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IN THE SUPREME COURT OF FLORIDA
CASE NO. SC03-1417
FLORIDA FARM BUREAU LOWER TRIBUNAL CASE NOS. GENERAL INSURANCE 4D02-11 & 4D02-96COMPANY,
Petitioner,vs.
MARIBEL FARINAS,MARGARITA FARINAS, SUSAN WALKER, et al.,
Respondents.__________________________/
PETITIONER’S INITIAL BRIEF ON THE MERITS
JANE KREUSLER-WALSH and GREG M. GAEBE ofREBECCA MERCIER-VARGAS of GAEBE, MULLEN, ANTONELLI, JANE KREUSLER-WALSH, P.A. ESCO & DiMATTEOSuite 503 - Flagler Center 420 South Dixie Highway501 South Flagler Drive Third FloorWest Palm Beach, FL 33401 Coral Gables, FL 33134(561) 659-5455 (305) 667-0223
and and andJ. MICHAEL BURMAN of DONALD H. PARTINGTON ofBURMAN, CRITTON, LUTTIER CLARK, PARTINGTON, HART, et al & COLEMAN P.O. Box 13010515 North Flagler Drive, Suite 400 Pensacola, FL 32591West Palm Beach, FL 33401 (850) 434-9200(561) 842-2820
i
TABLE OF CONTENTS
Page
Preface 1
Statement of the Case and Facts 2
Summary of Argument 9
Argument 13
Standard of Review 13
Question on Review (Restated) 14
WHEN FACED WITH MULTIPLE CLAIMS, ASETTLEMENT DEMAND, INADEQUATE POLICYLIMITS AND CLEAR LIABILITY, MAY THEINSURANCE COMPANY ENTER INTO REASONABLESETTLEMENTS WITH SOME CLAIMANTS,MEASURED BY WHETHER A REASONABLYPRUDENT INSURER WOULD HAVE SETTLED THATCLAIM WHEN CONSIDERING SOLELY THE MERITSOF THAT CLAIM, EVEN THOUGH SUCHSETTLEMENTS EXHAUST THE PROCEEDSAVAILABLE TO SETTLE OTHER CLAIMS?
Conclusion 34
Certificate of Service 35
Certificate of Font 36
ii
TABLE OF CITATIONS
Cases Page
Alford v. Textile Ins. Co., 103 S.E.2d 8 (N.C. 1958) 30
Allstate Ins. Co. v. Evans, 409 S.E.2d 273 (Ga. Ct. App. 1991) 28, 31
Bartlett v. Travelers’ Ins. Co., 167 A. 180 (Conn. 1933) 28
Bennett v. Conrady, 305 P.2d 823 (Kan. 1957) 21, 29
BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) 33
Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980) 11, 16-17, 19-20, 23
Bruyette v. Sandini, 197 N.E. 29 (Mass. 1935) 29
Carter v. Safeco Ins. Co., 435 So. 2d 1076 (La. Ct. App. 1983) 22, 29
Carter v. State Farm Mut. Auto. Ins. Co., 33 S.W.3d 369 (Tex. Ct. App. 2000) 22
Castoreno v. W. Indem. Co., 515 P.2d 789 (Kan. 1973) 29
City of Miami v. Bell, 634 So. 2d 163 (Fla. 1994) 34
iii
TABLE OF CITATIONS (Cont.)
Page
Cont’l Concrete, Inc. v. Lakes at La Paz III Ltd. P’ship, 758 So. 2d 1214 (Fla. 4th DCA 2000) 13
DeCrane v. Allstate Ins. Co., No. 2D99-2783, slip op. (Fla. 2d DCA Feb. 16, 2001) (unpublished), 793 So. 2d 942 (Fla. 2d DCA 2001) (table) 15
Duprey v. Sec. Mut. Cas. Co., 256 N.Y.S.2d 987 (N.Y. App. Div. 1965) 30
Farinas v. Fla. Farm Bureau Gen. Ins. Co., 850 So. 2d 555 (Fla. 4th DCA 2003) 1-2, 9-11, 16-17, 19, 21, 23-24, 26
Farmers Ins. Exch. v. Schropp, 567 P.2d 1359 (Kan. 1977) 25
Fid. & Cas. Co. of N.Y. v. Cope, 444 So. 2d 1041 (Fla. 2d DCA 1984), quashed on other grounds, 462 So. 2d 459 (Fla. 1985) 15
Gathings v. W. Am. Ins. Co., 561 So. 2d 450 (Fla. 5th DCA 1990) 15, 23-24, 28
Haas v. Mid Am. Fire & Marine Ins. Co., 343 N.E.2d 36 (Ill. App. Ct. 1976) 29
Harmon v. State Farm Mut. Auto. Ins. Co., 232 So. 2d 206 (Fla. 2d DCA 1970) 2, 8, 10-18, 20-21, 23-24, 27, 30, 33
Hartford Accident & Indem. Co. v. Mathis, 511 So. 2d 601 (Fla. 4th DCA 1987) 15, 19, 20
iv
TABLE OF CITATIONS (Cont.)
Page
Hartford Cas. Ins. Co. v. Dodd, 416 F. Supp. 1216 (D. Md. 1976) 10, 28
Hernandez v. Travelers Ins. Co., 356 So. 2d 1342 (Fla. 3d DCA 1978) 14
Hewko v. Genovese, 739 So. 2d 1189 (Fla. 4th DCA 1999) 14
Infinity Ins. Co. v. Berges, 806 So. 2d 504 (Fla. 2d DCA 2001),review granted, 826 So. 2d 991 (Fla. 2002) 33
Lane v. State Farm Mut. Auto. Ins. Co., 992 S.W.2d 545 (Tex. Ct. App. 1999) 23
Liberty Mut. Ins. Co. v. Davis, 412 F.2d 475 (5th Cir. 1969),receded from on other grounds,Venn v. St. Paul Fire & Marine Ins. Co., 99 F.3d 1058 (11th Cir. 1996) 24-25
Liguori v. Allstate Ins. Co., 184 A.2d 12 (N.J. Super. Ct. Ch. Div. 1962) 17-18, 29-30
Miller v. Ga. Interlocal Risk Mgmt. Agency, 501 S.E.2d 589 (Ga. Ct. App. 1998) 22, 28
Millers Mut. Ins. Ass’n of Ill. v. Shell Oil Co., 959 S.W.2d 864 (Mo. Ct. App. 1997) 29
Owens v. Publix Supermarkets, Inc., 802 So. 2d 315 (Fla. 2001) 33
v
TABLE OF CITATIONS (Cont.)
Page
Peckham v. Cont’l Cas. Ins. Co., 997 F. Supp. 73 (D. Mass. 1989) 25
Pieno v. Bailey, 815 So. 2d 188 (La. Ct. App. 2002) 29
Powell v. Prudential Prop. & Cas. Ins. Co., 584 So. 2d 12 (Fla. 3d DCA 1991) 8, 9-10, 19-20
Richard v. S. Farm Bureau Cas. Ins. Co.,212 So. 2d 471 (La. Ct. App. 1968),aff’d, 223 So. 2d 858 (La. 1969) 31
Richard v. S. Farm Bureau Cas. Ins. Co., 223 So. 2d 858 (La. 1969) 29
Scharnitzki v. Bienenfeld, 534 A.2d 825 (Pa. Super. Ct. 1987) 30
Shuster v. S. Broward Hosp. Dist. Physicians Prof’l Liab. Ins. Trust, 591 So. 2d 174 (Fla. 1992) 26-27
State Farm Fire & Cas. Co. v. Zebrowski, 706 So. 2d 275 (Fla. 1997) 18, 33
State Farm Mut. Auto. Ins. Co. v. Hamilton, 326 F. Supp. 931 (D.S.C. 1971) 28
State Farm Mut. Auto. Ins. Co. v. Murphy, 348 N.E.2d 491 (Ill. App. Ct. 1976) 29
STV Group, Inc. v. Am. Cont’l Props., Inc., 650 N.Y.S.2d 204 (N.Y. App. Div. 1996) 30
vi
TABLE OF CITATIONS (Cont.)
Page
Talat Enters., Inc. v. Aetna Cas. & Sur. Co., 753 So. 2d 1278 (Fla. 2000) 13
Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312 (Tex. 1994) 22-23, 30
Thompson v. Commercial Union Ins. Co. of N.Y., 250 So. 2d 259 (Fla. 1971) 31
Travelers Indem. Co. v. Citgo Petroleum Corp., 166 F.3d 761 (5th Cir. 1999) 22, 30
Unigard Ins. Co. v. Yerdon, 417 So. 2d 713 (Fla. 4th DCA 1982) 15
Walston v. Holloway, 416 S.E.2d 109 (Ga. Ct. App. 1992) 28
Other Authorities
Art. V, § 3(b)(3), Fla. Const. 2, 16
Art. V, § 3(b)(4), Fla. Const. 2, 16
Fla. R. Civ. P. 1.290(a)(2) 22
§ 624.155, Fla. Stat. 10, 18-19
44 Am. Jur. 2d Insurance § 1709 (2d ed. 2002) 30
8 John A. Appleman, Insurance Law & Practice § 4892 (1981) 30
vii
TABLE OF CITATIONS (Cont.)
Page
V.H. Cooper, Annotation, Basis & Manner of DistributionAmong Multiple Claimants of Proceeds of Liab. Ins.Policy Inadequate to Pay All Claims in Full, 70 A.L.R.2d 416 (1960 & Supp. 2002) 30
12 Lee R. Russ, Couch on Ins. § 172:69 (3d ed. 1998 & Supp. 2001) 30
1
PREFACE
Petitioner, Florida Farm Bureau General Insurance Company (“FFB”), invokes
this Court’s discretionary jurisdiction to resolve a question the Fourth District Court
of Appeal certified to be of great public importance. See Farinas v. Fla. Farm Bureau
Gen. Ins. Co., 850 So. 2d 555, 562 (Fla. 4th DCA 2003) (A-1; A-2). Respondents,
Margarita and Maribel Farinas (Fourth District Case No. 4D02-11), and Susan Walker,
individually and as representative of the Estate of Margaux Schehr; Rochelle Slosberg,
individually; Irving Slosberg, individually and as representative of the Estate of Dori
Slosberg; Emily Slosberg, individually; and Ligia Gallego, individually and as
representative of the Estate of Carolina Gil (Fourth District Case No. 4D02-96), filed
bad faith actions against FFB. The actions emanated from Nicholas F. Copertino’s
causing an accident and killing five teenage passengers in his car and seriously injuring
six people, including three in the car he collided with. Nicholas F. Copertino owned
the car. His father, Nicholas T. Copertino, was the named insured under the FFB
insurance policy that afforded coverage of $100,000/$300,000 for this accident. The
trial court granted summary judgment for FFB on respondents’ bad faith claims. The
Fourth District reversed and certified the following question:
2
IN AN AUTOMOBILE ACCIDENT SCENARIO INVOLVINGCLEAR LIABILITY, MULTIPLE CLAIMS, AND INADEQUATEPOLICY LIMITS, DOES INSURANCE GOOD FAITH LAWREQUIRE THAT AN INSURER REASONABLY INVESTIGATEALL CLAIMS PRIOR TO PAYMENT OF ANY CLAIM, KEEP THEINSURED INFORMED OF THE CLAIMS RESOLUTION PROCESS,AND ATTEMPT TO MINIMIZE THE MAGNITUDE OF POSSIBLEEXCESS JUDGMENTS AGAINST THE INSURED?
Farinas, 850 So. 2d at 562 (A-2). This Court also has jurisdiction to resolve the
certified question, as well as to resolve express and direct conflict with Harmon v.
State Farm Mutual Automobile Insurance Co., 232 So. 2d 206 (Fla. 2d DCA 1970).
See Art. V, § 3(b)(3),(4), Fla. Const.
All references to “Mr. Copertino” in this brief are to the son, Nicholas F.
Copertino, unless stated otherwise. Florida Farm Bureau is referred to as FFB.
Respondents in both cases are collectively referred to as the claimants or as the
Farinases and the Walkers. All emphasis is supplied unless indicated otherwise. The
following symbols are used:
A - Appendix
R - Record
1SR - First Supplemental Record
2SR - Second Supplemental Record
3SR - Third Supplemental Record
3
STATEMENT OF THE CASE AND FACTS
On February 23, 1996, Nicholas F. Copertino loaded seven teenagers into his
Honda Civic and sped down the highway (1SR13 6222, 6247). He lost control,
crossed the median and collided head-on with another car, driven by Lisa Boccia and
occupied by two passengers (1SR13 6222, 6247). Mr. Copertino’s liability was clear
(3SR1 7535; R4 667). His negligence resulted in five dead teenagers and six other
seriously injured people, including Ms. Boccia and her two passengers (R4 667; 3SR1
7534-37; 3SR3 7935).
The Copertinos had purchased automobile insurance from FFB with limits of
$100,000 per claim, $300,000 per incident (R4 667, 675D). The insurance policy
contained a “deems expedient” clause, granting FFB discretion to settle cases within
the policy limits (1SR13 6260, Part A.A.).
Upon learning of the accident, FFB immediately hired attorney John Bulfin to
represent Mr. Copertino (3SR1 7538-39, 7544). By letter of February 27, 1996, FFB
reminded Nicholas T. Copertino of his minimal $100,000/$300,000 policy limits and
told him that “[b]ecause of the catastrophic nature of this accident and the multi,
complex civil claims which will be made against you and your son,” FFB had hired
4
Mr. Bulfin to represent him (1SR13 6250; 3SR1 7540). FFB additionally advised Mr.
Copertino that its financial responsibility for all claimants was limited to the policy
limits, that it would try to distribute the $300,000 among the competing claims, and that
judgments in excess of his policy limits could result (1SR13 6250-51). FFB suggested
that Mr. Copertino retain personal counsel to represent his personal interests (1SR13
6250-51). In a “B.P.S.” footnote to Mr. Bulfin, FFB stated, “we may need to pay the
300K to the court soon and ask it to divide it up.” (1SR6 4851; 3SR1 7620).
FFB began investigating ways to protect Mr. Copertino (3SR1 7538-39, 7544).
Three possibilities surfaced: (1) interplead the policy limits into the court registry
(3SR2 7775-77, 7779); (2) attempt global settlement (3SR2 7776, 7780); or (3) make
reasonable settlements with some of the claimants (3SR2 7776, 7778, 7781). FFB
researched the options and prepared a detailed memorandum, summarizing the facts
and controlling case law (3SR2 7775-84; 1SR6 4834-36).
Research revealed that interpleader was not an option in Florida (3SR1 7620;
3SR2 7775, 7777, 7779). FFB then investigated the option of global settlement and
concluded that it was totally impractical due to the number of competing claims, high
potential damages and low policy limits (R8 1337-38, pp. 117-21; R10 1599-601;
1Ms. Boccia suffered multiple severe ankle and foot fractures, possibly requiringamputation of her foot, along with a fractured pelvis and facial lacerations (R4 675U-OO).
5
3SR1 7609-17, 7640-41; 3SR2 7780, 7785-87, 7829). In order to attempt global
settlement, FFB would have had to stall settlement demands from some claimants,
eliminating FFB’s ability to settle those claims and placing it in a scenario where it
could be found in bad faith for failing to settle them (R10 1599-601; 3SR1 7572, 7643-
44; 3SR2 7814; 3SR3 7952, 8010).
As expected, FFB quickly received representation letters and claims from
attorneys representing many of the victims (R4 675M-W; 1SR6 4775, 4881-85). Ms.
Boccia backed up her 48-hour demand with medical documentation (R4 675U-OO).1
In a February 29, 1996, letter to Mr. Copertino, FFB enclosed Ms. Boccia’s demand
and advised Mr. Copertino that settlement with all potential claimants would be
“extremely difficult due to the number of serious claims and the relatively low
amount of bodily injury coverage available” (1SR6 4837-38; 1SR13 6255). In the
letter, FFB alerted Mr. Copertino that it could settle some claims, but not others:
As you know from the local news reports and perhaps firsthand information, there are at least five fatalities and sixother persons with varying degrees of serious injuries.
6
Florida law provides us the opportunity to settle withthe claimants on a first come, first serve basis as longas the settlement evaluations are reasonable. We are giventhat option even if doing so results in only a few of theclaimants receiving a settlement and the others beingleft with no payment from your policy proceeds.
We will strive in good faith to settle the various claims asbest as we can under the circumstances.
(1SR6 4838; 1SR13 6256). FFB stated its intent to provide Mr. Copertino with all
attorneys’ letters of representation and settlement demands when received and
welcomed any questions (1SR6 4837-38; 1SR13 6255-56).
Faced with five deaths, a 48-hour demand from Ms. Boccia supported with
medical documentation, five other seriously injured people and clear liability, FFB
reviewed its brief bank and confirmed that Florida law permitted it to pay the policy
limits to some claimants to get releases from those claimants, to the exclusion of
others (3SR1 7573, 7640, 7642; 3SR2 7740-41, 7780-81; 3SR3 7917-23, 7940-42;
1SR6 4831-33). FFB knew the value of each of the five death claims exceeded the
policy limits (3SR1 7580; 3SR3 8000). After reviewing Ms. Boccia’s medical records,
FFB evaluated her personal injury claim at between $250,000 to $500,000 (3SR1 7595;
3SR3 8000; R4 675WW).
7
FFB decided to pursue the option afforded under Florida law and settle the first
two death claims that had sent attorney representation letters and the only personal
injury time-limit demand with medical documentation (3SR1 7573, 7642-44; 3SR2
7780-81; 3SR3 7918-23, 7940-42; 1SR6 4831-33). FFB obtained releases for Mr.
Copertino from these claimants and continued to provide defense counsel to represent
him (R4 675RR-675UU; R8 1349, p.168; R8 1352, p.181). FFB defended Mr.
Copertino in the wrongful death and personal injury lawsuits brought against him by
the remaining claimants that culminated in judgments against Mr. Copertino
approximating $40 million (R4 669; R8 1349, p. 168; R8 1352, p. 181).
While continuing to defend Mr. Copertino, FFB filed a declaration of rights
action (1SR1 3840-74). Mr. Copertino counter-claimed for bad faith (1SR3 4412-24).
The Farinases and the Walkers intervened and filed third-party bad faith actions against
FFB (1SR1 3885-89, 3894, 3909-12, 3923-33, 4002-04; 1SR2 4062-10, 4114; R4 601-
35). FFB and the Farinases moved for summary judgment, alleging that the court
could determine the issue of FFB’s bad faith as a matter of law (R4 666-75; R6 926-
1034). FFB presented evidence that it reasonably settled the claims it did because it
knew the value of each of the claims it settled exceeded the policy limits (3SR1 7580,
7595; 3SR3 8000; R4 675A-ZZ). Claimants did not dispute the reasonableness of the
8
settlements. Instead, the Farinases presented affidavits that they would have settled
for policy limits, had FFB offered to settle (R19 3351-57).
The trial court granted FFB’s motion for summary judgment, concluding that
“Florida Law provides that when an insurer is faced with multiple claims, minimum
policy limits and clear liability, the insurer has the right to pay some of the claims
immediately, thereby exhausting policy limits” (R21 3803, 3806-07). Citing Harmon
v. State Farm Mutual Automobile Insurance Co., 232 So. 2d 206 (Fla. 2d DCA 1970),
and several other cases, the court reasoned that “where there are multiple claims, they
are to be treated one at a time or collected and evaluated together which is a choice
solely within the discretion of the insurer” (R21 3805-06). The court found Harmon
“even more compelling today in light of the insurer’s legal duties to settle cases with
or without settlement demands once liability is clear and the damages are likely to
exceed the policy limits.” (R21 3806, citing Powell v. Prudential Property and Casualty
Insurance Co., 584 So. 2d 12 (Fla. 3d DCA 1991)).
The Fourth District reversed and remanded for trial on the claimants’ bad faith
claims, concluding that “whether Farm Bureau has met its good faith duty and
undertaken a reasonable claims settlement strategy are questions for a jury to decide.”
9
Farinas, 850 So. 2d at 561. The Fourth District adopted a new bad faith standard that
“requires [the insurance company] to fully investigate all claims arising from a multiple
claim accident, keep the insured informed of the claim resolution process, and
minimize the magnitude of possible excess judgments against the insured by reasoned
claim settlement.” Id. The insurance company must attempt global settlement of all
claims before settling any. See id. at 560-61. On rehearing, the Fourth District
certified the above-stated question “in light of the fact that automobile accidents
involving multiple claims and inadequate policy limits are likely to lead to recurrent
lawsuits raising similar issues in the future.” Id. at 562.
SUMMARY OF ARGUMENT
Five teenagers died and six people were seriously injured as a result of Mr.
Copertino’s negligence. It was immediately apparent to FFB that Mr. Copertino was
liable and that his $100,000/$300,000 automobile liability insurance was woefully
inadequate to cover the devastation. Within days of the accident, FFB began receiving
representation letters and claims from attorneys representing several of the victims.
FFB knew that Florida law requires the insurance company to promptly initiate
settlement negotiations where liability is clear and excess judgments likely, even if no
demands have been made. See Powell v. Prudential Prop. & Cas. Ins. Co., 584 So.
10
2d 12, 14 (Fla. 3d DCA 1991); Hartford Accident & Indem. Co. v. Mathis, 511 So.
2d 601, 602 (Fla. 4th DCA 1987); see also § 624.155, Fla. Stat.
Florida law afforded FFB the right to treat the eleven claimants “one at a time
or collected and evaluated together,” when faced with this situation of clear liability,
multiple deaths and injuries so serious that judgments in excess of the policy limits
were virtually guaranteed. Harmon v. State Farm Mut. Auto. Ins. Co., 232 So. 2d 206,
208 (Fla. 2d DCA 1970). Courts around the country universally follow the Harmon
rule in cases with multiple claims and inadequate policy proceeds. FFB reasonably
decided to follow the Harmon rule and settled the first two death claims that had sent
representation letters and the only personal injury claim with medical documentation.
Claimants never disputed the reasonableness of the settlements, each of which
exceeded the policy limits.
The Fourth District rejected the settled Harmon rule and rewrote bad faith law
to now require that an insurance company faced with clear liability, multiple claims and
short limits take all of the following steps before settling any claims: (1) identify and
fully investigate all claims; (2) weigh and evaluate all claims; and (3) attempt global
settlement with all claimants. See Farinas, 850 So. 2d at 560-61. Only then may the
11
insurance company enter “reasonable” settlements, vaguely defined as those that result
from reasonable settlement strategy. Id. According to the Fourth District, the
question of good faith will always be for the jury. See id.
Abandoning Harmon, the Fourth District misinterpreted this Court’s decision
in Boston Old Colony Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980), as
requiring the insurance company to “conduct a full investigation of all competing
claims arising out of an accident before endeavoring to settle any one individual claim,
while keeping the insured informed at all junctures of the process.” Farinas, 850 So.
2d at 560. Actually, this Court in Boston Old Colony required insurance companies
to investigate “the facts [not all claims]...and settle, if possible.” Boston Old Colony,
386 So. 2d at 785. Further, Boston Old Colony involved a single claim and was not
an exhaustion of policy limits case involving multiple claims with inadequate limits.
See id. at 785-86. Even the Fourth District recognized that Harmon “applies to the
subset of those cases involving multiple competing claims.” Farinas, 850 So. 2d at
560. Directly contrary to the Fourth District’s creating a universal right to jury trial
wherever a claim is not settled, this Court in Boston Old Colony remanded with
directions to enter judgment for the insurance company because there was insufficient
evidence to demonstrate bad faith as a matter of law. 386 So. 2d at 785-86.
12
The Fourth District’s new “comparative seriousness” approach leaves the
insurance company in a multiple claimants/inadequate insurance case unable to settle
valid claims, contrary to settled Florida law and public policy. As a result, the
insurance company cannot avoid bad faith claims and trials. The Harmon rule is, and
should continue to be, the law because:
• Florida law requires insurance companies to initiate prompt settlements.
• The public policy of Florida favors compromise and settlement.
Discretionary payment of some claims avoids needless litigation.
• Needy and deserving claimants receive full policy limits on a timely basis.
Discretionary payment of some claims provides a just and efficient
mechanism for paying deserving claimants in a multiple claims/insufficient
coverage situation where global settlement is impractical.
• The insured benefits by having the insurance money applied to at least
some of the claims, which reduces the ultimate judgment debt.
• An insurer cannot interplead its policy limits into the registry of the court
in a multiple claimant situation.
13
If this court overturns Harmon and rejects the universal rule applied throughout
the country, the decision should apply prospectively. FFB should not be punished for
following settled bad faith law in resolving the claims it did.
As a matter of law, FFB did not act in bad faith toward its insured. Summary
judgment for FFB should be affirmed and the Fourth District’s decision quashed.
ARGUMENT
STANDARD OF REVIEW
The interpretation of an insurance policy is an issue of law subject to de novo
standard of review. See, e.g., Talat Enters., Inc. v. Aetna Cas. & Sur. Co., 753 So.
2d 1278, 1281-82 (Fla. 2000) (affirming summary judgment for the insurance company
where its actions did not constitute bad faith as a matter of law). This Court applies
a de novo standard of review to a trial court’s decision to grant summary judgment.
See Cont’l Concrete, Inc. v. Lakes at La Paz III Ltd. P’ship, 758 So. 2d 1214, 1217
(Fla. 4th DCA 2000).
14
QUESTION ON REVIEW (RESTATED)
WHEN FACED WITH MULTIPLE CLAIMS, A SETTLEMENTDEMAND, INADEQUATE POLICY LIMITS AND CLEARLIABILITY, MAY THE INSURANCE COMPANY ENTER INTOREASONABLE SETTLEMENTS WITH SOME CLAIMANTS,MEASURED BY WHETHER A REASONABLY PRUDENTINSURER WOULD HAVE SETTLED THAT CLAIM WHENCONSIDERING SOLELY THE MERITS OF THAT CLAIM,EVEN THOUGH SUCH SETTLEMENTS EXHAUST THEPROCEEDS AVAILABLE TO SETTLE OTHER CLAIMS?
From the moment FFB learned of the tragic Copertino accident, it knew that
Nicholas F. Copertino was liable, that there were five dead teenagers and six injured
people, and that Mr. Copertino’s $100,000/300,000 policy limits were inadequate to
cover the high potential damages. Within days of the accident, FFB began receiving
representation letters and claims from attorneys representing several of the victims.
FFB researched the issues and realized it could not interplead its policy limits to
determine distribution. See Hernandez v. Travelers Ins. Co., 356 So. 2d 1342, 1343-
44 (Fla. 3d DCA 1978) (holding that interpleader is not available to an insurance
company to adjudicate competing claims); see also Hewko v. Genovese, 739 So. 2d
1189, 1190-91 (Fla. 4th DCA 1999). Faced with this dilemma, FFB had the right
under settled Florida law to treat the eleven claimants “one at a time or collected and
evaluated together.” Harmon v. State Farm Mut. Auto Ins. Co., 232 So. 2d 206, 208
(Fla. 2d DCA 1970) (hereinafter “the Harmon rule”); see also Hewko, 739 So. 2d at
2Pursuant to the Second District’s policy, the citation to Harmon in the slipopinion was omitted from the per curiam affirmance published the same day. SeeDeCrane v. Allstate Ins. Co., 793 So. 2d 942 (Fla. 2d DCA 2001) (table). The trialcourt took judicial notice of the briefs and unpublished opinion in DeCrane (R17 2962-3043; 2SR 7584-85).
15
1193; Gathings v. W. Am. Ins. Co., 561 So. 2d 450, 451 (Fla. 5th DCA 1990); Fid.
& Cas. Co. of N.Y. v. Cope, 444 So. 2d 1041, 1046 (Fla. 2d DCA 1984), quashed
on other grounds, 462 So. 2d 459 (Fla. 1985); Unigard Ins. Co. v. Yerdon, 417 So.
2d 713, 714 (Fla. 4th DCA 1982); see also DeCrane v. Allstate Ins. Co., No. 2D99-
2783, slip op. (Fla. 2d DCA Feb. 16, 2001) (unpublished).2 FFB followed Florida law
and settled the first two death claims that had sent representation letters and the only
personal injury claim with medical documentation.
Under the Harmon rule, “where multiple claims arise out of one accident, the
liability insurer has the right to enter reasonable settlements with some of those
claimants, regardless of whether the settlements deplete or even exhaust the policy
limits to the extent that one or more claimants are left without recourse against the
insurance company.” Harmon, 232 So. 2d at 207-08. The insurer is not required to
identify all claimants or wait until all claims have been presented before dealing with
any claimant. See id.; see also Hartford Cas. Ins. Co. v. Dodd, 416 F. Supp. 1216,
3This Court has jurisdiction to resolve the express and direct conflict withHarmon and its progeny, as well as to resolve the certified question. See Art. V, §3(b)(3), (4), Fla. Const.
16
1219 (D. Md. 1976). Instead, “[w]hether multiple claims are to be treated one at
a time or collected and evaluated together, is a choice solely within the
discretion of the insurer.” Harmon, 232 So. 2d at 208. “[T]o impose a duty upon
insurers to ascertain all claimants ... before settling with any, and to require them
to settle such claims at their peril is contrary to the policy of encouraging
compromises and speedy settlements, and would do more harm than good.” Id.
The Fourth District rejected this settled rule3 and adopted a new bad faith
standard for these cases, concluding that this Court’s decision in Boston Old Colony
Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980), required a different result. See
Farinas, 850 So. 2d at 560-61. This new approach requires the insurance company
to identify, weigh and evaluate all claims and then attempt global settlement (the
“comparative seriousness approach” claimants and their amicus advanced below)
before settling any claims. See id. Directly contrary to Harmon, the Fourth District
held that a settlement can never be reasonable unless the insurance company first “fully
investigate[s] all claims arising from a multiple claim accident, keep[s] the insured
17
informed of the claim resolution process, and minimize[s] the magnitude of possible
excess judgments against the insured by reasoned claim settlement.” Id. at 561.
In an effort to harmonize the duties expressed in Boston Old Colony with those
in Harmon, the Fourth District misinterpreted both cases. Boston Old Colony
involved a single claim and was not an exhaustion of policy limits case involving
multiple claims with inadequate limits. 386 So. 2d at 785-86. Even the Fourth
District recognized that Harmon “applies to the subset of those cases involving
multiple competing claims.” Farinas, 850 So. 2d at 560.
The Harmon court considered the comparative seriousness approach and
rejected it because it contravenes the insurer’s discretion to evaluate multiple claims
singly or together: “[w]hether multiple claims are to be treated one at a time or
collected and evaluated together, is a choice solely within the discretion of the
insurer.” 232 So. 2d at 208 (citing Liguori v. Allstate Ins. Co., 184 A.2d 12, 17 (N.J.
Super. Ct. Ch. Div. 1962) (holding that while an insurer may wish to collect data on
all the claims before negotiating settlement of any particular one, it is certainly under
no legal compulsion to do so, since whether multiple claims are to be treated one at
a time or collected and evaluated together is a choice solely within the discretion of the
18
insurer)). As the Liguori court stated, a contrary rule “would interfere with the
judicially favored policy of avoiding unnecessary expense and delay through settlement
practice.” Liguori, 184 A.2d at 17. In language the Fourth District omitted from its
decision, the Harmon court explained why the comparative seriousness approach is
unworkable:
[W]e feel that to impose a duty upon insurers toascertain all claimants under their ... coverages beforesettling with any, and to require them to settle suchclaims at their peril is contrary to the policy ofencouraging compromises and speedy settlements, andwould do more harm than good.
232 So. 2d at 208.
In the very next sentence, the Harmon court recognized “[i]f such a duty is to
be imposed ..., it must be done by the legislature.” Id. In the 33 years since Harmon,
the legislature has not imposed such a duty. Indeed, in 1982, the legislature adopted
a comprehensive scheme detailing the insurance company’s duties of good faith and
settlement. See § 624.155, Fla. Stat. The duty of good faith runs to the insured, not
the claimants. See State Farm Fire & Cas. Co. v. Zebrowski, 706 So. 2d 275, 277
(Fla. 1997) (holding that the duty of good faith “runs only to the insured”). This
statute, the relevant portion of which has remained unchanged since 1982, requires that
19
the insurance company settle claims “when, under all the circumstances, it could and
should have done so, had it acted fairly and honestly toward its insured and with due
regard for his or her interests.” § 624.155(1)(b)1. The statute does not require that the
insurance company ascertain the existence of all claims and evaluate the seriousness
of each before settling any claim. See id. Under the current statute, the insurance
company will be subject to a bad faith claim if it refuses to settle a claim it should
have settled because it delayed settlement of that claim to attempt global settlement of
all claims. See Powell v. Prudential Prop. & Cas. Ins. Co., 584 So. 2d 12, 14 (Fla.
3d DCA 1991); Hartford Accident & Indem. Co. v. Mathis, 511 So. 2d 601, 602 (Fla.
4th DCA 1987).
This Court in Boston Old Colony did not, contrary to the Fourth District’s
statements, “provide[ ] that an insurer must conduct a full investigation of all
competing claims arising out of an accident before endeavoring to settle any one
individual claim, while keeping the insured informed at all junctures of the process.”
Farinas, 850 So. 2d at 560. Instead, this Court held that “[t]he insurer must
investigate the facts [not all claims], give fair consideration to a settlement offer that
is not unreasonable under the facts, and settle, if possible, where a reasonably
20
prudent person, faced with the prospect of paying the total recovery, would do so.”
Boston Old Colony, 386 So. 2d at 785.
FFB unquestionably investigated the facts. From the moment FFB learned of
this tragic accident, it knew that Nicholas Copertino was liable, that there were eleven
potential claimants, including five dead teenagers, and that Mr. Copertino’s policy
limits were grossly inadequate to cover the high potential damages (3SR1 7534-37,
7580, 7595; 3SR3 7935, 8000). FFB knew that Florida law required it to promptly
initiate settlement negotiations where liability is clear and excess judgments likely, even
if no demands have been made. See Powell, 584 So. 2d at 14; Mathis, 511 So. 2d at
602. FFB followed Harmon and Powell and settled the first two death claims that had
sent letters of representation and the only personal injury claim with medical
documentation (3SR1 7573, 7642-44; 3SR2 7740-41, 7780-81; 3SR3 7918-23, 7940-
42; 1SR6 4831-33).
The value of each of the claims FFB settled exceeded the policy limits,
rendering them reasonable (R4 675VV-WW; 3SR1 7580, 7595; 3SR3 8000). FFB
knew the value of each death claim exceeded the policy limits (3SR1 7580; 3SR3
8000). FFB evaluated Ms. Boccia’s claim at between $250,000 to $500,000, after
21
receiving and reviewing her medical records (3SR1 7595; 3SR3 8000; R4 675U-OO).
Claimants never disputed the reasonableness of these settlements, and instead argued
that FFB was required to identify, evaluate and weigh all eleven possible claims when
deciding which claims to settle.
Despite acknowledging that, “[b]ased on Harmon, Farm Bureau could have
entered into reasonable settlements with some claimants to the exclusion of others
based on an exercise of its discretion,” the Fourth District adopted claimants’ new
comparative seriousness approach as the standard for reasonableness. Farinas, 850
So. 2d at 561. The Fourth District misread Harmon as failing to “define ‘reasonable.’”
Id. To the contrary, Harmon defined reasonableness in terms of the particular claim
being settled, not in terms of an evaluation of all claims. 232 So. 2d at 207-08 (holding
that the insurance company acts reasonably when it treats multiple claims one at a time
on their respective merits). Harmon cited Bennett v. Conrady, 305 P.2d 823, 826
(Kan. 1957), which explained that a settlement is reasonable where “there is nothing
in the record which controverts the statement by the insurance carrier that the claims
in the two cases which were settled exceeded the settlement figure ... for each one.”
As subsequent cases make plain, the test is whether a reasonably prudent insurance
company would have settled the claim in question, considering solely the merits
22
of the settled claim and the insured’s potential liability on that claim. See, e.g.,
Travelers Indem. Co. v. Citgo Petroleum Corp., 166 F.3d 761, 765 (5th Cir. 1999);
Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312, 315-16 & n.2 (Tex. 1994); see
also Miller v. Ga. Interlocal Risk Mgmt. Agency, 501 S.E.2d 589, 590-91 (Ga. Ct.
App. 1998); Carter v. Safeco Ins. Co., 435 So. 2d 1076, 1080 (La. Ct. App. 1983);
Carter v. State Farm Mut. Auto. Ins. Co., 33 S.W.3d 369, 372-73 (Tex. Ct. App.
2000).
The newly adopted comparative seriousness approach is unworkable because
there exists no objective standard to evaluate and compare the five child death claims,
let alone against the six additional serious injury claims. Experience teaches that each
parent will claim the death of his or her child is subjectively worth more than another.
Further, investigating and evaluating a personal injury takes time--some injuries worsen
over time while others improve. Discovering medical records and setting depositions
takes additional time. See Fla. R. Civ. P. 1.290(a)(2) (allowing parties to take
depositions before filing suit, but requiring at least 20 days notice). These delays make
it difficult for the insurance company to investigate, globally assess the claims, and
attempt settlement.
23
For precisely this reason, the Texas Supreme Court in Soriano rejected the
comparative seriousness approach. The insured in Soriano argued that its insurance
company settled the “wrong” claim, exposing him to personal liability in the more
dangerous suit. See Soriano, 881 S.W.2d at 314. The Texas Supreme Court held that
evidence that the larger claimant was willing to settle within the policy limits was
irrelevant in the absence of evidence that the settlement actually reached with the other
claimant, considered alone, was unreasonable. See id. at 315-16; see also Lane v.
State Farm Mut. Auto. Ins. Co., 992 S.W.2d 545, 551-53 (Tex. Ct. App. 1999) (citing
Harmon, 232 So. 2d at 208, Gathings, 561 So. 2d at 451, and Soriano, 881 S.W.2d
at 315, in rejecting the insured’s argument that the UM insurer was in bad faith because
it failed to conduct a reasonable investigation that would have revealed that the claims
it paid were not as strong as the plaintiff’s claim).
The Fourth District further misinterpreted Boston Old Colony in holding that the
determination of bad faith is always a question of fact for the jury. See Farinas, 850
So. 2d at 560-61. Directly contrary to the Fourth District’s blanket requirement of jury
trial, this Court in Boston Old Colony remanded with directions to enter judgment
for the insurance company because “[t]here is no sufficient evidence from which
any reasonable jury could have concluded that there was bad faith on the part of the
4Receded from on other grounds in Venn v. St. Paul Fire & Marine Ins. Co.,99 F.3d 1058 (11th Cir. 1996).
24
insurer.” 386 So. 2d at 785. Harmon was also decided as a matter of law. 232 So.
2d at 206-08. The Second District affirmed the dismissal of a claim for insurance
benefits after the policy limits had been exhausted by settlements with certain
claimants. Id. at 206, 208; see also Gathings, 561 So. 2d at 451 (affirming summary
judgment for the insurance company based on the Harmon rule in a case with multiple
claims and inadequate policy limits). The Fourth District compounded the error by
providing no standard for the jury to use in determining what is reasonable.
The Fourth District also misapplied the other cases it relied on as authority for
adopting this new approach. The Fourth District cited Liberty Mutual Insurance
Company v. Davis, 412 F.2d 475 (5th Cir. 1969),4 for the proposition that FFB
“should have sought to settle as many claims as possible within the policy limits.”
Farinas, 850 So. 2d at 560. Importantly, Liberty Mutual predated Harmon and involved
an insurance company’s refusal to pay deserving claimants on a timely basis, not
exhaustion of policy limits by payment. See Liberty Mut., 412 F.2d at 482. In this
context of refusal to pay, the Fifth Circuit held that a jury question was created as to
25
whether this insurance company acted in bad faith where there was evidence that the
insurance company gave more weight to its own interests than to the insured’s by
failing to settle with one claimant for the policy limits, to the exclusion of others. See
id.; see also Farmers Ins. Exch. v. Schropp, 567 P.2d 1359 (Kan. 1977) (holding that
a liability insurer acted in bad faith in refusing to settle one of multiple claims when
a seriously injured claimant demanded payment).
Insightfully, the Fifth Circuit in Liberty Mutual recognized that while insureds
ordinarily do not want the policy limits “exhausted without an attempt to settle as many
claims as possible,” seeking a global settlement is a waste of time “where the
insurance proceeds are so slight compared with the totality of claims as to
preclude any chance of comprehensive settlement.” Liberty Mut., 412 F.2d at
481. In that instance, the insured “would do better to have the leverage of his
insurance money applied to at least some of the claims, to the end of reducing his
ultimate judgment debt.” Id.; see also Peckham v. Cont’l Cas. Ins. Co., 997 F. Supp.
73, 81 (D. Mass. 1989) (discussing Liberty Mutual and recognizing that while the
insurer generally should “attempt to settle as many claims as possible,” in situations
where “the insured’s coverage is slight compared to the total of the injured persons’
26
claims, as to make settlement of all injured persons’ claims within the policy limits
impossible, insistence upon settling all the claims might not benefit the insured” and
“[t]he insured might be better protected if the leverage of his coverage is applied to at
least some of the claims so as to reduce his ultimate judgment debt”). FFB followed
this mandate and used the policy proceeds to extinguish two deaths and one serious
personal injury claim.
The Fourth District also misapplied this Court’s decision in Shuster v. South
Broward Hospital District Physicians Professional Liability Insurance Trust, 591 So.
2d 174 (Fla. 1992), in stating that FFB “had the duty to avoid indiscriminately settling
selected claims and leaving the insured at risk of excess judgments that could have
been minimized by wiser settlement practice.” Farinas, 850 So. 2d at 560. In Shuster,
the insured physician argued that the insurer acted in bad faith by settling a frivolous
malpractice claim. 591 So. 2d at 176. Like here, the insurance contract in Shuster
gave the insurance company the authority to make good faith settlements of claims as
it deemed expedient. See id. at 176-77. In dicta, this Court provided an example
where a “deems expedient” clause might not protect the insurance company--where
the insurance company in bad faith “indiscriminately settles with one or more of the
27
parties for the full policy limits, thus exposing the insured to an excess judgment from
the remaining parties.” Id. at 177.
This dicta provides no solace to claimants here. For one thing, this Court in
Shuster was concerned with insurance companies settling claims for more than their
value to discharge their duty to defend. Id. at 176-77. The three settlements FFB
made were undisputably reasonable and FFB continued to defend Mr. Copertino.
Further, Shuster did not address the policy favoring settlement of claims. See id. The
Second District in Harmon did and found that an insurance company can enter good
faith settlements with some of multiple claimants as long as the settlements are
reasonable when considered individually. 232 So. 2d at 208.
Had FFB not settled the claims it did, Mr. Copertino would have faced three
more lawsuits and FFB would have faced twelve potential bad faith claims (the eleven
claimants plus Mr. Copertino). FFB should not be penalized for following the law and
reducing its insured’s exposure to excess judgments. FFB properly relied on and
followed the Harmon rule, which is and has been the law in Florida for 33 years.
5See Hartford Cas. Ins. Co. v. Dodd, 416 F. Supp. 1216, 1219-20 (D. Md.1976) (applying Delaware law) (“A liability insurer may settle claims in good faithwith some claimants, even if such settlements reduce the amount available to others.There is ordinarily no requirement that the insurer wait until all claims have beenpresented before it deals with any claimant.”); State Farm Mut. Auto. Ins. Co. v.Hamilton, 326 F. Supp. 931, 934 (D.S.C. 1971) (applying South Carolina law)(finding a liability insurer acted “reasonably and properly” when entering settlementswith some of the claimants because “the general law seems to be that a liability insurermay settle a part of multiple claims arising from the alleged negligence of its insuredeven though such settlements result in preference by impairing or exhausting the fundsto which other injured parties whose claims have not been settled might otherwise lookfor payment”); Bartlett v. Travelers’ Ins. Co., 167 A. 180, 182 (Conn. 1933) (holdingthat a liability insurer may make good faith settlements with some of the multipleclaimants because a contrary rule would violate the public policy encouragingsettlement of claims); Miller v. Ga. Interlocal Risk Mgmt. Agency, 501 S.E.2d 589,590-91 (Ga. Ct. App. 1998) (quoting Allstate Insurance Co. v. Evans, 409 S.E.2d273, 274 (Ga. Ct. App. 1991), and holding that “a liability insurer may, in good faithand without notification to others, settle part of multiple claims against its insured eventhough such settlements deplete or exhaust the policy limits so that the remainingclaimants have no recourse against (the) insurer”); Walston v. Holloway, 416 S.E.2d109, 110 (Ga. Ct. App. 1992) (citing Gathings, 561 So. 2d at 450, and holding thegeneral rule that liability insurers may settle some of multiple claims also applies to UM
28
The Harmon rule comports with the vast weight of authority throughout the
country in states that have considered the issue in this third-party liability context.
Every court faced with the issue of settlement demands arising out of multiple claims
and inadequate policy proceeds has held that the insurance company may enter into
reasonable settlements--measured by looking at the settled claims in isolation--with one
or more claimants, even though such settlements exhaust the proceeds available to
settle other claims.5
carriers); Haas v. Mid Am. Fire & Marine Ins. Co., 343 N.E.2d 36, 38-39 (Ill. App.Ct. 1976) (holding the liability insurer did not act in bad faith for entering settlementswith some of multiple claimants and observing “it is generally held in other jurisdictionsthat an insurer may settle with some claimants even if the settlement virtually orcompletely exhausts the available proceeds and even though another claimant, whosubsequently obtains a judgment, is unable to collect in full”); State Farm Mut. Auto.Ins. Co. v. Murphy, 348 N.E.2d 491, 494 (Ill. App. Ct. 1976) (holding a liabilityinsurer did not act in bad faith for making settlements in good faith with some ofmultiple claimants, even though the settlements exhausted the policy limits); Bennettv. Conrady, 305 P.2d 823, 827-28 (Kan. 1957), cited in Castoreno v. W. Indem. Co.,515 P.2d 789, 792-95 (Kan. 1973) (“Our holding is that a liability insurer may in goodfaith settle part of multiple claims arising from the negligence of its insured even thoughsuch settlements deplete or exhaust the policy limits of liability so that the remainingclaimants have little or no recourse against the insurer.”); Richard v. S. Farm BureauCas. Ins. Co., 223 So. 2d 858, 861 (La. 1969) (“[W]here there are multiple claimsarising out of an accident, the liability insurer, in entering compromise settlementspursuant to the right accorded it under the provisions of the policy, may exhaust theentire fund and thus one or more of the injured parties may find that they have little orno recourse against such insurer.”), cited in Pieno v. Bailey, 815 So. 2d 188, 190 (La.Ct. App. 2002) (“Where there are multiple claims arising out of an accident, the liabilityinsurer, in entering compromise settlements under the policy, may exhaust its policylimits, thus leaving one or more injured parties with little or no recourse against theinsurer”), and cited in Carter v. Safeco Ins. Co., 435 So. 2d 1076, 1080 (La. Ct. App.1983) (stating in a bad faith claim against a liability insurer that “it is well-settled law inLouisiana that an insurer may enter into reasonable, good faith settlements even thoughsuch settlements exhaust or diminish the proceeds available to other claimants”);Bruyette v. Sandini, 197 N.E. 29, 32 (Mass. 1935) (holding a claimant cannot enjointhe insurer from settling with other claimants because the insurer may settle part ofmultiple claims; otherwise, it would be “necessary for the insurance company toascertain, before it could safely pay any one, how many persons might have claimsthereon ... and what the total amount of judgments which might be presented wouldbe”); Millers Mut. Ins. Ass’n of Ill. v. Shell Oil Co., 959 S.W.2d 864, 870-81 (Mo. Ct.App. 1997) (holding a liability insurer acted in good faith in settling a claim against oneinsured without obtaining a release for another insured, even though the settlementexhausted the policy limits); Liguori v. Allstate Ins. Co., 184 A.2d 12, 17 (N.J. Super.
29
Ct. Ch. Div. 1962) (rejecting a claimant’s argument that a liability insurer should beenjoined from settling with another claimant, where the settlement was not in bad faithbecause “[w]hether multiple claims are to be treated one at a time or collected andevaluated together, is a choice solely within the discretion of the insurer”); Duprey v.Sec. Mut. Cas. Co., 256 N.Y.S.2d 987, 989 (N.Y. App. Div. 1965) (holding the policyallowed the liability insurer to make a good faith settlement with one of multipleclaimants even though the total claims would likely exceed the policy limits), cited inSTV Group, Inc. v. Am. Cont’l Props., Inc., 650 N.Y.S.2d 204, 205 (N.Y. App. Div.1996) (finding no evidence of bad faith because “[a]n insurer may settle with less thanall of the claimants under a particular policy even if such settlement exhausts the policyproceeds”); Alford v. Textile Ins. Co., 103 S.E.2d 8, 12-13 (N.C. 1958) (holding aliability insurer did not act in bad faith because “an insurer may settle part of multipleclaims arising from the negligence of its insured, even though such settlements resultin preference by exhausting the fund to which the injured party whose claim has notbeen settled might otherwise look for payment”); Scharnitzki v. Bienenfeld, 534 A.2d825, 827-29 (Pa. Super. Ct. 1987) (citing Harmon and holding it is not necessary fora liability insurer to interplead the policy proceeds to avoid a bad faith claim because“according to the majority rule, it would not be improper for [the insurance company]to pay or settle claims on a first-come-first-served basis”); Texas Farmers Ins. Co. v.Soriano, 881 S.W.2d 312, 315-16 & n.2 (Tex. 1994) (citing Harmon and holding“[w]e conclude that when faced with a settlement demand arising out of multipleclaims and inadequate proceeds, [a liability] insurer may enter into a reasonablesettlement with one of the several claimants even though such settlement exhausts ordiminishes the proceeds available to satisfy other claims”), cited in Travelers Indem.Co. v. Citgo Petroleum Corp., 166 F.3d 761, 764-65 (5th Cir. 1999) (applying Texaslaw) (applying Soriano and finding that a liability insurer does not act in bad faith foraccepting a reasonable settlement that only releases one insured, even if that exhauststhe policy available to settle claims against another insured); see also V.H. Cooper,Annotation, Basis & Manner of Distribution Among Multiple Claimants of Proceedsof Liab. Ins. Policy Inadequate to Pay All Claims in Full, 70 A.L.R.2d 416 (1960 &Supp. 2002); 8 John A. Appleman, Insurance Law & Practice § 4892 (1981); 12 LeeR. Russ, Couch on Ins. § 172:69 (3d ed. 1998 & Supp. 2001); 44 Am. Jur. 2dInsurance § 1709 (2d ed. 2002).
30
31
The Fourth District’s new “comparative seriousness” approach conflicts with
settled bad faith law and public policy in Florida, which is expressly designed to
encourage compromise and speedy settlement and decrease costs and delay. See,
e.g., Thompson v. Commercial Union Ins. Co. of N.Y., 250 So. 2d 259, 263 (Fla.
1971). This new approach discourages settlements and places additional burdens on
the legal system, making any settlement risky for the insurer. See Richard v. S. Farm
Bureau Cas. Ins. Co., 212 So. 2d 471, 479 (La. Ct. App. 1968), aff’d, 223 So. 2d 858
(La. 1969) (rejecting the comparative seriousness approach because it would “have the
effect of discouraging, rather than encouraging, the settlement of cases, because each
compromised settlement effected by the insurer would subject it to the risk of liability
in excess of the policy limits.”). Each claimant will be motivated to solve the under-
insurance problem by insisting that the insurer pay the policy limits to him or her within
a short time period, thereby jockeying for excess judgment suits. Holdouts will create
a gridlock. The insurer will have to fully identify and resolve the worth of each claim
before settling any. Insurers will be unable to settle any claim safely, resulting in their
adopting a general policy to pay claims only after they are reduced to judgment. See
Allstate Ins. Co. v. Evans, 409 S.E.2d 273, 274 (Ga. Ct. App. 1991) (“Were the rule
otherwise, an insurer would be precluded from settling any claims against its insured
in such a situation and would instead be required to await the reduction of all claims
32
to judgment before paying any of them, no matter how favorable to its insured the
terms of a proposed settlement might be.”).
The Fourth District’s decision makes it virtually certain that any insurance
company facing multiple claims exceeding policy limits will be required to defend a
claim of bad faith at trial by one or more claimants. The insurance company will be
charged with bad faith if it does settle claims it can settle and bad faith if it does not
settle claims in order to evaluate the comparative seriousness of all potential claims and
attempt global settlement. No claimant will ever agree that the insurer reasonably
settled with others. The result will be even more litigation, including litigation over who
has the most serious and most deserving claim. Under this new approach, insurance
companies cannot avoid bad faith trials, since the determination is now always a
question for the jury. Policy limits are rendered irrelevant, causing premiums to
skyrocket.
The “comparative seriousness” approach leaves no way out for the insurance
company, which will face bad faith suits in all events. No settlements will be reached,
leaving the insured exposed to excess judgments from all claimants and the insurance
company exposed to bad faith suits from its insured and all claimants. The
33
undesirable social and economic effects of this approach--multiple litigation,
unwarranted bad faith claims, coercive settlements, excessive jury awards, and
escalating insurance, legal and related costs--are overwhelming. See Zebrowski, 706
So. 2d at 277 (citing these policy concerns when explaining that the duty of good faith
runs only to the insured). The Second District in Harmon correctly rejected this
approach. This Court should also.
If this court overturns Harmon and rejects the universal rule applied throughout
the country, the decision should apply prospectively. An insurance company does not
act in bad faith by following established law in settling claims. See Infinity Ins. Co. v.
Berges, 806 So. 2d 504, 510 (Fla. 2d DCA 2001)(“[I]t was not bad faith on the part
of [the insurance company] to follow the law as it existed at that time....”), review
granted, 826 So. 2d 991 (Fla. 2002). “To punish a person because he has done what
the law plainly allows him to do is a due process violation of the most basic sort.”
BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 573 n.19 (1996). This Court has often
applied decisions prospectively when announcing a new judicial rule that unfairly
burdens a party who had reasonably relied upon settled law. See, e.g., Owens v.
Publix Supermarkets, Inc., 802 So. 2d 315, 331 (Fla. 2001) (deciding the cases under
review on the basis of existing law and establishing a new rule for premises liability
34
cases that have not gone to trial); City of Miami v. Bell, 634 So. 2d 163, 166 (Fla.
1994) (considering the impact on a city’s finances when determining whether an earlier
decision should be applied prospectively only).
CONCLUSION
The Fourth District’s decision should be quashed and remanded with directions
to affirm the final judgment for FFB.
JANE KREUSLER-WALSH andREBECCA MERCIER-VARGAS ofJANE KREUSLER-WALSH, P.A.Suite 503 - Flagler Center501 South Flagler DriveWest Palm Beach, FL 33401(561) 659-5455
andJ. MICHAEL BURMAN ofBURMAN, CRITTON, LUTTIER & COLEMAN515 North Flagler Drive, Suite 400West Palm Beach, FL 33401(561) 842-2820
andGREG M. GAEBE ofGAEBE, MULLEN, ANTONELLI, ESCO & DiMATTEO420 South Dixie Highway, Third FloorCoral Gables, FL 33134(305) 667-0223
and
35
DONALD H. PARTINGTON ofCLARK, PARTINGTON, HART, ET AL.P.O. Box 13010Pensacola, FL 32591(850) 434-9200
By:__________________________________JANE KREUSLER-WALSHFlorida Bar No. 272371
CERTIFICATE OF SERVICE
I CERTIFY that a true and correct copy of the foregoing has been mailed this
_____ day of October, 2003 to:
BRIAN J. GLICK GARY E. SHERMANGLICK LAW OFFICES SHERMAN & WALDMAN200 West Palmetto Park Road 440 South Andrews AvenueSuite 301 Fort Lauderdale, FL 33301Boca Raton, FL 33433 Trial and appellate counsel forTrial counsel for Appellants Slosberg, Appellants FarinasSchehr and Gil
MARJORIE GADARIAN GRAHAM SYLVIA H. WALBOLTMARJORIE GADARIAN GRAHAM, P.A. F. TOWNSEND HAWKES11211 Prosperity Farms Road, #D129 JOSEPH H. LANGPalm Beach Gardens, FL 33410 CARLTON FIELDS, P.A.Appellate counsel for Appellants P. O. Drawer 190Slosberg, Schehr and Gil Tallahassee, FL 32302-0190
Counsel for Florida Defense Lawyers’ Association and American
International Companies, Amicus
36
LOUIS K. ROSENBLOUMLOUIS K. ROSENBLOUM, P.A.4300 Bayou Boulevard, Suite 36Pensacola, FL 32503Counsel for Academy of FloridaTrial Lawyers
By:__________________________________JANE KREUSLER-WALSHFlorida Bar No. 272371
CERTIFICATE OF FONT
Petitioner’s Initial Brief on the Merits has been typed using the 14 point Times
New Roman font.
By:___________________________JANE KREUSLER-WALSHFlorida Bar No. 272371
Document Page_______________________________________________________________
Farinas v. Fla. Farm Bureau Gen. Ins. Co.,Nos. 4D02-11 & 4D02-96, slip op.(Fla. 4th DCA Apr. 23, 2003) A-1
Farinas v. Fla. Farm Bureau Gen. Ins. Co.,Nos. 4D02-11 & 4D02-96, slip op.(Fla. 4th DCA July 9, 2003)(opinion on motion for rehearing, rehearing en banc and certification) A-2
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