Bad Faith Set Up Fails
Prompt Offer of Policy Limits Defeats Attempt to Set Up Insurer for Bad Faith
Prompt Offer of Policy Limits Defeats Attempt to Set Up Insurer for Bad Faith
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Posted on June 29, 2021 by Barry Zalma
Daniel Ilias was badly injured in a multi-vehicle automobile crash. The driver at fault for the accident was insured by Defendant USAA General Indemnity Company. Ilias sued the driver for his injuries and obtained a judgment for $5,230,559.44. Ilias then brought this third-party bad-faith action against USAA, who had insured the driver for $10,000. Ilias sued USAA for its purported bad faith in failing promptly to settle Ilias’s personal injury claim against its insured. USAA moved for summary judgment. In Daniel Ilias v. USAA General Indemnity Co., Case No. 8:20-cv-834-WFJ-TGW, United States District Court Middle District Of Florida Tampa Division (June 24, 2021) the injured person received a more than $5 million Judgment after failing to accept a policy limits offer.
THE FACTUAL RECORD
The Accident
On July 29, 2017, USAA’s insured, Scott Dunbar, was driving on a divided highway in Pasco County, Florida. Dunbar, traveling in the outside southbound lane of the highway, lost control of his van and struck an SUV traveling in the center southbound lane. After hitting the SUV, Dunbar’s van veered toward the median, went airborne over the median, and landed directly on top of the front end of Ilias’s Honda Pilot traveling in the northbound lanes. As a result of the crash, Ilias suffered a torn aorta and broke several bones. Ilias was airlifted from the crash site to the hospital and placed in the intensive care unit (ICU), where he remained for 10 days before spending another three weeks in the hospital and a rehab facility. Others in the wreck were injured also.
The Claims Process and Failure to Reach a Settlement
At the time of the accident, Dunbar was insured under an auto policy with USAA. The policy carried a bodily injury limit of $10,000 per person and $20,000 per accident.
USAA learned of the accident the day it occurred when the owner of the SUV filed a claim of loss. Maryanne Furman, Esq represented Illias. Furman noted that his damages were “pretty significant” and believed they exceeded Dunbar’s $10,000 policy limit.
Raymond attached to the letter a declarations page confirming Dunbar’s coverage and policy limits. The letter also assured that Furman would receive a certified copy of the policy under separate cover, which Furman received a few days later. Raymond accepted liability for Ilias’s property damage claim. Raymond retired from USAA at the end of the month and transferred the claim to adjustor Don Johnson.
USAA inspected Ilias’s vehicle and declared it a total loss. A few days after the vehicle inspection, on September 15th, Furman and Johnson spoke over the phone to discuss Ilias’s injuries and treatment status. Furman confirmed that Ilias had been hospitalized for a few days following the accident and had suffered multiple broken bones. Because this description of Ilias’s injuries aligned with the description provided by Ilias’s prior attorney, Johnson tendered the policy limits as an offer to settle Ilias’s injury claim. The $10,000 policy limits tender came 48 days after the accident. The second letter enclosed a check for $10,000 and a general release from liability. Furman denies receiving the disclosure.
Furman did not respond to USAA’s full tender of September 15th and just filed a personal injury lawsuit on Ilias’s behalf against Dunbar in Florida state court. Johnson learned of the lawsuit when USAA was served with the complaint. Johnson then called Furman to confirm that she was rejecting USAA’s tender of the policy limits. Furman confirmed that she was rejecting the settlement offer and stated that she had filed suit because she needed to depose Dunbar and Brignoni to rule out the possibility that either of them had other insurance coverage. The case proceeded to trial and a jury found Dunbar liable for Ilias’s injuries. Final judgment was entered for Ilias in the amount of $5,230,559.44.
After the final judgment, Ilias sued USAA.
FLORIDA LAW ON BAD FAITH
In Florida, like in almost every state, an insurer owes a duty of good faith to its insureds in handling their claims. Florida case law also allows a third-party claimant—here, Ilias—to step into the shoes of the insured and sue an insurer directly for its bad faith in failing to settle a claim on behalf of its insured. The duty of good faith requires the insurer to exercise the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.
Whether an insurer has breached its duty of good faith is determined under the totality of the circumstances. The critical inquiry in a bad faith action is whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment.
ANALYSIS
In her deposition, Furman stated that she did not accept the policy limits once tendered because USAA failed to provide an insurance disclosure that addressed her requests for coverage information and complied with the statutory disclosure requirements. Specifically, USAA did not confirm or deny whether Dunbar had an umbrella policy or other coverage as a source available to compensate Ilias for his injuries. Had USAA provided this information when it tendered the policy limits, Furman claimed that, regardless of the other shortcomings with USAA’s claims handling, she would have accepted the policy limits and Ilias would have agreed to settle his claim, thereby avoiding the excess judgment.
No Reasonable Jury Could Conclude that USAA Acted in Bad Faith.
On the evidence presented, a reasonable jury could not find that USAA acted in bad faith. USAA diligently tried to settle Ilias’s claim. Assuming, as Furman claimed, that USAA indeed failed to send the disclosure form, this was evidence of some negligence on its part—but nothing more and with little prejudice to Furman. While negligence is relevant to the bad-faith inquiry— negligence is not the standard. A cause of action based solely on negligence which does not rise to the level of bad faith does not lie. USAA’s actions, though potentially negligent to some degree, did not rise to the level of bad faith.
No Reasonable Jury Could Find that USAA Caused the Excess Verdict against Its Insured.
USAA also was not the cause of the excess verdict. Though Furman testified that she would have settled Ilias’s injury claim had she received a proper disclosure, her actions suggest otherwise. “Her actions suggest a ‘bad faith setup,’ which the Florida law of third-party bad faith seems to encourage in cases like this of great damages but small insurance.”
Furman never made a settlement demand; her initial representation letter was a notice of representation and request for information. She also never discussed with Ilias the possibility of settling for the $10,000 policy limits, though Ilias said he would have followed Furman’s advice had she instructed him to settle his claim.
The District Court noted:
Regrettably, the Florida common law of third-party bad faith encourages costly lawsuits, like the instant one. One cannot fault Ilias’s counsel—her client was badly injured, and Dunbar was underinsured. She is seeking as great a recovery for him as the legal theories permit. But to contend that a $10,000 tender issue caused this $5 million-plus jury verdict—and would have prevented it had USAA acted slightly differently—is not plausible to any realistic Florida personal injury lawyer.
The undisputed evidence establishes that Furman never made a demand for the policy limits; never expressed to USAA that she intended to settle; never followed up with USAA when she did not receive information about possible (nonexistent) umbrella coverage; and did not settle after confirming Dunbar had no coverage beyond his USAA policy. Considering all this, no reasonable jury could conclude that Ilias’s injury claim would have settled had USAA properly executed and mailed the coverage form Furman requested.
USAA’s motion was granted.
ZALMA OPINION
Bad faith set-ups exist because courts often allow them to succeed. Even finding that Furman attempted – although poorly – to set up USAA for a bad faith suit the court was not willing to fault Furman for her attempt because of the serious injuries suffered by her client. The judge was wrong – there is no reason to attempt to create a bad faith suit – when an insurer acts fairly and in good faith and offers up its full policy limits. A bad faith set up is an attempt at fraud and, in this case, the injured person testified he would have accepted the $10,000 policy limit if Furman had so advised him. This type of conduct should not be faultless but should, rather, be condemned.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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