McNamara v. Gov't Emps. Ins. Co.

30 F.4th 1055

Erika L. MCNAMARA, Willard F. Warren, Plaintiffs-Appellants,

Kenneth Bennett, non-party, Intervenor-Appellant,

v.GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant-Appellee.

No. 20-13251

United States Court of Appeals, Eleventh Circuit.

Filed: April 5, 2022

Brent G. Steinberg, Dale Swope, Swope Rodante, PA, Tampa, FL, for Intervenor-Appellant.

Philip M. Burlington, Bard D. Rockenbach, Nichole J. Segal, Burlington & Rockenbach, PA, West Palm Bch, FL, Kenneth J. McKenna, Daniel Edward Smith, II, Anthony F. Sos, Dellecker Wilson King McKenna Ruffier & Sos, LLP, Orlando, FL, for Plaintiffs-Appellants.

Billy Richard Young, Megan Alexander, Jordan M. Thompson, Young Bill Boles Palmer Duke & Thompson, PA, Tampa, FL, Joshua John Cecil Hartley, Boyd & Jenerette, PA, Boca Raton, FL, for Defendant-Appellee.

Rebecca Bowen Creed, Creed & Gowdy, Jacksonville, FL, for Amicus Curiae.

Before Newsom, Branch, and Brasher, Circuit Judges.

Newsom, Circuit Judge:

Under Florida law, a plaintiff who brings a bad-faith claim against an insurer for failing to settle a lawsuit against one of its insureds must prove, among other things, that the insurer's conduct caused his loss. And as one means of demonstrating the requisite causation, the plaintiff may show that the insured suffered an "excess judgment" as a result of the insurer's actions. In this case, we must decide whether a qualifying "excess judgment" must be based on a verdict following a trial or, instead, may be predicated on a consent judgment that memorializes a private settlement agreement.

In Cawthorn v. Auto-Owners Insurance Co. , this Court held—in an unpublished opinion—that only a judgment that follows a trial and results from a verdict qualifies as an "excess judgment" for bad-faith purposes under Florida law. 791 F. App'x 60, 65 (11th Cir. 2019). The district court in our case relied on Cawthorn to conclude that a consent judgment formalizing a settlement between an insured and a third party didn't qualify. We now hold that Cawthorn misinterpreted Florida law and that a consent judgment can qualify for "excess judgment" status. Accordingly, we reverse the district court's decision and remand for further proceedings.

I

While driving Willard Warren's vehicle, Erika McNamara negligently changed lanes and caused a collision that seriously injured Deborah Bennett.¹ At the time of the accident, Warren had a GEICO insurance policy that provided bodily-injury coverage up to $100,000 per person. Both Bennett and GEICO assert that they made offers to settle within policy limits, but the parties never reached a deal. Eventually, Bennett sued Warren and McNamara in Florida state court. Pursuant to its policy contract, GEICO provided Warren and McNamara with a lawyer.

Bennett later served both Warren and McNamara with proposals for settlement pursuant to Fla. Stat. § 768.79, which, as relevant here, permits a plaintiff to make "a demand for judgment" as a means of settling a tort action against an insured defendant. Bennett proposed to settle her claims against Warren and McNamara for $474,000 and $4,740,000, respectively. The proposals were conditioned on two factors: (1) Warren and McNamara had to consent to the entry of final judgments against them in the amounts of the proposals; and (2) GEICO had to confirm that it wouldn't assert that Warren and McNamara had breached the policy by accepting the proposals.

Warren and McNamara's attorney informed GEICO about the proposals and advised that they were "far below what a jury would award in this case." Given that assessment, he informed GEICO that "[m]y clients are inclined to accept, but cannot do so without assurance from GEICO that [accepting the proposals will] not violate the terms and conditions of their policy." GEICO replied: "Although it should be understood GEICO is not agreeing to be a party to this settlement, we will not assert that your clients have breached their policy contract with us if they wish to accept the Proposals for Settlement as currently written." Both Warren and McNamara accepted the proposals, and "Pursuant to Stipulation," the state court entered final judgments against them.

After the conclusion of Bennett's lawsuit, Warren and McNamara sued GEICO for bad faith, seeking to recover the amounts of the final judgments entered against them that exceeded the $100,000 policy limit. They contended that GEICO had breached its fiduciary duty to them by failing to settle Bennett's case within the policy limit when it had the opportunity to do so. GEICO removed the case to federal court and sought summary judgment.

The district court granted summary judgment to GEICO based on our unpublished Cawthorn decision. In that case, a panel of this Court held (1) that to prove causation in an insurer-bad-faith case, a plaintiff must show that the insured suffered an "excess judgment," i.e. , a final judgment that exceeds all available insurance coverage, and (2) that the excess judgment must result from "a verdict." 791 F. App'x at 64–65. Thus, the panel concluded, because a "consent judgment" is not preceded by a verdict but, rather, is premised on a voluntary settlement, it cannot, as a matter of law, constitute an "excess judgment." Id. at 65. And accordingly, the panel held, causation can't be established in an insurer-bad-faith action, as a matter of law, when the insured is subject only to a consent judgment. Id. Following Cawthorn , the district court here held that the consent judgments entered against Warren and McNamara weren't qualifying "excess judgments" and, therefore, that they couldn't prove causation in their bad-faith action. Warren and McNamara appealed.²

Before us, Warren and McNamara challenge Cawthorn ’s reasoning, arguing that Florida law doesn't require that a verdict precede an excess judgment as a prerequisite to proving the causation element of an insurer-bad-faith claim. Because the outcome of this case must turn on Florida bad-faith law—not on what this Court might have said in unpublished opinions—we begin by considering whether a consent judgment can constitute an excess judgment under Florida law. We then turn to Cawthorn to determine whether it should affect our analysis.

II

A

A bad-faith claim arises when, as a result of the alleged misconduct of his insurer, an insured incurs a liability that is covered by an insurance policy but exceeds the policy's coverage limit. A bad-faith claim is rooted in the same logic that underlies an ordinary negligence claim, and it comprises four familiar elements: The plaintiff must show (1) that the insurer owed the insured a duty of care, (2) that the insurer breached its duty, and (3) that the breach caused the plaintiff to suffer (4) an injury. See Boston Old Colony Ins. Co. v. Gutierrez , 386 So.2d 783, 785 (Fla. 1980) (per curiam).

An insurer owes its insureds a duty of good faith. Id . For lawsuits brought against an insured, that duty includes giving "fair consideration to a settlement offer that is not unreasonable under the facts, and settl[ing], if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so." Id . The insurer breaches its duty by acting in bad faith, and the insured suffers an injury if he incurs a liability that exceeds his insurance coverage.

Importantly, a bad-faith plaintiff must link the insurer's conduct to the insured's injury by proving causation. In Perera v. United States Fidelity & Guaranty Co. , 35 So.3d 893 (Fla. 2010), the Florida Supreme Court answered several certified questions about causation in third-party bad-faith claims.³ The court explained that "the existence of a causal connection is a prerequisite [to a bad-faith claim]—in other words, the claimed damages must be caused by the [insurer's] bad faith." Id . at 901. But, it clarified, there is no single way of proving causation. See id. ; see also id. at 898 n.7. Importantly for our purposes, the court concluded that showing the existence of an "excess judgment" is generally the most straightforward way to prove causation. Id . at 899.⁴

In Perera , the Florida Supreme Court referenced its earlier decision in United Services Automobile Association v. Jennings , which had defined an excess judgment as " ‘the difference between all available insurance coverage and the amount of the verdict recovered by the injured party.’ " Perera , 35 So.3d at 902 (quoting Jennings , 731 So.2d 1258, 1259 n.2 (Fla. 1999) ). Notably, though, in Perera there was no "verdict." By contrast, Perera and several insurance companies had entered a "Stipulation to Settle," pursuant to which a state court had entered the final judgment that formed the basis for Perera's bad-faith lawsuit. Id . at 896. Ultimately, the Florida Supreme Court found no causation in Perera because the final judgment didn't exceed all available insurance coverage and there was no other evidence of causation. Id . at 902–04. Notably, though, the court never cast doubt on the idea that a final judgment based on a settlement agreement could constitute proof of causation in a third-party bad-faith action.

More recently—and perhaps more to the point—in Fridman v. Safeco Insurance Co ., the Florida Supreme Court expressly held, in the context of a statutory first-party bad-faith action, that "the insured is not obligated to obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration, or stipulation before initiating a bad faith cause of action." 185 So.3d 1214, 1224 (Fla. 2016) (emphasis omitted). And significantly, the court further confirmed that "first-party bad faith claims ... should be treated in the same manner as third-party bad faith claims." Id . at 1221.⁵ Accordingly, both Perera and Fridman indicate that a jury verdict is not a prerequisite to an excess judgment in a bad-faith action and that, instead, a plaintiff can base a...