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Ripe For Campbell Review: A Florida Uninsured Motorist Claimant’s Statutory Right To Recover Excess Verdict Damages In A Bad Faith Action

January 22, 2008

This is one of a series of articles under the by line “Butler on Bad Faith” originally published in Mealey’s Litigation Report: Insurance Bad Faith, Vol. 21, #18, page 29 (January 22, 2008).

[Editor’s Note: J. Pablo Caceres is a partner with the law firm of Butler Weihmuller Katz Craig LLP, with offices in Charlotte, Miami, Mobile, Tallahassee, and Tampa. He litigates a broad range of first and third party coverage and bad faith insurance claims. Christopher M. Ramey is an associate with the law firm of Butler Weihmuller Katz Craig LLP. His practice centers around the litigation of first-party property coverage issues and bad faith. This commentary, other than the quoted material, is the authors’ opinion; not their firm’s, and not Mealey’s Publications’. Copyright © 2008 by the authors. Responses are welcome.]

In many jurisdictions, jurors can award punitive damages to punish or penalize an insurer for improper claims handling, in addition to any compensatory damages caused by an insurer’s bad faith. Such jury awards of punitive damages now are subject to scrutiny under State Farm Mutual Automobile Insurance Company v. Campbell.1 As a result of Campbell, insurers have one final check against excessive punitive damages awards by juries.

Within the context of a bad faith action involving an uninsured motorist (UM) claim, one jurisdiction, by statute, allows punitive-like damages that would seem to raise serious Campbell concerns. In a Florida bad faith action, a UM insured can recover the total amount of a personal injury damages verdict that was set by a jury in a prior UM contract action and that exceeded the applicable UM policy limits.2 For example, suppose a UM claimant sues an insurer in Florida for contractual UM benefits having policy limits totaling $25,000. Under Florida law, the UM claimant would present her case for personal injuries against the insurer and a jury would determine liability and damages caused by the uninsured tortfeasor. Assume a jury returns a verdict for $1,000,000, representing the personal injury damages sustained by the UM claimant. The resulting judgment against the UM insurer in that action would be limited by the $25,000 UM policy limit. However, the $1,000,000 personal injury verdict–an excess verdict because of the low policy limit–would be recoverable, by statute, in any subsequent bad faith action for improper UM claims handling.

Now, here’s the important point for applying a Campbell analysis. Assume an award of prior excess verdict amount equates to the imposition of bad faith punitive damages (as discussed later, it does). Doesn’t the above scenario, so common in Florida, present serious Campbell concerns? At first blush, it would seem so, given that the 40 to 1 ratio between the $1,000,000 excess verdict and the $25,000 policy limit3 would greatly exceed the “single digit” guideline set by Campbell. Moreover, the amount of the personal injury-based excess verdict has little to do with the degree of “bad faith” in the handling of the UM claim. The jury in the underlying contractual UM claim did not hear any evidence of bad faith. Yet, by statute, the full amount of that verdict is awardable, automatically, when a UM insurer is found liable for bad faith.

Notably, Florida appears unique in allowing recovery of the excess verdict amount in a UM bad faith case.4 This may be because Florida’s first party bad faith action is statutory, while most other states that recognize first party bad faith base the action on tort or contractual principles, which require the element of causation.5 For example, in California, an insurer in bad faith cannot be liable for excess bodily injury damages involving an uninsured motorist.6 The rationale is that such damages precede any bad faith conduct by the insurer and are not proximately caused by the insurer.7 In Pennsylvania, no common law remedy exists for an action against a bad faith insurer.8 Instead, a Pennsylvania insured must sue under its statutory scheme which contains no express allowance for recovery of a UM excess verdict.

Florida did not always allow recovery of the excess verdict in a first party bad faith action. Before the UM statute was amended specifically to allow such recovery, in McLeod v. Continental Insurance Company, the Florida Supreme Court held that the underlying excess verdict in a UM case could not be recovered in a subsequent statutory bad faith case.9 The court discussed fundamental principles underlying compensatory damages. Such damages represent the “loss, injury or deterioration caused by negligence, design or accident of one person to another.”10 A person injured “by breach of contract or by wrongful or negligent act of omission shall have fair and just compensation commensurate with the loss sustained in consequence of the defendant’s act which [gave] rise to the action.”11 Within the context of a UM bad faith action, the McLeod court noted that the amount of a UM excess verdict does not qualify as a bad faith compensatory damage because 1) the excess judgment did not injure the UM insured and 2) the uninsured tortfeasor, not the insurer, caused the excess verdict damages.12 “To allow recovery of the excess judgment would be in direct conflict with the fundamental principle that one is not liable for damages that he or she did not cause.”13

Of course, a third-party bad faith action fundamentally differs from a UM bad faith action with regard to the recovery of any excess judgment. An excess judgment entered against an insured (under bodily injury liability coverage) in a third-party action is recoverable because the insurer’s bad faith failure to settle 1) caused the judgment against the insured and 2) the judgment against the insured, indeed, amounts to real damage that was avoidable but for the insurer’s bad faith failure to settle.14 But, within the context of a UM bad faith claim, the UM insured is not damaged by the entry of an excess judgment.15 The UM insured, of course, was damaged by the uninsured motorist.

McLeod’s holding that a UM claimant in a bad faith action could not recover the amount of the excess judgment soon became moot. Immediately after McLeod, the Florida Legislature amended the UM statute and expressly authorized such recovery in a UM bad faith case.16

Eventually, the Florida Supreme Court addressed, very briefly, pre-Campbell constitutional concerns regarding the statutory amendment in State Farm Mutual Automobile Insurance Company v. LaForet.17 (Actually, LaForet is better known in Florida as establishing the “totality of the circumstances” standard for determining “bad faith.”) Within the discussion of whether the amendment was retroactive, the court gave a footnote’s worth of discussion to the point raised by Amicus Florida Defense Lawyers Association (“FDLA”).18 The FDLA argued that the statute was unconstitutional as a whole, not just when retroactively applied. The Florida Supreme Court rejected the argument “without discussion,” citing its acknowledgment in McLeod that the enactment of such a provision would be within the province of the Legislature.19

The acknowledgment in McLeod is dubious. Citing the Florida Supreme Court case of E. F. Hutton & Company v. Rousseff,20 the McLeod court wrote that “the legislature has the right to modify the common law definition of damages and allow recovery for amounts not proximately caused by the insurer’s bad faith.”21 This statement, however, cannot be interpreted to mean that the legislature’s prerogative has no constitutional limitations, particularly with respect to insurance bad faith damages.22 Moreover, the Florida Supreme Court’s reliance on Rousseff seems misplaced. Rousseff involved the very narrow question of whether Florida’s statutory securities fraud remedies required proof of causation for recovery of damages, even though the statute had no expressed causation element.23 In holding that proof of causation was not required, the Florida Supreme Court in Rousseff did not say (or mean to say) that the Florida legislature had the unfettered right to “modify the common law definition of damages.” In fact, the Court in Rousseff noted that the Florida statutory securities fraud remedies were “patterned after” the common law action for contractual rescission, a remedy that does not require proof of causation.24 Clearly, the omission of any causation element did not modify any “common law definition of damages”–the common law rescission remedy was consistent with the securities fraud statutory scheme.25

So, LaForet’s rejection, in a footnote, of the FDLA’s pre-Campbell constitutional argument seems to lack any real precedential support. Perhaps the Florida Supreme Court’s scant attention to the issue is best explained by the fact that FDLA’s point was not raised by the petitioner, State Farm.26 But, while the Florida Supreme Court found the UM bad faith penalty constitutional in LaForet, new considerations should arise after the U.S. Supreme Court released its decisions in BMW of North America, Inc. v. Gore27 and State Farm Mutual Automobile Insurance Company v. Campbell.28 The FDLA did not, of course, have these cases at its disposal in LaForet.

Before considering Gore/Campbell, one must accept the premise that the UM statute authorizes, in effect, the recovery of punitive damages in a bad faith case, notwithstanding the statute’s failure to call these damages “punitive.” The Florida Supreme Court in McLeod discussed at length why any imposition of the excess verdict would amount to an award of punitive damages.29 LaForet confirmed that the UM statute is a penalty.30 So, for purposes of a Gore/Campbell analysis, the authorized recovery of the excess verdict amount must be considered a punitive remedy. As previously discussed, such damages cannot be considered compensatory.

According to the Court in Campbell, punitive damage awards must follow the guideposts set forth in Gore.31 State courts must implement the Gore principles “with care,” taking into account “both reasonableness and proportionality”32 as the Due Process Clause of the Fourteenth Amendment disallows “grossly excessive” or “arbitrary punishments” on the tortfeasor.33 The guideposts are: 1) the degree of reprehensibility of the conduct, 2) the ratio between the punitive award and the actual harm inflicted on the plaintiff, and 3) sanctions for comparable conduct. Here, only the first two really merit discussion.

As noted in previous articles, the reprehensibility guidepost focuses around five considerations.34 These includes whether: 1) the harm by the insurer consisted of physical rather than economic harm; 2) the insurer’s conduct exposed an indifference to or a reckless disregard for the safety of others; 3) the insurer’s conduct exposed a economically vulnerable victim; 4) the conduct occurred repeatedly; and 5) the conduct involved intentional malice, trickery, or deceit.35

Florida’s UM statute ignores the guideposts and the specified reprehensibility considerations when it authorizes full recovery of the UM excess verdict amount. It has to–the insurer’s conduct did not cause the damages represented by the excess verdict. The excess verdict amount is determined only by the seriousness of the personal injury claim, not the nature of the insurer’s conduct. The reprehensibility factor has no role whatsoever in determining whether an award of the excess judgment amount exceeds constitutional limitations. Also, under Florida’s bad faith statute, liability for the UM excess judgment would not necessarily require a determination that the insurer engaged in the type of conduct normally applicable to a determination of punitive damages. For these reasons alone, the UM statute could be struck down as unconstitutional.

With regard to the second, ratio guidepost, the UM statute has the potential to authorize awards that greatly exceed the punitive-compensatory single-digit ratio. This “single digit” figure is important because even though the Campbell Court refused to place concrete constitutional limits on the ratio between compensatory and punitive damages, single digit multipliers were recognized as most likely to satisfy a due process test.36 However, could the statute be struck merely because it has the potential to award amounts exceeding reasonable ratios? Juries have the similar potential to award such amounts and, of course, they remain an integral part of the procedure. If the UM statute is not struck down for violation of the first guidepost, perhaps a case by case consideration would be warranted to determine whether particular excess judgment- based awards exceed the permissible ratio.

In this article, we assumed the UM policy limit amount would be a proper basis for determining the Gore ratio. It represents the contractual amount allegedly withheld in bad faith, and it makes sense to use as the basis for the ratio, even though, in Florida, the policy limit is recovered in a different action. But, as one federal appellate court noted in Willow Inn, Inc. v. Public Service Mutual Insurance Company, there are “no shortage of candidates” as to which figures to use as the basis for the ratio.37 Within the UM context, one could argue that the damage directly caused by the delay in payment would be the appropriate figure to use. In Florida, such compensatory damages are often nominal. The expected recovery might include only the insured’s attorney fees, extra costs, and interest.38 It should be noted that Florida allows emotional distress damages only in a bad faith action involving health care insurance.39

There is another important point to consider with respect to Florida’s statutory bad faith scheme as it relates to UM bad faith damages. In addition to recovery of the excess verdict amount and compensatory damages, Florida’s bad faith statute specifically allows a claimant to recover punitive damages.40 Even LaForet noted that Florida’s bad faith statute awards two penalties.41 This double penalty would seem to violate fundamental Gore/Campbell considerations.

Eventually, the Florida Supreme Court must consider a Campbell challenge to the UM statute, or at least its application to particular cases. If the Florida Supreme Court fails to strike down the statute, it is conceivable that it will attract the attention of the U.S. Supreme Court. In light of the continuous cycle of Campbell challenges to jury awards of punitive damages, a Campbell challenge to a statutorily-sanctioned award at least would break the monotony of jury-sanctioned punitive damages amounts.


  1. State Farm Mutual Automobile Insurance Company v. Campbell, 538 U.S. 408 (2003).
  2. Florida Statute § 627.727(10) reads: “The damages recoverable from an uninsured motorist carrier in an action brought under s. 624.155 [the Florida bad faith statute] shall include the total amount of the claimant’s damages, including the amount in excess of the policy limits, any interest on unpaid benefits, reasonable attorney’s fees and costs, and any damages caused by a violation of a law of this state. The total amount of the claimant’s damages is recoverable whether caused by an insurer or by a third-party tortfeasor.”
  3. As will be discussed later herein, one could argue that the $25,000 policy limit in the underlying contractual UM case cannot be used in the subsequent bad faith case to determine whether bad faith punitive damages exceed the appropriate ratio.
  4. Creative Westlaw searches revealed that only Florida appears to allow such recovery.
  5. First-Party Bad Faith: The Search for a Uniform Standard of Culpability, 52 Hastings L.J. 181, 182 n. 5 (2000) (finding twenty-five states that explicitly allow common law tort recovery, but citing five others that have allowed for “similar damages on expanded notions of contract law,” and two more that have enacted statutes covering bad-faith actions).
  6. See State Farm Mutual Automobile Insurance Company v. Superior Court of Las Angeles County, 123 Cal.App. 4th 1424 (2004).
  7. Id. at 1433. California is a tort-based bad faith state. Id.
  8. See Reithmiller v. Bedford County Grange Mutual Insurance Company, 52 Pa. D. & C.4th 190, 195 (2001).
  9. McLeod v. Continental Insurance Company, 591 So. 2d 621, 626 (Fla. 1992).
  10. Id. at 624.
  11. Id.
  12. Id.
  13. Id.
  14. Id.
  15. Id.
  16. 1State Farm Mutual Automobile Insurance Company v. LaForet, 658 So. 2d 55, 60 (Fla. 1995).
  17. LaForet, 658 So. 2d at 55.
  18. Id. at 61, n. 1.
  19. Id.
  20. E. F. Hutton & Co., Inc. v. Rousseff, 537 So. 2d 978 (Fla. 1989).
  21. McLeod, 591 So. 2d at 625.
  22. Interestingly, involving an insurer’s wrongful refusal to pay, the U.S. Supreme Court acknowledged the ability of a state legislature to fix an amount of damages if those damages were moderate and reasonable. Life & Casualty Company of Tennessee v. McCray, 291 U.S. 566, 570 (1934).
  23. Rousseff, 537 So. 2d at 978.
  24. Id. at 981.
  25. Id. at 981—82.
  26. See Appellant’s Brief, 658 So. 2d 55 (Fla. 1995) (No. 83537).
  27. BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
  28. Campbell, 538 U.S. at 408.
  29. “Further, arbitrarily setting the damages recoverable as the amount of the excess judgment would be analagous (sic) to imposing a penalty or punitive damages upon the insurer.” McLeod, 591 So. 2d at 625.
  30. LaForet, 658 So. 2d at 61.
  31. Campbell, 538 U.S. at 427.
  32. Id. at 428.
  33. Id. at 416—17. The Court maintains this fundamental principle dates back to the Magna Carta and “arises out of the basic unfairness of depriving citizens of life, liberty, or property, through the application, not of law and legal processes, but of arbitrary coercion.” The Court continues, “[t]he reason is that [e]lementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.”
  34. Id. at 419, citing Gore, 517 U.S. at 559. See also Diane M. Barnes, Punitive Damages- the Rationale of Ratios, Vol 21, Number 16 (December 18, 2007); John V. Garaffa, Sleep Tight, Don’t Let the Bedbugs Bite: Exploring the Increasingly Ephemeral Limits on Punitive Damages, Mealey’s Litigation Report: Insurance Bad Faith, Vol. 19, Number 14 (November 15, 2005); John V. Garaffa, Remanded in Light of State Farm v. Campbell: The Opportunity For Further Illumination Presented by Williams v. Philip Morris Inc., Mealey’s Litigation Report: Insurance Bad Faith, Vol. 20, Number 10 (September 19, 2006).
  35. Id.
  36. Id. at 425.
  37. Willow Inn, Inc. v. Public Service Mutual Insurance Company, 399 F.3d 224, 234 (3rd Cir. 2004).
  38. LaForet, 658 So.2d at 61.
  39. Time Insurance Company v. Burger, 712 So. 2d 389 (Fla. 1998).