When suing a party that has an insurance policy involving the set of facts that are the reason for the lawsuit, you’re normally limited to whatever limits of coverage there are in that given policy.
Circumstances for Suing Beyond Policy Limits
However, in certain circumstances, a litigant may be able to sue for amounts beyond the policy limits. They can do so when liability is clear, the insurance company exposes its insured to a judgment in excess of the policy limits, and the insurance company fails to properly defend or settle the case.
The Duty of Good Faith
The Florida Supreme Court states that, “[i]n a case where liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations.” Harvey v. GEICO Gen. Ins. Co., 259 So. 3d 1, 7 (Fla. 2018). When the insurance company fails to negotiate, “Florida’s bad-faith law imposes a fiduciary obligation on an insurer to protect its insured from a judgment that exceeds the limits of the insured’s policy, otherwise known as an excess judgment.”
Direct Lawsuits against Insurers
Although this duty of good faith is one that the insurer owes to the insured, “Florida law authorizes the victim . . . to sue the insurer directly for its bad-faith failure to settle on the insured’s behalf.” Ilias v. USAA Gen. Indem. Co., 61 F.4th 1338, 1344 (11th Cir. 2023). “Under Florida law, a judgment creditor may maintain suit directly against a tortfeasor’s liability insurer for recovery of the judgment in excess of the policy limits, based upon the alleged fraud or bad faith of the insurer in the conduct or handling of the suit.” Brink v. Direct Gen. Ins. Co., 38 F.4th 917, 921 n.1 (11th Cir. 2022).
Essence of a Bad Faith Insurance Suit
“The essence of a bad faith insurance suit (whether it is brought by the insured or by the injured party standing in his place), is that the insurer breached its duty to its insured by failing to properly or promptly defend the claim (which may encompass its failure to make a good faith offer of settlement within the policy limits)—all of which results in the insured being exposed to an excess judgment.” Kelly v. Williams, 411 So. 2d 902, 904 (Fla. Dist. Ct. App. 1982).
Conditions Precedent and Joining the Insurer
However, before a lawsuit can be filed, a judgement or settlement is needed, “It shall be a condition precedent to the accrual or maintenance of a cause of action against a liability insurer by a person, not an insured under the terms of the liability insurance contract that such person shall first obtain a settlement or verdict against a person who is an insured under the terms of such policy for a cause of action which is covered by such policy.” Fla. Stat. § 627.4136(1).
“At the time a judgment is entered or a settlement is reached during the pendency of litigation, a liability insurer may be joined as a party defendant for the purposes of entering final judgment or enforcing the settlement by the motion of any party, unless the insurer denied coverage under the provisions of s. 627.426(2), or defended under a reservation of rights pursuant to s. 627.426(2). A copy of the motion to join the insurer shall be served on the insurer by certified mail. If a judgment is reversed or remanded on appeal, the insurer’s presence shall not be disclosed to the jury in a subsequent trial.” Fla. Stat. § 627.4136(4).
For more information on litigation involving bad faith claims, contact one of our experienced commercial litigation attorneys at 305-570-2208. You can also email our lead attorney Eduardo directly at email@example.com.
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