,000 because that amount represented appellate attorney's fees in several of the previous appeals in which attorney's fees had not been requested. Second, the district court rejected State Farm's contention that the trial judge did not apply the appropriate standard for determining bad faith. Finally, the district court held that the trial judge properly granted the motion for additur, finding that section 627.727(10) is to have retroactive application. In so holding, the district court certified the question regarding whether section 627.727(10) was, in fact, to be applied retroactively to 1982.

In this appeal, State Farm raises four issues, contending that: (1) section 627.727(10) cannot be retroactively applied; (2) the trial court incorrectly denied State Farm's motion for directed verdict because the basis on which State Farm denied coverage was "fairly debatable"; (3) the trial judge improperly instructed the jury regarding State Farm's duty to investigate; and (4) the judgment for attorney's fees and costs should be reversed. To properly evaluate the certified question and the other issues before us, we find it appropriate to first review the law as it relates to bad faith insurance claims in general.

Until this century, actions for breaches of insurance contracts were treated the same as any other breach of contract action and damages were generally limited to those contemplated by the parties at the time they entered into the contract. Roger C. Henderson, The Tort of Bad Faith in First-Party Insurance Transactions: Refining the Standard of Culpability and Reformulating the Remedies by Statute, 26 U.Mich.J.L.Ref. 1 (Fall 1992). Eventually, however, insurance contracts began to be seen as distinguishable from other types of contracts because they came to "occupy a unique institutional role" in modern society and affected a large number of people whose rates were dependent upon the acts of not only themselves but also of other insureds. Id. at 8. This became especially true when liability policies began to replace traditional indemnity policies as the standard insurance policy form. Under indemnity policies, the insured defended the claim and the insurance company simply paid a claim against the insured after the claim was concluded. Under liability policies, however, insurance companies took on the obligation of defending the insured, which, in turn, made insureds dependent on the acts of the insurers; insurers had the power to settle and foreclose an insured's exposure or to refuse to settle and leave the insured exposed to liability in excess of policy limits. Id. at 19-22. This placed insurers in a fiduciary relationship with their insureds similar to that which exists between an attorney and client. Baxter v. Royal Indem. Co., 285 So.2d 652 (Fla. 1st DCA 1973), cert. discharged, 317 So.2d 725 (Fla.1975). Consequently, courts began to recognize that insurers "owed a duty to their insureds to refrain from acting solely on the basis of their own interests in settlement." Henderson, supra, 26 U.Mich.J.L.Ref. at 21. This duty became...