Tender of Limits Does Not Moot Jury Valuation of UM/UIM Claim, Florida Supreme Court Rules


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)


Unfair Trade Claims Not Covered By Liability Insurance, Pa. Appeals Court Rules


PITTSBURGH, Feb. 25 – The Pennsylvania Superior Court has ruled that Westfield Insurance is not obligated to defend or indemnify an insured from civil claims of unfair trade practices.

Westfield’s insured, PeopleKeys,  sued a former employee for misappropriation of trade secrets in federal court in Ohio, and the employee filed a counterclaim against PeopleKeys, alleging unfair business competition.  The counterclaim alleged that PeopleKeys’ suit was baseless, and done for the purposes of unfair competition with the former employee.  The counterclaim against PeopleKeys alleged PeopleKeys’ knew of the falsity of the allegations contained in the Ohio trade secrets litigation.  PeopleKeys submitted the counterclaim for defense and indemnity to its insurer, Westfield.

After Westfield denied coverage under the policy’s  Personal Advertising Injury Coverage Endorsement, PeopleKeys filed a breach of contract and bad faith suit against Westfield in Pennsylvania state court.  Westfield filed a motion for judgment on the pleadings, on grounds that the policy’s Personal Advertising Injury Endorsement did not apply to the Ohio counterclaim, and even if it did, the endorsement contained exclusions for 1.)  claims alleging knowing violation of the rights of another, or 2.)  claims for publication of material the insured knew to be false.  The trial court granted the motion and dismissed the claims against Westfield.

The Pa. Superior Court affirmed the trial court’s grant of Westfield’s motion for judgment on the pleadings, holding that Westfield had no duty to defend nor indemnify PeopleKeys in the Ohio litigation because the intentional conduct and knowing falsity exclusions to the Personal Advertising Injury Endorsement applied.  The Court, analyzing the counterclaim against Westfield under Ohio law, found that the allegations against Westfield plainly referred to intentional misconduct on the part of PeopleKeys, thereby barring coverage.

PeopleKeys, Inc. v. Westfield Insurance Company (Pa. Super., Feb. 25, 2016)

Cyber Insurance: Judge Holds Insurer’s “Privacy Pledge” Could Be Part of Policy In Data Breach Class Action


CHICAGO, Feb. 23 – A Federal Judge in Illinois has allowed a proposed data breach  class action case against an insurer to proceed, ruling the insurer’s “Privacy Pledge” could be a part of the insuring agreement.

Dolmage and other employees of Dillard’s Stores purchased coverage from Combined Insurance through her employer between 2011 and 2012.  During the course of the application process, Dolmage and other employees were required to provide personal information to Combined.  During the process Combined furnished applicant’s with a “Privacy Pledge,” which indicated that personal information obtained in the application process, such as social security numbers, would be safeguarded and protected.   The Pledge further stated that Combined would provide information to affiliated companies to assist with the insurance placement process.

Combined engaged Enrolltek to assist with processing and placement of the coverage, and provided Enrollteck with a database of applicants’ information, which Enrolltek copied to an unsecure external hard drive and later maintained on an unsecured website.  Dolmage and other employees discovered through Google searches that their personal information from this process was readily available online at the unsecure website operated by Enrolltek.

Dolmage and other class action plaintiffs filed a ten – count complaint in federal court alleging, among other things, breach of contract and breach of fiduciary duty.  Following a Rule 12(b)(6) motion filed by Combined, the class action plaintiffs filed an amended complaint alleging only a breach of contract claim, and Combined filed a motion to dismiss, alleging that the complaint failed to state a plausible cause of action against it relating to the “Privacy Pledge” serving as the basis for a breach claim.

Judge Ruben Castillo denied Combined’s dismissal motion, and ruled that the Privacy Pledge, as the Plaintiffs alleged, was part of the insuring agreement between Combined and the Dillard’s employees, despite an integration clause in the policy, presumably preventing the policy from being supplemented.  Castillo ruled that at other parts of the policy,  Combined did incorporate by reference other extraneous documents, such as applications, riders, and endorsements.   The Court also relied on case law and Black’s Law Dictionary to point out that the terms “rider” and “endorsement” were broad, covering many possible amendments to the insuring agreement.

The Court, accepting all of the averments of the amended complaint as true, and giving the Plaintiffs the benefit of all reasonable inferences,  also dismissed Combined’s arguments that the amended complaint 1.) failed to allege that the Plaintiff’s relied on the pledge,  2.) failed to allege the Privacy Policy was part of the insuring agreement because it was provided to Plaintiffs after coverage was placed, 3.) failed to allege the Privacy Policy was supported by adequate consideration; and 4.) failed to allege how Combined breached the policy.  As to the latter claim, Judge Castillo observed that it was reasonable to infer that Combined’s failure to require Enrolltek to adhere to Combined’s data security policies and procedures could constitute a breach of the Privacy Policy.

Dolmage v. Combined Insurance Co. of America (N.D. Ill, February 23, 2016)

Third Circuit Rules Subcontractor’s Insurer Must Defend, Indemnify Construction Project Owner


PHILADLEPHIA, Feb. 17 – The U.S. Third Circuit Court of Appeals has ruled that the insurer of a subcontractor who employed an injured worker must defend the project owner  in the personal injury litigation brought by worker, regardless of the subcontractor’s immunity under Pennsylvania workmens’ compensation law.

In Ramara v. Westfield, the Court provided a succinct statement of the facts:

Appellee, Ramara, Inc. (“Ramara”), the garage owner, engaged Sentry Builders Corporation (“Sentry”) as a general contractor to perform work at its parking garage, and, in turn, Sentry engaged a subcontractor, Fortress Steel Services, Inc. (“Fortress”), to  install concrete and steel components as part of the work. As  required by its subcontracting agreement with Sentry, Fortress obtained a general liability insurance policy (“the Policy”) from Westfield Insurance Group (“Westfield”) naming Ramara as an additional insured under the Policy. While Fortress was working on the project in April 2012, one of its employees on the job, Anthony Axe, was injured in an accident. As a result of his injury, Axe filed a tort action against Ramara and Sentry but he did not include Fortress as a defendant as it was immune from actions at law by its employees for injuries suffered on the job if they were entitled to compensation for their injuries under the Pennsylvania Workers’ Compensation Act (“Act”).   Ramara tendered its defense in Axe’s action to Westfield. But Westfield declined to defend Ramara as it claimed that Axe’s complaint against Ramara did not include allegations imposing that obligation on it under its Policy with its applicable endorsements.

The policy secured by Fortress naming Ramara as an additional defendant contained an Additional Insured Endorsement, under which Ramara was entitled to defense and indemnity if the underlying personal injury action alleged that the plaintiff’s injuries were in whole or in part caused by Fortress, the named insured.    Westfield claimed that since the complaint, which did not name Fortress as a defendant, contained no express averments of wrongdoing against Fortress, Ramara was not entitled to defense and indemnification.

Judge Morton Ira Greenberg undertook an examination of the underlying personal injury complaint, and concluded there were sufficient allegations implicating Fortress’ role in causing the accident, its legal immunity notwithstanding:

Taken together and construed liberally in favor of Ramara for purposes of this insurance coverage case, these allegations partially base Ramara’s liability on its failure to supervise the work of its contractors or subcontractors who used equipment improperly and disregarded a site specific fall protection plan, all while performing their work in violation of the industry’s standard of care. Fortress, though engaged by Sentry, was one of Ramara’s subcontractors, and Axe’s employment by Fortress was the sole reason that Axe was at the job site and was injured. Clearly, Axe made factual allegations that potentially would support a conclusion that Axe’s injuries were “caused, in whole or in part” by Fortress’s acts or omissions.

Of course, we need not and, indeed, cannot decide whether Axe will succeed on these claims at trial. Ramara only must show that the Axe complaint, when liberally construed in favor of Ramara, includes allegations to support a conclusion that Fortress was potentially negligent and that its negligence was a proximate cause of Axe’s injuries. We conclude that it does. Accordingly, Ramara comes within the Additional Insured Endorsement of the Policy with respect to the Axe case. Therefore, Ramara is entitled to a defense in the Axe case even under Westfield’s narrow interpretation of the Additional Insured Endorsement limiting coverage to situations in which an insured’s contractor’s actions proximately caused a plaintiff’s injuries.

(emphasis added).

The Court ruled that the workmen’s compensation immunity which Fortress enjoyed was not dispositive of whether the factual allegations of the complaint made out a case that but for Fortress’ acts or omissions, the injury would not have occurred, thereby entitling Ramara to defense and indemnity under the Westfield policy insuring Fortress.  The Court affirmed the District Court judgment holding Westfield liable for the defense and indemnity of Ramara in the underlying personal injury litigation.

Ramara v Westfield Ins. Co., (Third Cir., Feb. 17, 2016)

Sub-Surface Water Loss Mostly Excluded By Policy, Texas Judge Rules


HOUSTON, Feb. 16 – A district judge in the Southern District of Texas has dismissed breach of coverage and bad faith claims against Praetorian Insurance Company, ruling that several of the policy’s coverage exclusions defeat the insured’s claims for property damage arising from a water related loss.

In Praetorian v. Arabia Shrine, a building owned by the Shrine suffered a subs-surface water loss which seeped into the building causing more than $1.8 million worth of damage to the foundation and building on March 14, 2014.   While the policy provided for coverage of for the loss of fire suppression equipment, and Praetorian paid nearly $64,000.00, it disclaimed nearly $2 million in other claims made by the Shrine.

The Policy contained an exclusion for damage to foundational elements, as well as an exclusion for damage to sub-surface piping.  The policy was also endorsed with a “Water Exclusion” disclaiming coverage for damage caused the escape or seepage of subsurface water into the building.

Judge Keith Ellison found that Praetorian met its burden of showing that the exclusions precluded the vast majority of coverage for the underground water loss.    The judge also found that since Praetorian had a reasonable basis to deny coverage, claims for breach of the Texas Insurance Code, and for the breach of Praetorian’s duty of good faith and fair dealing should also be dismissed by way of summary judgment as well.

Praetorian Ins. Co. v. Arabia Shrine Center Houston (S.D. Texas Feb. 16, 2016)

Defeating The Third Party Time Limit Settlement Demand


It’s the most common arrow in the quiver of plainfiffs’ lawyers when it comes to dealing with insurance companies:  the time limit settlement demand.  It’s used as a multi-purpose tool  against insurers to 1.) force an early settlement of the underlying third party  claim; 2.) prevent the insurer from conducting a full investigation into the underlying claim; 3.) drive a wedge between the insurer and its insured; and 4.) set up assignment of a follow-on bad faith claim in the event of an excess verdict in the third party claim.

Here’s how insurers can successfully defend against this tactic every time:

Document Receiving The Demand, And Immediately Request An Extension To Respond

This seems a rather obvious suggestion, but in practice it is overlooked as many times as utilized,  in my experience.   The failure to document receipt of the time limit settlement demand will not be of any help, and it exposes the insurer to the allegation of sloppy claims handling and inattentiveness to the claim.   If it arrives, when it arrives, acknowledge it in writing to the Plaintiff’s lawyer.

Especially when the time limits demand arrives early in the claims investigation, a written request for extension to respond to the demand should be made in writing immediately.  And of course, any refusal by plaintiff’s counsel to agree to the extension should be documented as well.

Document The Investigation Which Must Be Done Before Responding

While not strictly necessary, it is extremely helpful to identify with as much specificity as possible  the nature and extent of investigation you would like additional time to complete.    Providing these specifics will prevent any claim that the insurer is merely requesting additional time to delay paying the claim.

Obviously, the proposed investigation steps should be followed, and the results documented in the claims file.  Requesting an extension to investigate the claim and then failing to do the investigation exposes an insurer to bad faith exposure for  unreasonable delay.

Document Any Attempts By The Plaintiff’s Lawyer To Delay or Obstruct The Investigation

It happens.  Some zealous advocates are not content with merely refusing a request for an extension; in order to manufacture insurer delay the insurer will find that it is unable to get medical authorizations promptly, or unable to schedule the claimant’s examination under oath, to name two.  It is important that the claims file document accurately document responsibility for delay, or for expiration of the time limit demand, especially if the plaintiff’s lawyer is being either not helpful or worse, obstructing the investigation.

Keep The Insured Apprised, And Document That

In order to discharge the fiduciary duty an insurer owes to its insured in defending him or her in a third partly claim, the insured must be included and involved in communications involving the claim.  This is especially true where the insurer refuses to settle the underlying claim within policy limits, theoretically exposing the insured to an excess judgment.

An insurer does not have an obligation to settle non-meritorious or questionable claims within the insured’s policy limits.  However, if the insurer decides not to respond to a time limit demand, or refuses to settle a claim,  that should be communicated to the insured in advance of the time limit demand deadline, and the specific reasons for the insurer’s course should be provided to the insured.

Dual Benefits

All of the above steps will not only be of use in defending a follow – on bad faith claim should it come down the road, but it will lead to better results, and allow for proper investigation, of the underlying third party claim.  For more information on how to effectively rebut and defend against third party time limit settlement demands, reach me at chaddick@dmclaw.com or 717-731-4800.

Legal Project Management Made Simple


LPM sounds intimidating.   Anything which has to be shortened by using initials has to be, right?  Not to worry.  Legal departments don’t want to be bogged down in complicated legal project management processes any more than outside lawyers do.  They are only interested in legal project management to the extent it gets them to their goal:  engagements with outside lawyers who will do what they say they are going to do, on budget, and on time.

Legal Project Management can be thought of as the GPS of an engagement of outside counsel.   Every trip starts with an intended route, and a GPS does nothing more than tell you where you are in relation to that route.  It keeps you on track.  LPM=GPS.

The biggest obstacle to beginning a foray into LPM is what I call the intimidation of complexity.  Where do I start?  What methods should I use?  Will I need software?    Why can’t I just practice law?    The trouble, however, is that legal departments do not exist for the purpose of allowing outside law firms to practice law;  they exist for the purpose of solving the company’s headaches from within,  quickly, cheaply, and efficiently.  Outside lawyers will only be engaged if they help solve a problem in alignment with those goals.

Elaborate software and project diagramming are unnecessary to both the process and a happy client.   There are but three secrets to implementing LPM for outside lawyers and law firms:  1.) start somewhere; 2.) keep going; and 3.) the simpler the better.   A good outside lawyer with sufficient experience can sketch a project management outline for an assigned matter on the back of an envelope in less than five minutes.

An LPM Example

Here is an templated example of a project management outline I sketched out for a recent assignment from one of the insurance companies I represent in a relatively small, straightforward matter. Complicated, it is not:


Pleadings Closed      4/1/2016

Written Discovery Complete     12/31/2016

Depositions Complete      1/31/2017

Dispositive Motions Filed         3/15/2017

Mediation Completed     4/30/2017

Settle or Try Decision      5/31/2017

Trial           8/31/2017


The budget portion of the legal project management sketch is hardly more complicated:


Investigation          Planned:  $ X            Actual:  $ Y

Pleadings        Planned:  $ X            Actual:  $ Y

Discovery        Planned:  $ X            Actual:  $ Y

Dispositive Motions     Planned:  $ X            Actual:  $ Y

Expert Workup    Planned:  $ X            Actual:  $ Y

Mediation/ Negotiation     Planned:  $ X            Actual:  $ Y

Total         Planned:  $ X            Actual:  $ Y

Trial Preparation        Planned:  $ X            Actual:  $ Y

Trial          Planned:  $ X            Actual:  $ Y

Total         Planned:  $ X            Actual:  $ Y

The plan is kept electronically in the matter (hard copy is fine too for the traditionalists), checked at regular intervals, updated, and the updates fed back to the client, so the client can see whether the matter is on course as planned, or whether adjustments need to be made, either to the plan itself, or to the execution of the plan.

A legal project management plan is only as good as the effort put into it up front, however.  There must be agreement and buy in up front from the client, and major deviations in the plan must be explained to the client’s satisfaction.  Unforseen developments will be encountered, and adjustments to the plan should be made where warranted.

LPM is no more than a good outside lawyer road-mapping a matter for his or her legal department client.  It gives the client the data it needs to exercise oversight and cost control in increasingly more demanding and less forgiving environments.  LPM=GPS.

For more information on how to effectively use LPM, reach me at chaddick@dmclaw.com or 717-731-4800.