TALAHASSEE, Feb. 25 – The Florida Supreme Court in a 5-2 decision has ruled that a UM/UIM insured is entitled to a trial on underlying liability and damages before proceeding to litigate a bad faith claim, and that such a right is not mooted by the insurer’s tender of policy limits.
In Fridman v. Safeco Insurance Company of Illinois, the Supreme Court of Florida reversed a trial court ruling which vacated a $1,000.000 verdict in favor of the insured. The trial court reasoned that Safeco’s pre-verdict tender of the policy’s $50,000 UM/UIM limit mooted litigation of the UM/UIM claim.
After largely unproductive settlement negotiations, in February 2011, about 30 days before Fridman’s UM/UIM claim against Safeco was to be tried, Safeco tendered its $50,000 policy limit to Fridman. The tender came more than four years after the underlying automobile accident, and more than a year after the plaintiff demanded the policy limits from Safeco.
Fridman twice refused accepting the tender, and Safeco moved to confess judgment in the amount of the policy limits, which was denied by the trial court. At the trial of the UM/UIM claim, the jury awarded Fridman $1,000,000, but an intermediate appeals court ruled that the judgment should be amended to omit any reference to the verdict, or to the trial court retaining jurisdiction to entertain a follow – on bad faith claim arising out of the excess verdict.
In reversing the Fifth District Court of Appeals, the Florida Supreme Court revewed a long line of decisions holding that the insured retained the right to litigate underlying liability a damages as a prerequisite to a bad faith proceeding against the insurer, because such items were required elements of proof in a bad faith proceeding in Florida. Justice Barbara Pariente wrote:
Certainly, the insured is not obligated to obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration, or stipulation before initiating a bad faith cause of action. See, e.g., Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216, 1234-35 (Fla. 2006). But the availability of other alternatives does not change the insured’s entitlement to a determination of liability and the full extent of damages in the first instance. Therefore, for all these reasons, we conclude that an insured is entitled to a determination of liability and the full extent of his or her damages in the UM case prior to filing a first-party bad faith action.
The Court went on to hold that these underlying determinations of liability and damages in a UM/UIM proceeding were subsequently binding upon the insurer provided the insurer had a full and fair opportunity to offer defense on those items in the UM/UIM proceeding.
We conclude that an insured is entitled to a jury determination of liability and the full extent of his or her damages, which may be in excess of the policy limits, in the underlying UM case, prior to litigating a first-party bad faith cause of action. This determination is then binding in the subsequent bad faith action, provided the parties have had the opportunity for appellate review of any trial errors that were timely raised. An approach such as the one taken by the trial court in this case—that is, going forward with the trial, including the verdict amount in the final judgment, and reserving jurisdiction to consider a motion to amend to add the bad faith cause of action—appropriately addresses how the parties can review that jury determination of the extent of the damages for error prior to it being used in the subsequent bad faith litigation as an element of damages.
The Supreme Court quashed the ruling of the Fifth District Court of Appeals and remanded the case for further proceedings.
Fridman v. Safeco Insurance Company of Illinois (Fla., Feb. 25, 2016)
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