Florida Proposal Would Defend Insurers Against Time Limited Bad Faith Suits
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.
