Florida has no requirement that an owner of an automobile maintain liability insurance. Thus, many drivers in Florida have no liability insurance. Many who do have insurance have only minimal limits of liability such as $10,000 per accident. This has created a problematic scenario for both Plaintiffs' lawyers seeking to maximize recovery for their clients, and insurance companies seeking to only pay losses for which they have received payment of a premium.
In The Past…
In the past, if a Plaintiff had a catastrophic injury worth well in excess of the Defendant's minimal liability insurance, the Plaintiff's lawyer would typically accept payment of the minimal limits of liability from the tortfeasor's insurance company.
Beginning This Century…
Beginning in the early part of this century, however, enterprising Plaintiffs' lawyers began to manipulate Florida's "bad faith" laws in order to maximize recovery for their clients.
Florida has a general rule that if an insurance company acts in "bad faith" it can ultimately be required to pay more than its policy limits. An example of bad faith conduct by an insurer is failing to settle a case when the insurer should have done such.
Thus, if a claim should have been settled for the insurer's policy limits of $10,000, but the carrier failed to settle the case, the carrier can be held liable for bad faith for an excess recovery against the insured.
Lawyers Contending Bad Faith
Claimants' lawyers realizing this fundamental bad faith law began to purposefully make it difficult for insurers to settle claims so they could later contend the insurer had acted in bad faith.
For example, the Plaintiff's lawyer might make a demand for payment of the minimal policy limits, but include in this demand fifteen other terms and conditions. If the carrier does not strictly comply with each of the terms and conditions, it is then asserted there had been a counter-offer/rejection of the settlement offer.
It is then contended there is no settlement.
After an excess verdict is rendered, it is then contended that the carrier should be liable for the full amount of the verdict because of the carrier's "bad faith" in failing to settle the claim.
What About Hospital Liens?
One of the particularly troublesome areas for insurance carriers is the problem of hospital liens. Often times when a claimant is injured, the hospital or medical provider has a lien against any potential liability proceeds recovery.
Traditionally, insurance carriers have made sure that the lienholder is protected by issuing settlement checks that include as the payee not only the claimant, but also the lienholder.
What happens, however, if the claimant's attorney demands payment of the settlement proceeds but says nothing about the lienholder? If the insurance carrier were to issue a check made payable to the claimant and the lienholder, then it risks an argument there had been a failure to meet the settlement demand and, therefore, ultimately, the carrier is in bad faith.
On the other hand, if the insurer pays the policy limits just to the claimant, under Florida law the insurer risks having to pay the policy proceeds a second time to the lienholder for failing to protect the lien.
This places insurers in an untenable position where there is no clear resolution to the question of what to do when the claimant is demanding payment of the policy proceeds and saying nothing about the lienholder's interest.
Marin v. Infinity Auto Ins. Co
This issue, however, was addressed by the court in Marin v. Infinity Auto Ins. Co., 239 So. 3d 751 (Fla. 3d DCA 2018).
In this case, the plaintiff's lawyer sent a letter to the carrier which confirmed that the insured had $10,000 in available liability coverage. It then stated, "I am requesting that your company tender by delivering the settlement draft to my office by the close of business on April 28, 2014."
The carrier responded by stating they were accepting the settlement demand. The carrier sent a $10,000 check made payable to the claimant, the claimant's lawyer, and the lienholder.
The claimant's lawyer, however, then took the position there had been no settlement because he had never proposed the check include the lienholder as a payee.
Set Up Or Bad Faith?
Of course, this was all being done to "set up" an argument that the carrier had failed to in good faith to settle the claim. The ultimate goal of the claimant's attorney was to get an excess verdict and then claim the insurance carrier had acted in bad faith by failing to provide a settlement check made payable just to the claimant and the claimant's lawyer.
The court, however, held that because under Florida law there is an obligation to protect a lienholder, the inclusion of the lienholder on the check was not an objectionable or unusual term and was not a rejection of the settlement offer.
Thus, the court concluded that a binding settlement was present. This ultimately resulted in the claimant's lawyer being unable to pursue a bad faith claim.
But What If…?
While this decision holds that including the lienholder on a check in response to an offer to settle for the policy limits does not result in there being no settlement, it still leaves many questions unanswered.
What would the ruling have been if the Plaintiff's lawyer explicitly stated the check should be made payable only to the claimant and the claimant's lawyer? Would the court have reached the same decision?
Also, if a court found there was no valid settlement, could there be a valid bad faith claim against the insurer?
All of this will undoubtedly be the subject of future litigation.
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