The vast majority of extra-contractual/bad faith cases involve a carrier’s failure to secure a release of an insured by accepting a reasonable settlement opportunity within the policy limits. The absence of a reasonable settlement opportunity may complicate proof requirements in the bad faith case but may not be fatal to the claim as the Florida courts have again shown.
Markuson, et al. v. State Farm Mut. Auto. Ins. Co.,
2024 WL 817545 (Fla. Ct. App. Feb. 28, 2024)
Markuson stems from a 2006 car crash involving Eric Saterbo and Benjamin Markuson. Saterbo was driving a vehicle owned by his father. Markuson suffered significant injuries and filed a lawsuit against Saterbo and his father roughly 2 years after the collision.
At the time of the wreck, the Saterbo vehicle was insured by State Farm under a policy with liability limits of $300,000. Four months after the lawsuit was filed and before receiving a demand, State Farm retained counsel for the Saterbos and authorized retained counsel to offer the $300,000 to Markuson for a release of his claims.
Markuson did not accept State Farm’s offer. Instead, Markuson sent two settlement proposals to State Farm several years into the litigation. The offers required:
- State Farm pay the $300,000 policy limits to Markuson;
- State Farm authorizes the Saterbos to enter into a $1.9 Million consent judgment with Markuson; and
- State Farm authorize the Saterbos to assign their claims against their insurance agent to Markuson.
In exchange, Markuson would execute a release of his claims against the Saterbos and would file a satisfaction of the consent judgment. It does not appear that State Farm would have been released from liability for extra-contractual claims if the proposals were accepted.
State Farm passed on the proposals and the case continued to trial. The jury ultimately awarded Markuson over $3 Million in damages.
Extra-Contractual Action
Following the jury verdict, Markuson and Saterbo brought a lawsuit against State Farm, Saterbos’ retained counsel and insurance agent in an effort to satisfy the excess judgment. The claims against State Farm were premised on common law or statutory bad faith and focused primarily on State Farm’s refusal to accept the settlement proposals involving the consent judgment.
State Farm took the position that based on past Florida precedent, it had no obligation to accept the settlement proposals because they included a consent judgment that exceeded the Saterbos’ policy limits. On this basis, State Farm moved for summary judgment on the bad faith claims.
The trial court agreed with State Farm and found that as a matter of law, State Farm had no duty to agree to a consent judgment that was in excess of the policy limits. The trial court reasoned that the proposals exposed State Farm to extra-contractual claims and would not have released State Farm from liability for bad faith. The trial court reasoned that because of this, State Farm did not act in bad faith when it did not agree to or negotiate in response to the proposals from Markuson and was entitled to summary judgment on the bad faith claims.
Appellate Court
The appellate court agreed that State Farm had no duty to accept the Markuson settlement proposals. Based on prior precedent, the appellate court reiterated that an insurer does not have a duty to agree to a consent judgment in excess of the applicable policy limits.
However, the appellate court determined that summary judgment on the bad faith claims was not appropriate. While Marukuson and the Saterbos could not prove bad faith based on State Farm’s failure to accept the settlement proposals, other conduct might be actionable. Under Florida law, an insurer has good faith duties to:
- Advise the insured of settlement opportunities;
- Advise the insured of the probable outcome of litigation;
- Warn the insured of the risk of an excess judgment;
- Advise the insured of steps it might take to avoid an excess judgment; and
- Investigate the claim and give fair consideration to reasonable settlement offers.
Each of these factors would need to be reviewed under a totality of the circumstances standard by a judge or, most likely a jury, to determine whether State Farm had any bad faith liability. Because other avenues proving bad faith potentially existed, the trial court’s summary judgment ruling was reversed in part.
Markuson doesn’t appear to have upset Florida law and it may be an uphill battle to collect the excess judgment in this particular case. However, the appellate court’s decision is a reminder that bad faith claims turn on more than settlement offers and responses. The entirety of the insurer’s claims handling actions are at issue and any misstep by the insurer could be used as support for a bad faith claim. At the very least, Markuson clarifies that summary judgment will likely be a rare remedy in a bad faith claim.
