Middle District Slams Bad Faith “Set-ups”

In Noonan v. Vermont Mutual Ins. Co., ___ F. Supp. 2d ___, (M.D. Fla. Slip Op. Case No. 6:10-cv-512-Orl-31KRS Nov. 15, 2010), Judge Gregory Presnell of the Middle District granted summary judgment to an excess insurer that did not tender its policy limit until almost 11 months after the serious bodily injury giving rise to a personal injury claim, where the delay was caused by the claimant’s failure to provide medical documentation despite numerous requests by the insurer that he do so. In this third-party bad faith case governed by Florida law, the primary carrier, Allstate, gave the excess carrier, Vermont, sufficient information to place it on notice of the probable serious nature of the injury and probable liability on the part of its omnibus insured, soon after the loss. It was not until the primary insurer tendered its $100,000 limits, however, that Vermont (which also had $100,000 limits) began to aggressively solicit from the claimant’s attorney specifics about the claimant’s injuries. These efforts were ignored by the attorney. Ultimately, the claim was placed in suit, at which time Vermont finally obtained records demonstrating that the claim’s value exceeded its policy limits, whereupon it promptly tendered. The tender was rejected, and the claimant entered into a consent judgment with the insured (which may have been by way of a Cunningham stipulation), then sued Vermont for bad faith.

The court held that Vermont had no duty to investigate the claim until the primary insurer tendered its policy limits. After Allstate exhausted its limits, Vermont was entitled to a reasonable opportunity to investigate and adjust the claim. The court said “[h]ere, the delay was caused . . . by Plaintiffs’ attempt to ‘set-up’ the Defendant by withholding pertinent information concerning Plaintiffs’ claim,” rather than by any unreasonable delay on the insurer’s part.

This case exemplifies the growing trend among federal courts sitting in Florida to restrict the insurer’s duty to proactively initiate settlement negotiations, as enunciated in Powell v. Prudential Property & Casualty Co., 584 So. 2d 12 (Fla. 3d DCA 1991), and its progeny.