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Summary Judgment for Insurer Reversed in Bad-Faith Case

December 5, 2012

Goheagan v. Am. Vehicle Ins. Co., No. 4D10—3781 (Fla. 4th DCA Dec. 5, 2012)

Significance

On rehearing, the Fourth District Court of Appeal reversed summary judgment in favor of an insurer in a third-party bad-faith case, ruling there were genuine issues of material fact regarding whether the insurer acted reasonably and prudently in attempting to protect its insured.

Background

An insured of American Vehicle Insurance Company (“AVIC”) caused the death of another motorist (Molly Swaby) on February 24, 2007. Two days after the collision, on February 26, the insured reported the accident to AVIC. On February 28, AVIC sent a letter to the insured advising him that the bodily injury claims for the accident may exceed his policy limits and that AVIC would make every attempt to settle all claims within the policy limits. By March 1, AVIC had determined that its insured was the sole cause of the accident and intended to settle the claim for the $10,000 policy limit. In order to obtain the name of the personal representative’s attorney, AVIC attempted to contact Olive Goheagan, the personal representative of the Estate of Swaby, on five separate occasions: February 28, March 1, March 21, March 27, and April 16. Each time, AVIC was unable to obtain from Goheagan the name of the personal representative’s attorney. On April 19, AVIC learned that Goheagan had filed a wrongful death suit against its insured. AVIC offered to tender the $10,000 policy limits to Goheagan’s attorney on April 26; however, Goheagan rejected the offer. Goheagan also rejected a second settlement offer dated June 7. Subsequently, the wrongful death action went to trial.

Following a jury verdict, the trial court entered a final judgment against the insured in an amount exceeding $2 million. Subsequently, Goheagan filed a common law bad-faith action against AVIC, alleging that AVIC breached its duty of good faith with regard to the insured’s interests. Goheagan specifically alleged that AVIC failed to affirmatively initiate settlement negotiations, failed to actually tender the policy limits in a timely fashion, and failed to warn the insured of the possibility of an excess judgment. 

AVIC moved for summary judgment, asserting that it acted fairly and honestly toward its insured but was prevented from entering into settlement negotiation or consummating a settlement for two reasons: (1) there was no one to make an offer to because the other motorist was in a coma; and (2) because AVIC had been made aware of the fact that there was a lawyer involved, Florida Administrative Code Rule 69b–220.201 prohibited AVIC from communicating or negotiating a settlement with the decedent or her mother, Goheagan. 

Goheagan filed the affidavit and deposition of an expert in opposition to AVIC’s motion for summary judgment. In the expert’s opinion, “[t]he claims should have immediately been recognized as one requiring tender of the $10,000 policy limits. Steps should have been taken to immediately tender the $10,000 policy limits to Molly Swaby. This did not happen.” The expert also submitted that no ethical rules would have prohibited AVIC from tendering a check to Goheagan. 

AVIC argued that the material facts were undisputed and the evidence of bad faith was insufficient as a matter of law. Goheagan argued that there remained genuine issues of material fact precluding summary judgment. The trial court granted summary judgment in favor of AVIC.

Critical Issue

Was AVIC entitled to summary judgment on the common law bad-faith claim?

Holding

In its original opinion, the Fourth District affirmed the trial court’s order granting summary judgment in favor of AVIC. However, on rehearing, the Fourth District issued a corrected opinion that reversed the trial court’s order because there were disputed issues of material fact. 

Analysis

The Fourth District found that there were genuine issues of material fact precluding summary judgment with respect to whether Goheagan’s retention of an attorney was an impediment to the communication of a settlement offer and whether the injured motorist’s comatose status prevented any possible settlement so there was no point in making the offer or tender. The Fourth District determined that the trial court erred in granting summary judgment based on its assumption that there could be no bad faith because the decedent was in a coma and therefore there was no one to whom to make an offer. The Fourth District also rejected AVIC’s argument that AVIC could not have made a written offer or tender to Goheagan because of the application of Florida Administrative Code Rule 69b–220.201.

Impact of Decision

The Fourth District’s decision illustrates the challenges in obtaining summary judgment in favor of an insurer in a third-party bad-faith case.