On June 19, 2014, the Eleventh Circuit reversed and remanded a Florida District Court order requiring a primary insurer to pay damages to an excess carrier for failure to settle an underlying personal injury suit. In the per curiam opinion, the Court of Appeals, comprised of a three-justice panel, found there was no evidence the primary insurer, Mid-Continent Casualty, caused any injury to the excess carrier, Westchester Fire, by rejecting a settlement offer in an underlying action.
The underlying suit involved a products liability claim brought by an employee of the insured manufacturing company. The Plaintiff alleged brain and vertebrae injuries with damages exceeding $1 million. As a result, early into litigation, Westchester demanded Mid-Continent settle the suit. While Mid-Continent and defense counsel made several attempts to settle the suit during litigation, no settlement was ever reached, and a jury returned a Plaintiff’s verdict for $1,705.173. Post-trial, Plaintiff offered to settle the case for $1.6 million; however, believing a worker’s compensation set-off would apply, Mid-Continent refused the settlement offer without informing Westchester that an offer had been made. Ultimately, the trial court determined the set-off did not apply, and, after allocating costs, the total judgment in the case was $1,990,173. Westchester’s excess exposure amounted to $705,173 of the judgment.
Following the underlying litigation, Westchester brought suit against Mid-Continent alleging Mid-Continent acted in bad faith by refusing to settle the personal injury claim. After a two-day bench trial, the district court, interpreting Florida state law, held that while Mid-Continent’s pre-verdict actives did not constitute bad faith, it’s failure to inform Westchester of the post-verdict $1.6 million settlement offer amounted to bad faith. Accordingly, the district court awarded Westchester damages representing the difference between what it would have paid under the $1.6 million dollar settlement and the final judgment, a $390,173 award.
The Court of Appeals reversed and remanded the district court’s award, finding there was no evidence of a causal connection between the damages claimed and Mid-Continent’s alleged bad faith. In particular, the Court of Appeals found, “Westchester is unable to identify any evidence in the record showing it has incurred an obligation that it should not have been required to pay, absent the primary insurer’s bad faith.”
Westchester pointed to its pre-verdict requests for settlement as proof that it would have accepted the Plaintiff’s post-verdict offer. The Court of Appeals was unconvinced, finding Westchester’s pre-verdict demands, “nothing more than pro forma demands for Mid-Continent to settle within its policy limits.” Accordingly, the Court of Appeals reversed and remanded with instruction that the district court enter judgment in favor of Mid-Continent.
Westchester Fire Ins. Co. v. Mid-Continent Cas. Co., 13-12932, 2014 WL 2766764 (11th Cir. June 19, 2014).
Prepared by R. Jordan Wood 