Wednesday, November 18, 2009

Summary Judgment In Bad Faith Action Reversed In 2-1 Decision

In Gutierrez v. Yochim and Dairyland Insurance Company (2D08-4513, 2D08-5499), the trial court entered summary judgment in favor of the insurer in a bad faith claim.  In a 2-1 decision, the Second District reversed holding there were genuine issues of material fact.  Judge Khouzam wrote the majority opinion and was joined by Judge LaRose. The majority noted:
It is well settled that an insurance company has an obligation to properly defend its insured from claims that are covered within the policy of insurance and that it must exercise good faith in satisfying that obligation. See generally Berges, 896 So. 2d 665. When defending its insured against a claim, the insurer has a duty to " 'use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.' " Id. at 668 (quoting Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783, 785 (Fla. 1980)). "The insurer must investigate the facts, give fair consideration to a settlement offer that is not unreasonable, and settle the claim, if possible, 'where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.'"
Based on the record before us, it appears that Dairyland knew that Mr. Yochim's injuries would exceed the policy limits of $10,000, and its failure to tender the policy limits created a genuine issue of material fact regarding whether it breached its duty of good faith.
Additionally, "Under the facts presented, a lack of a fo rmal offer to settle is a factor to be considered in determining whether the insurance company acted in bad faith. See Powell v. Prudential Prop. &  Cas. Ins. Co., 584 So. 2d 12, 14 (Fla. 3d DCA 1991).  Under these circumstances, whether it was reasonable for Dairyland to insist on additional medical information beyond what it already knew, whether it was reasonable for Dairyland to insist on further verification of the attorney's lien issue, and whether Dairyland reasonably handled the purported "tender" are factual disputes that are for determination by the finder of fact."

Judge Whatley wrote a dissent arguing "Courts should be cautious not to manufacture coverage that otherwise does not exist under the guise of bad faith."  Judge Whatley stated:
As noted in Shin Crest PTE, Ltd. v. AIU Insurance Co., 605 F. Supp. 2d 1234, 1243 (M.D. Fla. 2009), Justice Wells, in a well-reasoned dissenting opinion, discussed the dilemma that occurs in bad faith litigation:
I do not believe that it is acceptable for the Court to merely say that bad faith is a jury question. It is the Court's responsibility to have logical, objective standards for bad faith and not to avoid setting definitive standards by declaring bad faith to be a jury question. The Court should recognize that it has the responsibility to reserve bad faith damages, which is limitless, court-created insurance, to egregious circumstances of delay and bad faith acts. The Court likewise has a responsibility to not allow contrived bad faith claims that are the product of sophisticated legal strategies and not the product of actual bad faith.
(quoting Berges v. Infinity Ins. Co., 896 So. 2d 665, 686 (Fla. 2004) (Wells, J., dissenting)).
The actions of Dairyland were not remotely egregious in this case. Further, Dairyland acted with reasonable diligence and care in the claims process.
Courts must ensure that valid claims of an insured are timely paid.  Egregious conduct of an insurer in denying or delaying payment of a valid claim should result in bad faith. However, tactics designed to manufacture coverage, when none exists, should never be accepted.


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