Florida Proposal Would Defend Insurers Against Time Limited Bad Faith Suits

Posted on March 1, 2009 by Mike Aylward

Legislation has been proposed in the Florida Senate that would ameliorate present law with respect to the liability of insurers for failing to accept “time limited” policy limit demands.

Since the Florida Supreme Court’s ruling in Berges v. Infinity Ins. Co. 896 So.2d 665 (Fla. 2004), liability insurers have been plagued by set up claims in cases with severe injuries and relatively low limits. The signature aspect of these cases is a demand by counsel for the tort claimant soon after the accident that the insurer pay its full limits within a short period of time (e.g. 30 days) that is generally less than the insurer would ordinarily need to conduct an investigation of the claim against its insured. Failure to accept the settlement as presented has been held tantamount to a counter-offer, subject the insurer to liability far in excess of the policy limits when the plaintiff thereafter withdraws the offer of settlement and pursues the case to trial.

Unlike the typical “failure to settle” claim, the plaintiff does not want the insurer to accept its settlement offer. Rather, the offer is only a pretext whereby the insurer’s failure to settle can form the basis for making funds available to the plaintiff commensurate with the plaintiff’s injuries. Nevertheless, Florida courts have refused to find that this transparently deceitful practice is a basis for avoiding bad faith claims.

 In contrast to current law, which only requires that insurers act promptly to effectuate settlements on behalf of their insureds, Senate Bill 1650 would amend Section 624.155 to impose a reciprocal obligation on both the insured and any third party claimant demanding payment. Such parties would be required to cooperate fully with respect to settlement.

Further, a failure by the tort claimant to cooperate would serve as a defense to any subsequent bad faith claim against the insurer for failing to settle. Additionally, the legislation would give the insurer a 90-day window after receiving a written complaint to cure its claimed violation. Additionally, the legislation provides that in cases where multiple claimants are seeking compensation under a single policy, the insurer shall not be liable for extracontractual damages if it makes a written offer of its policy limits or tenders its limit into court for apportionment to the claimants. In such cases, the legislation provides that the insurer that tenders its limits is entitled to a release from its insured if the claimant accepts the tender.
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Florida Supreme Court Punts on Construction Defect Case

Posted on June 18, 2008 by Mike Aylward

Our readers will forigive a Massachusetts lawyer for questioning the counting skills of  the Florida Supreme Court.  In a recent opinion, however, the state Supreme Court has again discounted the value of precedent, throwing a certified issue Auto Owners Ins. Co. v. Pozzi Window Co., No. SCO6-779 (Fla. June 12, 2008)back to the U.S. Court of Appeals for the Eleventh Circuit due to a factual dispute that somehow eluded the Supreme Court in its original opinion last December.

Oon  December 20, 2007 opinion, , the Florida Supreme Court had ruled that claims brought against a contractor for water damage caused by the defective installation of windows were not covered since CGL policies do not cover the cost of repair and replacement of defective work.   The court contrasted its opinion with its December 20, 2008 opinion in JSUB , in which it held that  there would be coverage for CD losses.

On June 12, however, the Florida Supreme Court econsidered its earlier opinon and  ruled  thatt it was unable to answer the Eleventh Circuit’s certified question owing to the fact that the court had failed to clarify whether the water damage resulted from defective installation, for which there would not be coverage, or defects in the installed windows themselves. In keeping with its earlier opinion in JSUB, the Supreme Court noted that if the windows were not defective prior to their installation, coverage would exist for the cost of repair or replacement of the windows because there was physical injury to tangible property (the windows) caused by their defective installation by a subcontractor. However, a different result would follow if the windows were in a defective condition before being installed and the damage to the completed project was therefore caused by defective windows rather than faulty installation alone.

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Additional Insured Coverage Limited to Vicarious Liability

Posted on October 28, 2007 by Kevin Merriman

On certified questions from the Eleventh Circuit, the Florida Supreme Court holds in Garcia v. Federal Ins. Co. (Oct. 25, 2007), that additional insured provisions in a homeowner’s policy extending coverage to “any other person or organization with respect to liability because of acts or omissions” of the named insured limits coverage to instances of vicarious liability, and does not extend to the additional insured’s own active negligence.

 

The claim arose when plaintiff’s foot slipped from a worn brake pedal, which caused the vehicle she was operating to strike and seriously injure a pedestrian. At the time of the accident, plaintiff was running errands for the insured, her employer. In the ensuing lawsuit, the complaint alleged that the insured and plaintiff were each independently negligent for allowing the brake pedal to wear down to bare metal.

 

The plaintiff sought coverage under the insured’s homeowner’s policy, which extended coverage to “any other person or organization with respect to liability because of acts or omissions” of the named insured. At issue was whether the additional insured coverage was limited to the additional insured’s vicarious liability.

 

Two phrases were relevant to the court’s narrow construction of the clause: “with respect to,” and “because of.” Relying on dictionary definitions of these terms, the court found that the phrase “with respect to,” means “concerning,” while “because of” means “by reason of.” Thus, in the court’s view, the clause must be read to mean that an additional insured “is only entitled to coverage concerning liability caused by or occurs by reason of acts or omissions of the named insured,” and that the policy does not extend to the additional insured’s liability for her own acts of negligence.

 

Though the court had not previously interpreted the clause at issue, the court noted its earlier decision, Container Corp. of Am. v. Maryland Cas. Co., 707 So.2d 733 (Fla. 1998), in which it had explained that a carrier wishing to limit additional insured coverage to vicarious liability could do so with appropriate language. In Container Corp., the court had referred to the language at issue in Consolidation Coal Co. v. Liberty Mut. Ins. Co., 406 F.Supp. 1292 (W.D.Pa. 1976), in which the phrase “but only with respect to acts or omissions of the named insured” had been construed to limit the coverage. The court rejected plaintiff’s efforts to distinguish this case based on the absence of the phrase “but only,” finding the two clauses substantially similar.

 

The court also rejected plaintiff’s argument that the clause should be equated with “arising out of,” a phrase previously construed very broadly by the court in Taurus Holdings, Inc. v. United States Fidelity & Guaranty Co., 913 So.2d 528 (Fla. 2005). “Arising out of,” the court had held in Taurus Holdings, “requires only some level of causation greater than coincidence” and is “broader in meaning than the term caused by.” Presence of the term “because of” required a narrower construction limiting coverage to the insured’s liability caused by the named insured’s negligence.

 

The court found in this case that, since the claimant sued plaintiff for plaintiff’s own negligence, and did not allege that plaintiff was vicariously liable for the conduct of the insured, plaintiff was not entitled to additional insured coverage under the policy.
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