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Recent Court Decisions Could Impact the Insurance Industry

Fri Mar 29th, 2019 on     Insurance Law,    

In two recent decisions, Florida’s highest court has issued significant rulings relating to insurance law.  In both cases, the Supreme Court reversed the decisions of the lower appellate court and upheld the decisions of the trial court, which were favorable to the policyholders.  As Miami insurance law attorneys, it is our job to stay up-to-date on important legal and regulatory developments in the industry, particularly those that may impact our insurance law practice.

Court Supports Jury’s Finding of Bad Faith Against Insurer

Harvey v. GEICO involved the application of the law of bad faith, which imposes a fiduciary obligation on an insurer to protect its insured from a judgment that exceeds the limits of the insured’s policy.  The case arose from a fatal car accident in which the insured driver had limited coverage ($100,000) under his liability policy.  GEICO resolved the liability issue against the insured and tendered the policy within days of the accident but failed to promptly cooperate with the request of the victim’s attorney for a statement from the driver concerning the extent of his assets.  The estate of the victim returned GEICO’s check and sued the driver for wrongful death, resulting in an $8 million verdict against the driver.  Mr. Harvey then brought a bad faith action against GEICO.

During the bad faith trial, the lawyer for the estate testified that had he known that the driver’s only other asset was a business account worth approximately $85,000, he would not have filed suit and would have instead advised the estate to accept the policy limits.  Evidence was also presented that the claims representative had a history of struggling to manage her files.  The court entered judgment in favor of the insured, in the amount of $9.2 million.  GEICO appealed, and the appellate court (Fourth District) overturned the jury verdict.      

The Supreme Court held that the lower appellate court misapplied the standard for bad faith when it concluded that an insurer cannot be liable for bad faith “where the insured’s own actions or inactions” at least in part caused the excess judgment.  There was evidence that the driver and his attorney were aware of the estate’s attorney’s request for information but never offered to provide the information.  Emphasizing that Supreme Court precedent “could not be clearer in stating” that the focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured, the Court rejected the appellate court’s conclusion that even if GEICO handled the claim improperly, the insured failed to establish that GEICO’s conduct caused the excess judgment. 

Court Rejects Cap on Noneconomic Damages

In Odom v. R.J. Reynolds, the Supreme Court rejected the creation of a cap on the amount of non-economic damages a financially independent adult child may be awarded for the wrongful death of a parent, concluding that such a cap “does not find support in either Florida Statutes or this Court’s precedent.”  In addition,  because the appellate court (again, the Fourth District) “paid no deference to the trial court” in concluding that it was an abuse of discretion to deny defendant’s request for a new trial on damages, the Supreme Court held that the Fourth District misapplied the abuse of discretion standard, which requires a determination that the trial court’s decision was “unreasonable.”  The Supreme Court also took issue with the appellate court’s failure to consider any of the factors set forth in the relevant statute, as well as its reliance on district court of appeal cases, instead of Supreme Court precedent.

The Potential impact of Harvey and Odom on the Insurance Industry

Both decisions include strong dissenting opinions.  While the majority decision in Harvey suggests that, although negligence is not the standard for bad faith, it is relevant to the question of good faith, the dissent characterized the majority’s opinion as improperly establishing a standard for proving bad faith as “essentially whether the insurer ‘dropped the ball,’” which “sounds a lot like negligence.”  The dissent was also troubled by the majority’s suggestion that the bad faith analysis does not require analysis of the insured’s actions, in addition to those of the insured.  In the wake of Harvey, policyholders may be able to establish bad faith without having their own conduct called into question. 

The dissent in Odom argued that the Supreme Court exceeded its limited authority of discretionary review by overturning the decision, because there was no conflict among the appellate courts on the same question of law.   Going forward, litigants will be able to cite Odom for the proposition that a “misapplication of the abuse of standard discretion” by an appellate court satisfies “conflict jurisdiction,” as well as its conclusion that there is no cap on non-economic damages an adult child may be awarded for the wrongful death of a parent.

Let Miami Insurance Law Attorneys Keep You Informed About Florida Insurance Law

If you would like more information on these cases or have questions about insurance law in Florida, we welcome you to contact Ver Ploeg & Lumpkin.

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