When an auto insurance company fails or refuses to pay an insured or third party in accordance with its policy, injured persons can sue for actual damages, plus attorney’s fees. In some cases, when it’s proven the company acted in bad faith or engaged in unfair or deceptive acts, insurers can also be liable for amounts beyond those limits.
A practice can be deemed unfair when it goes against public policy or when it is oppressive, unscrupulous, unethical or substantially injurious to consumers. Some examples are failure to acknowledge and respond with reasonable promptness to claims, refusal to pay claims before conducting an adequate investigation and making no attempt in good faith to work out a prompt, fair settlement.
As a recent Florida Supreme Court illustrates, an insurer can still be held liable for additional bad faith damages, even if it pays the policy limits at the eleventh hour. Insurance companies should not be allowed to drag their feet and force consumers to litigate claims that reasonably should have been paid.
The case, Fridman v. Safeco Ins. Co. of Ill., was prolonged for four full years after the underlying incident – an auto accident – before insurer finally agreed to pay the policy limits on the eve of a trial. Insurer then tried to assert plaintiff’s claim for coverage was moot and the case should be dismissed. Not so fast, ruled the state high court.
Insureds should are entitled to receive a ruling on the full extent of damages in damages on an uninsured/underinsured motorist lawsuit before being forced to file a bad faith lawsuit.
According to court records, plaintiff was injured in 2007 in a car accident with an underinsured driver. After the crash, plaintiff filed a claim with his insurer for the $50,000 limits of his UM policy. Twenty-two months later, after the insurer still refused to pay, plaintiff filed a Civil Remedy Notice, as required by law, notifying insurer he would file a bad faith lawsuit if they refused to settle.
The law in Florida gives insurers 60 days to respond to such notice. In this case, four months passed without insurer response. Plaintiff proceeded with his lawsuit, seeking a determination of liability under the UM policy.
Bad faith damages can include not just the amount of the policy limit, but also interest on unpaid benefits, attorney fees and costs and other damages. Plaintiff then submitted another offer to settle for the policy limit. Insurer again did not respond, and after 30 days, it was deemed rejected.
Trial was set for April 2011, more than four years after the crash. One month before trial, the insurer issued a check to plaintiff for the full $50,000, stating this was the full and final settlement of any and all claims.
Plaintiff rejected the check with settlement language, and insurer received a continuance. Six months later, before the rescheduled trial, insurer again issued another $50,000, this time with no settlement language. However, it also at that time filed a request to find plaintiff’s request for UM coverage – and his future bad faith claim – moot because the full policy limits had been paid.
Plaintiff argued against this motion, asserting the jury should determine the extent of insurer’s liability. The only reason plaintiff had not already filed the bad faith claim was because he was under impression he couldn’t do so while also seeking UM damages.
Trial court denied insurer’s request, and jurors ultimately calculated plaintiff’s damages at $1 million, with the underinsured driver 100 percent responsible for the crash.
Insurer moved for a mistrial. Court of appeals vacated the verdict, finding the insurer had appropriately confessed to the judgment, so plaintiff’s UM action was moot.
The Supreme Court quashed the appellate court’s ruling, finding plaintiff was entitled to a determination of liability and full extent of damages before filing a first-party bad faith action and the determination of damages is generally binding.
Contact the Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.
Fridman v. Safeco Ins. Co. of Ill., Feb. 25, 2016, Florida Supreme Court
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