Disciplined in Sophisticated Defense and Insurance Litigation

July 07, 2004 | Publication| The Continuing Need for De Novo Review of Punitive Damage Awards -- Liggett Group, Inc. v. Engle

John V. Garaffa

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. 18, #5, p. 29 (July 7, 2004). © Copyright Butler 2004.

In Liggett Group Inc. v. Engle,(1) the Florida's Third District Court of Appeal reversed the largest punitive damage award in history. The circumstances of the award indicate it would have bankrupted the defendants and was, in essence, a civil death sentence. If that were the only error, Engle would merely mark another notch in the continued upward spiral of American jury awards. However, the compounded procedural and constitutional errors in Engle make it particularly useful for those who wish to examine the pros and cons of the current system of punitive damages. For those commentators (and dissenters) who would question the need for constitutional limitations on such awards, Engle is an abject warning that, even with increasing supreme court intervention, the system may be well off its intended track.

In State Farm v. Campbell,(2) the United States Supreme Court focused in part on the due process implications posed by the ratio between "actual damages" and often widely speculative "punitive" damages.(3) This was certainly an issue in Engle. However, among a parade of other horribles, the appeals court also found reversible error in the appropriateness of the class,(4) the trial plan,(5) the conduct of plaintiff's counsel, and the relationship between the punitive damage award and the assets of the defendants. These errors combined for a result that should prompt a reexamination of the purpose of punitive damages and the necessarily individual nature of due process.(6)

Now before the Florida Supreme Court, Engle involves a class action suit filed on behalf of six south Florida lead plaintiffs. The plaintiffs alleged that their addiction to nicotine made them unable to stop smoking. They asserted that, as a consequence of their addiction, they developed medical problems including cancer, heart disease, colds and sore throats. They sued the defendants, including the Liggett Group, Philip Morris, Lorillard, Brown & Williamson and R.J. Reynolds, on theories of strict liability, negligence, breach of express warranty, fraud, conspiracy to commit fraud and intentional infliction of emotional distress.

Even a cursory review of the appellate decision reveals Engle is replete with constitutional error. However, the Florida Supreme Court has not explained why it accepted the case for review. The plaintiffs had argued that the decision by the Third District Court of Appeal decertifying the class conflicted with rulings from other Florida appellate districts. As a consequence, the court might intend merely to address the class certification issue.(7) District Court of Appeals also found the award was intended to bankrupt the defendants, a result inconsistent with established state law. However, it remains clear that the award exceeded the standards established by the U.S. Supreme Court in Campbell, and thus presumptively violated the due process clause of the United States Constitution. Any of these findings would provide a basis for review by the Florida Supreme Court.(8)


What Is A Jury To Do When The Defendant Has Already Been "Punished?"

In general, the purpose of a suit for civil damages is to make the plaintiff whole.(9) It is clear the various states have discretion to permit suits for damages in their courts and to set the limits on such suits.(10) In comparison, punitive damages are generally seen as a windfall to plaintiffs. The purpose of punitive damages is, theoretically, to punish and thus deter the tortfeasor in an effort to protect the interests of members of the public other than the plaintiff.(11) Logic would seem to dictate that the penalty permitted by state law should go to the state for the good of all rather than to the fully compensated plaintiff.

Commentators have argued back and forth about the appropriateness of the current system of awarding punitive damages to individual plaintiffs.(12) In Engle we see the constitutional implications of such a system in sharp relief. As the court noted, the state of Florida, acting on behalf of all members of the public, had already sued the defendants for fraud, conspiracy, and the sale of a defective and "addictive" products, the same allegations of the class members in Engle. In the earlier suit, the state had asserted punitive-damage claims.(13) Other states around the country brought similar suits which were settled in 1997 and 1998.(14) Florida entered into the Florida Settlement Agreement ("FSA"), which resolved with finality all of Florida's claims, including those for punitive damages.

The fundamental unfairness of multiple punitive damage awards for the same conduct was not lost on the defendants. They moved to preclude any punitive award on the grounds that the "public's" punitive damage claims against the tobacco industry had been settled in the prior lawsuit. The trial court denied the motions. In its reversal, the Florida Court of Appeals reaffirmed the basic principle that, whoever might be the nominal plaintiff, punitive damages, at least theoretically, inure to the benefit of society. Thus the earlier punitive damage settlement by the state was binding upon the state's citizens even though they were not named parties to the earlier suit.(15)

Apart from its application of principles of res judicata to punitive damages, the Engle decision is interesting for its concise restatement of the principle underlying that application. The court states bluntly that the plaintiffs, as private citizens, do not have a "right" to the recovery of punitive damages. Instead, such damages merely serve as punishment for conduct that is adjudged to be a "public wrong." As such, punitive damages are awarded solely as a matter of public rights or interests, in order to serve the public policy of punishment and deterrence.(16) As a result, the court properly found the earlier Florida settlement of punitive damages against the defendants precluded the plaintiffs' punitive-damage claims in Engle.

The U.S. Supreme Court's focus on the ratio between the alleged harm and punitive damages in Campbell(17) suggests that the application of the principles of res judicata could be more expansive than that applied by the court in Engle. If res judicata bars the Florida plaintiffs' claim in Engle, why wouldn't the punitive damage award in Campbell bar all future punitive damage claims by Utah residents for claims handling practices by the insurer in that case? After all, the evidence was not limited to conduct against the named plaintiff. Instead, the evidence was expanded to the limit of activities that would support the "state's" interest in deterrence. Once such evidence is entered against the defendant, any resulting punitive damage award presumably addresses the state's, and hence every state citizen's, interest in punitive damages for such conduct during the period addressed by plaintiff's evidence. Subsequent claims for punitive damages by other state citizens would seemed to be cumulative and thus barred by the principles espoused by the supreme court in Campbell.(18)

In essence, even a single digit punitive damage award would seem to violate constitutional protections if it comes on the heels of a different punitive damage award for the same conduct in another case.(19) As the Engle court suggested, the trial court is obligated to examine the record to determine whether the behavior at issue in the instant case was used to support the award of punitive damages against the defendant in an earlier case. Unless the earlier plaintiff limited the evidence to the facts involving his or her particular claim, it would seem they will have foreclosed subsequent punitive damage claims by other, similarly situated, members of the public. After all, the punitive damage award in the earlier case was theoretically entered to protect that public rather than to merely enrich the earlier plaintiff and his or her counsel.

One can anticipate the protest by plaintiff's counsel that such a result enriches the first citizen (and their counsel) to the courthouse, depriving future plaintiff's (and their counsel) of their "fair" share of the spoils. As noted by the court in Engle, the plaintiffs never had a right to punitive damages. If the state legislatures wish, they can ameliorate the unfairness of such windfalls by providing the successful plaintiff with a bounty for litigating the issue of punitive of damages on behalf of their fellow citizens and appropriating the bulk of the award for the good of those citizens.


Does A Civil Death Sentence Violate Due Process?

Much has been written on the nature of the Campbell(20) factors and the importance of striking the appropriate constitutional balance between actual damages and punitive damages.(21) Engle addresses a more personal limitation. Regardless of the ratio between the actual and punitive damages, the state interests cited in support of punitive damages would seem to prohibit a jury from crafting a punitive damage award that is intended merely to bankrupt (kill) the corporate defendant. Florida, like many other states, prohibits bankrupting punitive awards.(22) Nonetheless, the jury in Engle, urged on by appeals to racial prejudice, jury nullification and the personal representations of plaintiffs' counsel, seemed intent on precisely that. The experts employed by both sides agreed that the $145 billion punitive award would extract all value from the defendants and put them out of business.

As noted by the appeals court in Engle, the power of state courts is necessarily constrained by principles of federalism, including preemption. The tobacco industry is heavily regulated. It is clear that the U.S. Congress has the power to legislate such businesses out of existence. It is equally clear that it chooses not to do so.(23) The various states are constrained by federal regulation. No individual state has the power to outlaw or punish behavior Congress has, by legislation, decided is lawful. Engle raises the question of whether state courts can be used as an alternate means to accomplish such an end.(24) The Florida Court of Appeals reminds us that, however unsympathetic a defendant, due process prohibits the various states from allowing their civil court systems to be used to do what the public's elected representatives decline to do by legislation.(25)

In additional to principles of federalism, the court in Engle discusses the due process considerations implicit in bankrupting awards. The court's reasoning suggests that, in addition to violating Florida law, such civil death sentences, violate constitutional protections. In essence, punitive damages are constitutional because the various states can articulate a valid interest in the deterrence and punishment of behavior that poses a threat to its citizens.

In Engle, the defendants properly established their net worth and ability to pay through the introduction of the defendants' audited financial statements and through the testimony of each manufacturer's CEO. The defendants established that their consolidated net worth was no more than $8.3 billion and their collective capacity to pay any punitive award and continue operations was far less.

An examination of the defendants' individual punitive damage awards leaves little doubt as to the jury's intention.(26) The jury either decided to completely disregard the implications for the evidence as to net worth, or affirmatively decided to use that evidence in an unconstitutional manner.(27) The record shows that each punitive damage award was actually a double digit multiple of that defendant's individual net worth.(28)



Net Worth


Ratio of Award to Net Worth

Brown & Williamson

$894 million

$17.59 billion



$921 million

$16.25 billion



$33.8 million

$790 million


Philip Morris

$6.4 billion

$73.96 billion




$36.28 billion


Engle illustrates a tension that has not been well resolved by the courts. The supreme court has instructed that the appropriateness of a punitive damages award cannot be justified solely upon the wealth of the defendant.(30) Instead, the state's (or the jury's) desire for retribution and deterrence must be balanced against the requirement that the punishment be reasonable and proportionate to the harm suffered by the particular plaintiff. Theoretically, any punitive damage award must also protect the state's interest in preserving the actual damage claims of other prospective plaintiffs.(31) While important to the issue of deterrence, the focus on the net worth of the defendants increases the danger that the jury will arbitrarily use the verdict to express their personal bias against the defendants or against big business in general.(32)


Adhering To The Gore/Campbell Factors

In Campbell,(33) the supreme court held that a punitive damage award that exceeded a single-digit ratio between punitive and compensatory damages presumptively violated due process. While the court declined to set a bright line, there is no doubt that the vague boundary put forth by the supreme court was utterly abandoned by the Florida trial court.

The Florida jury in Engle awarded $12.7 million in compensatory damages to the three named plaintiffs(34) and $145 billion in punitive damages, a ratio of $11,417 for every dollar of actual damages. Under the trial court's novel procedure, punitive damages were determined before any findings of actual damages. In defense of the trial court, one might argue that the amount of actual damages is still unknown. Perhaps, once actual damages for each member of the class are determined, the ratio between actual and punitive damages may well be within the limitations set by the supreme court in Campbell. However, such an argument ignores the very basis for the supreme court's direction on punitive damages.

In both BMW of North America, Inc. v. Gore and State Farm v. Campbell,(35) the supreme court cautioned that the due process clause of the fourteenth amendment prohibits the imposition of grossly excessive or arbitrary punishments.(36) While acknowledging the permissible state interests in deterrence and retribution, the court advised reviewing courts to consider three guideposts: (1) the degree of reprehensibility of the defendant's misconduct;(37) (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.(38) The supreme court made it clear that state sanctioned awards which were excessive and disproportionate to the wrong committed would constitute an unconstitutional deprivation of the defendant's property.

Despite this guidance, the trial court in Engle somehow fashioned a trial plan that permitted the jury to determine punitive damages before any finding of liability. In fact, the trial plan adopted by the Florida court seemed almost designed to make it impossible to adhere to the basic constitutional restrictions imposed by the Campbell court. Without a finding of liability, there was no way for the jury to measure the degree of reprehensibility of the defendant's misconduct as to the individual plaintiffs. Similarly, a complete failure to determine the actual or potential harm suffered by the plaintiff made it impossible for the jury to determine a punitive damages award that would within the appropriate range. Lastly, bereft of any determination of actual damages, neither the jury nor the trial court was in any position to compare the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed for comparable conduct. Instead, the jury's verdict as to punitive damages seemed to reflect nothing more that a determination that the defendants were bad, most assuredly hurt some, as yet unknown, people, and should thus be punished. While the court in Campbell declined to draw a "bright line," the line actually drawn is not so dim as to suggest that the actions of the Florida trial court and jury might ever pass constitutional muster.


Guardians Of The Constitutional Process

Under the supreme court's rulings, it is clear that, at a minimum, due process requires that punitive damage awards reflect some rational connection between the harm brought about by improper conduct and a resulting punitive damage award arguably imposed to protect the legitimate interests of society. It is also clear that counsel, as officers of the court, have a duty to act within the law. Finally the constitutional process requires courts to step in when counsel fail in their duty. Otherwise, a trial for actual and punitive damages becomes, at best, an unconstitutional popularity contest between the plaintiff and defendant. At worse it becomes an exercise in which jurors abandon the law and, on the basis of whimsy, fashion their own plan for the redistribution of wealth within their communities. If the Florida Appeals Court has correctly summarized the record, the trial in Engle exemplifies the potential constitutional pitfalls inherent in the current system.

The Florida Court of Appeals notes what it believes to be obvious error on the part of the trial court in the conduct of the case. However, it reserves its harshest language for what it perceives as the improper tactics of plaintiffs' counsel. As one reads the appellate decision, a number of starling phases fairly leap off the page. At one point the court characterizes the behavior of plaintiffs' counsel as "racial pandering." The court also notes with disapproval those portions of the trial record where it believes plaintiffs' counsel repeatedly encouraged the jury to ignore the law when reaching their decision on damages. Finally, the court highlights argument by plaintiffs' counsel that it interprets as an invitation for the jury to disregard the negative impact of a huge award because the award would be inevitably be subject to appellate review and payment over time.

In Phase 1 of the trial the jury was to try certain "common issues," determine the potential entitlement of subclasses to punitive damages and then determine a "basis or ratio" for computing punitive damages individually for each class member within each subclass. In opening statements during Phase I, plaintiffs' counsel told the jury that the defendants "study races" and "divide the American consumer up into groups," including "white" and "black." During this phase, plaintiffs' counsel apparently compared defendants' conduct with genocide and slavery. The trial court sustained a defense objection but, undeterred, plaintiffs' counsel proceeded to tell the jury that, like slavery and the Holocaust, there was just one "side" to whether the defendants should continue to sell cigarettes. Plaintiffs' counsel also presented an expert who testified that defendants' advertising had "perpetuated" the "racial segregation" of America through the 1970's and 1980's.

If such conduct was not a sufficient departure into constitutional error, plaintiff's counsel again descended into what the appellate court believed to be racial pandering during his cross-examining of a historian called by the defense. Noting that the defendants' historian had done some work on the study of Vice President John Calhoun, plaintiff's counsel suggested that the witness admired Calhoun, a defender of slavery before the Civil War. As noted by the Florida Appeals Court, plaintiff's counsel used the witness's resume reference to launch into the following speech about slavery:

[Y]ou know, according to people like Calhoun, there were two sides to that story. I mean, one side was: let's abolish slavery, and let's give people their freedom. And the other side was espoused by an intellectual such as Calhoun: No, slavery is okay. It's good. We need it. It's good for the South, good for the economy. Correct? There were two sides to that issue, according to people like Calhoun.

Having done his best to transform a suit about medical injuries due to tobacco use into a referendum on racism, plaintiff's counsel sought to free the jury from any other possible restraint on their emotions. The following excerpt, cited by the Florida Appeals Court in its reversal, illustrates the directness of counsel's appeal for jury nullification:

If you admit that you sell a product that causes cancer–I admit my product causes cancer–and if you also admit it's also addictive, get out of the business. That's the only moral, ethical, religious, decent judgment to make. . . .  If you sell a product which causes cancer and which is addictive, stop selling it. Stop selling it, because you know it's doing unbelievable harm to your fellow Americans.

The defendants' objection was inexplicably overruled. Plaintiffs' counsel continued:

[The defendants say] [i]t's a legal product. It's a legal product. Legal don't make it right. Legal don't make it right.

Plaintiffs' counsel then explicitly tied these racial references to appeals for jury nullification of the law during closing argument. He set the stage by telling the jury:

And let's tell the truth about the law, before we all get teary-eyed about the law. Historically, the law has been used as an instrument of oppression and exploitation.

According to the Florida Appellate Court, plaintiffs' counsel repeatedly urged the jury to fight what he called "unjust laws" citing the civil disobedience of Martin Luther King and Rosa Parks. He compared the defendants' reliance on the laws which provided for the lawful marketing of tobacco to positions taken by defenders of slavery and of the Holocaust. He compared the jurors' task, to the fight against segregation, the civil rights movement and as a fight against unjust laws. Counsel then tied this period in the past directly to the defendants, by telling the jury to stand up to the defendants' "lawful" conduct in marketing and selling cigarettes.

While one may be prompted to chalk up "missteps" by counsel to the inevitable emotion of litigation, this does not seem to have been the case in Engle. As noted by the Florida Appellate Court, there was striking evidence that the impermissible conduct of plaintiffs' counsel was intended to produce precisely the constitutional error that occurred. The court noted with disapproval that, after the Phase I closing arguments, the defendants discovered a book authored by plaintiffs' counsel. According to the court, in that book counsel boasts about having used the identical race-based nullification arguments in an earlier murder trial in which he obtained an acquittal. In Engle, plaintiff's counsel repeated his earlier performance almost exactly, well aware that the nullification arguments and racial appeals he presented to the jury would result in incurable prejudice. What plaintiffs' counsel apparently failed to realize was that while a criminal acquittal cannot be appealed on those grounds, a civil verdict obtained by such tactics is destined for the proverbial dustbin.

Assuming that the appellate court has accurately characterized the record at trial, one is left with a disturbing unwillingness by the trial court to rein in improper conduct by plaintiff's counsel. Anyone who has spent time as a member of the judiciary can sympathize with the reluctance to grant a mistrial after a lengthy case. Clearly, if inadvertent error can be cured with an instruction, the interests of the parties and the public dictate a less extreme response. However, if we are to credit the observations of the Florida Appellate Court, plaintiff's counsel in Engle began Phase I with open racial pandering and never looked back. Given the impact of such conduct on any case, it would seem that the time to talk about a mistrial would have been on that first day. After a second such reference, prudence would seem to suggest that plaintiffs' counsel, and the case, should have been shown the courthouse door.

In one of his repeated appeals for jury nullification, plaintiff's counsel devoted a portion of his argument analogizing the sale of tobacco product to segregated water fountains in the courthouse. He advised the jury, "The point I'm making is, the point I'm making, that some day, some day our kids and grandchildren are going to say ... [h]ow did you let them get away with it? How did you let them get away with it?" Given the extent and nature of the improper conduct by plaintiffs' counsel, a similar question might well be posed to the Engle trial court.


The Future

The decision in Campbell prompted some to suggest that the worst abuses of the current punitive damage system might be behind us. That view, and the supreme court's most basic guidance, has apparently failed to trickle down to some state trial courts. Almost a year after the reversal of Engle, a Texas jury awarded $100 million in actual damages and $900 million in punitive damages to the family of a woman who died of primary pulmonary hypertension after taking the diet drug Pondimin.(39) The facts advanced by the defendant indicated that the woman was morbidly obese, had a family history of cardiovascular disease and did not develop symptoms of primary pulmonary hypertension until more than four years after she stopped taking the drug. Defendant also pointed out the deceased had taken four other diet drugs after taking Pondimin. Nonetheless, in a verdict disturbingly reminiscent of Engle, the jury found the maker of the drug acted with actual malice in marketing the drug.

In addition to its apparent contravention of the constitutional restrictions outlined by the supreme court, the verdict permitted by the trial judge exceeded the state's estimated $4 million cap on punitive damages. Motions to set aside the award are pending before the trial court. We will have to wait and see if the Texas trial court provides any more relief than the trial court in Engle.

In Campbell,(40) the supreme court held that a punitive damage award that exceeded a single-digit ratio between punitive and compensatory damages presumptively violated due process. While the court declined to set a bright line, there is no doubt that the vague line actually drawn was crossed in Engle. Even if the awards had not been calculated to bankrupt the defendants, the ratio between the actual damage award and punitive damages violated due process.

Despite the transparent nature of the error, the trial court denied the defendants' motions for remittitur or a new trial. In light of its description of the record, it is not surprising that, in its reversal, the Florida Appellate Court found the denial was an abuse of discretion. Among the other errors discussed above, the appellate court found that the award was excessive as a matter of law, did not promote a valid societal interest and thus violated the due process rights of the defendants.

Quite apart from these interesting due process issues, the Engle award has had the rather bizarre effect of making allies of the various states and the defendant tobacco companies. This latest punitive award was supposedly entered to protect society. However, if the Engle award is upheld, it is clear that it will bankrupt the defendants. If it does, the Engle award will strip the various states of the fruits of earlier punitive awards, awards that would actually have gone to benefit the broader society. All eyes are therefore, once again, on the Florida Supreme Court, as new collection of strange bedfellows wait with bated breath.



1.  Liggett Group Inc. v. Engle, 853 So. 2d 434, (Fla. 3rd DCA, 2003). For simplicity, additional endnote citations to Engle have been omitted.

2.  State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, (2003).

3.  See: DeCamp, Beyond State Farm: Due Process Constraints on Noneconomic Compensatory Damages, 27 Harv. J.L. & Pub. Pol'y 231, 297 (2003) The fundamental problem at that point in the process is that the jury has essentially been asked to conjure a damages figure from thin air. The mechanism for producing a jury verdict in an informational vacuum is entirely arbitrary, and if the jury returns a verdict that is not outrageously large, that is only because the defendant has been lucky.

4.  The court decertified the class on the grounds that the claims of each class member were too unique to be tried collectively.

5.  The trial plan permitted a jury award for punitive damages to the class before determining whether any conduct of the defendants had resulted in injuries to members of the class.

6.  An issue raised by the U.S. Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).

7.  This is thought to be unlikely. As the Court of Appeals noted in its reversal: "In the years since initial affirmance of certification in 1996, virtually all courts that have addressed the issue have concluded that certification of smokers' cases is unworkable and improper." Among other cases, the court cited Barnes v. American Tobacco Co., 161 F.3d 127 (3d Cir.1998), cert. denied, 526 U.S. 1114 (1999).

8.  SECTION 3. (b) (3) of the Florida Constitution provides the supreme court:

"May review any decision of a district court of appeal that expressly declares valid a state statute, or that expressly construes a provision of the state or federal constitution, or that expressly affects a class of constitutional or state officers, or that expressly and directly conflicts with a decision of another district court of appeal or of the supreme court on the same question of law."

9.  BMW of North America, Inc. v. Gore, 517 U.S. 559, 575 (1996).

10.  Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 433 (2001).

11.  Liggett Group Inc. v. Engle, 853 So. 2d 434, 458 (Fla. 3rd DCA, 2003). The court noted the dilemma posed by a punitive damage award which merely flows to the current plaintiffs. The court held "Punitive damages are imposed to benefit society's interests. Because society has an interest in protecting future claimants' demands, the importance of the relationship between the amount of punitive damages and the ability of the defendant to pay the award cannot be ignored." The court also noted that "The excessive award in the present case will frustrate the societal interest in protecting all injured claimants' rights to at least recover compensatory damages for their smoking related injuries. Smokers with viable compensable claims will have no remedy if the bankrupting punitive award in the instant case is upheld."

12.  Smith v. Wade, 461 U.S. 30, 59 (1983) (Rehnquist, J., dissenting). See also: Shores, A Suggestion for Limited Tort Reform: Allocation of Punitive Damage Awards to Eliminate Windfalls, 44 Ala. L. Rev. 61 (1992) and Sharkey, Punitive Damages as Societal Damages, 113 Yale L.J. 347 (2003).

13.  Florida v. American Tobacco Co., No. 95-1446 AH (Fla. 15th Jud. Cir. 1995).

14.  A multistate agreement involved forty-six states, not including Florida. Under these agreements, the defendants in Engle are obligated to pay the states more than $200 billion dollars over the first twenty-five years, and, as the Engle court noted, billions more in perpetuity after that.

15.  The Appeals Court cited earlier Florida cases for the proposition that issues settled by the State or municipality cannot be relitigated by private citizens. Young v. Miami Beach Improvement Co., 46 So. 2d 26 (Fla. 1950), Castro v. Sun Bank of Bal Harbour, N.A., 370 So. 2d 392 (Fla. 3d DCA 1979).

16.  The court cites Florida cases on the issue. See, e.g., Gordon v. State, 585 So. 2d 1033, 1035-36 (Fla. 3d DCA 1991), aff'd., 608 So. 2d 800 (Fla. 1992); see also Chrysler Corp. v. Wolmer, 499 So. 2d 823 (Fla. 1986) (punitive damages are imposed for egregious conduct that constitutes a public wrong); Ingram v. Pettit, 340 So. 2d 922 (Fla. 1976)(same).

17.  State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, (2003).

18.  State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, (2003).

19.  See: Mesulam, Collective Rewards And Limited Punishment: Solving The Punitive Damages Dilemma With Class, 104 Colum. L. Rev. 1114 (2004). The Author argues that a fair reading of Campbell signals a prohibition on multiple punitive awards. She asserts that multiple punitive awards threaten to overdeter defendants and underprotect their due process rights. She also asserts that prospective Plaintiffs would benefit from claim aggregation, without which the winners of the race to the courtroom door reap windfall awards, leaving the coffers depleted for subsequent claimants. The author's thesis is that "punitive damages class stands alone as the procedural device best suited to effect the twin goals of deterrence and retribution, to prevent arbitrary results and overdeterrence, to achieve distributive justice, to protect the due process rights of all parties, and to subject punitive awards to effective review."

20.  State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, (2003).

21.  For a concise review of punitive damage cases through 2003, see the scholarly opinion of Judge Marrero in TVT Records v. Island Def Jam Music Group, 279 F. Supp. 2d 413 (S.D.N.Y. 2003). See also: Chanenson and Gotanda, The Foggy Road for Evaluating Punitive Damages: Lifting the Haze From The BMW/state Farm Guideposts, 37 U. Mich. J.L. Reform 441 (2004) The authors propose a greater reliance on the third guidepost of State Farm, comparison with legislative fines for comparable misconduct. In particular, the authors propose that the highest comparable fine should be the presumptive constitutional limit on a punitive damage award. The authors argue such an approach would give lower courts clear and workable guidance for review of punitive damage awards, provide civil defendants with fair notice of potential awards and reinforce the proposition that important lawmaking authority belongs in the hands of state legislatures.

22.  Turner v. Fitzsimmons, 673 So. 2d 532, 536 (Fla. 1st DCA 1996). But see: Welch v. Epstein, 536 S.E.2d 408 (S.C.App. 2000) ("economic bankruptcy" factor is not an absolute bar to the imposition of punitive damages in South Carolina.) In Welch, the court noted: "The gist and gravamen of Dr. Epstein's assertion is that the law on punitive damages has evolved to the point of erecting an irrevocable financial barrier to the imposition of punitive damages if harsh financial realities emanate from the award. We reject this position. It is untenable and unsupportable under South Carolina precedent and decisions of the United States Supreme Court."

23.  Liggett Group Inc. v. Engle, 853 So. 2d at 460. As the Florida Appeals Court noted, Congress has recognized that cigarettes are dangerous. Nonetheless, federal statutes have protected the right to sell cigarettes for more than sixty years. Under the circumstances, Federal law preempts claims that selling cigarettes is tortious or otherwise improper. See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000); Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001).

24.  Id. "Because the sale of cigarettes is subject to federal regulation, attempts to impose contradictory requirements or prohibitions under state law are subject to at least implied preemption. See, e.g., Insolia, 128 F. Supp. 2d at 1225 ("allowing tort actions against cigarette manufacturers and sellers for the allegedly negligent act of continuing to make and sell cigarettes would interfere with Congress's policy in favor of keeping cigarettes on the market"); see also, Geier v. American Honda Motor Co., 529 U.S. 861, 865 (2000) (federal regulation of car manufacturers preempted state-law tort claims); cf., Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 350 (2001) (state-law claims based on alleged misrepresentations to a federal regulatory agency were preempted)."

25.  Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001); BMW of North America, Inc. v. Gore, 517 U.S. 559, 562; TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993). See also: Finch, Giving Full Faith and Credit to Punitive Damages Awards - Will Florida Rule the Nation, 86 Minn. L. Rev. 497 (2002). The author notes "Engle sounds a grave warning. The current system of tort law increasingly 'commits the fate of an entire industry or, indeed, the fate of a class of millions, to a single jury.' (Citing Castano v. Am. Tobacco Co., 84 F.3d 734, 752 (5th Cir. 1996)). The constellation of interests affected by mass tort litigation–injured persons, consumers, states, national industries, and local economies–exceeds the competence of a single jury or single state court to resolve. A national solution is needed, and by default the task of devising that solution falls on Congress."

26.  Liggett Group Inc. v. Engle, 853 So. 2d at 458. The Florida District Court of Appeals found "The bankrupting punitive award resulted from inflamed juror passion and prejudice which blinded the jury from properly considering the purpose of the award in relation to the defendants' financial capacity." This language stressed the court's adherence to the spirit of Campbell where the court held: "Exacting appellate review ensures that an award of punitive damages is based upon an application of law, rather than a decision maker's caprice." Campbell, 123 S.Ct. at 1520.

27.  Of course it is possible that the jury simply chose to disbelieve the testimony and evidence presented. However, the manner used to establish net worth was consistent with Florida law. See generally: Rety v. Green, 546 So. 2d 410 (Fla. 3d DCA 1989); Salvage & Surplus, Inc. v. Weintraub, 131 So. 2d 515, 516 (Fla. 3d DCA 1961); Witchell v. Londono, 707 So. 2d 796, 799 n. 2 (Fla. 1st DCA 1998); Mercury Marine Div. of Brunswick Corp. v. Boat Town U.S.A., Inc., 444 So. 2d 88, 90 (Fla. 4th DCA 1984); Alexander v. Alterman Transp. Lines, Inc., 387 So. 2d 422, 424 (Fla. 1st DCA 1980). Perhaps more significantly, the plaintiffs' never presented any testimony or evidence that might have drawn into question the veracity of the defendants' testimony on this issue or their audited financial statements.

28.  The court in Engle noted that there had never been a punitive damage award which purported to deprive the defendant of its entire net worth much less one which inexplicably attempted to award more than that. The court cited: Wackenhut Corp. v. Canty, 359 So. 2d 430 (Fla.1978) (2%); Bould v. Touchette, 349 So. 2d 1181 (Fla.1977) (6.2%); Zambrano v. Devanesan, 484 So. 2d 603 (Fla. 4th DCA 1986) (14.29%); Smith v. Telophase Nat'l Cremation Soc'y, Inc., 471 So. 2d 163 (Fla. 2d DCA 1985) (20%); People ex rel. Dep't of Transp. v. Grocers Wholesale Co., 214 Cal. App. 3d 498, 262 Cal. Rptr. 689, 699-700 (1989).

29.  As noted by the court, there was no dispute that defendant Reynolds had a negative tangible net worth after the exclusion of good will, which is not a saleable asset. Reynolds' 1999 income from continuing operations nationwide was approximately $195 million.

30.  Tumey v. Ohio, 273 U.S. 510 (1927).

31.  Mesulam, Collective Rewards And Limited Punishment: Solving The Punitive Damages Dilemma With Class, 104 Colum. L. Rev. 1114 (2004).

32.  Tumey v. Ohio, 273 U.S. 510 (1927).

33.  State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, (2003).

34.  The Florida Appeals Court ultimately determined that even this award was erroneous. The claims of one named plaintiff were barred by the four year statute of limitations and the claims of the other two plaintiffs fell outside the period established for the class itself.

35.  BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996). State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, (2003). In Campbell, the supreme court recognized the states' legitimate interests but found excessive awards of punitive damages do not further a legitimate state purpose and constitute an arbitrary deprivation of property in violation of the Due Process Clause of the Fourteenth Amendment.

36.  See also: Honda Motor Co. v. Oberg, 512 U.S. 415, 432 (1994): "This court has not hesitated to find proceedings violative of due process where a party has been deprived of a well-established common-law protection against arbitrary and inaccurate adjudication."

37.  In defining the reprehensibility portion of the test, the court distinguished between "purely economic harm" and "conduct involving personal injury or indifference to or reckless disregard for the health and safety of others." Gore, 116 S.Ct. at 1599. The court also noted that purely economic harm is not as reprehensible, but that if done intentionally through affirmative actions it can warrant a severe penalty.

38.  Campbell (citing BMW of North America, Inc. v. Gore, 517 U.S. 559, 560-61 (1996).

39.  Coffey v. Wyeth, Tex. Dist. Ct., Jefferson Cnty., No. E167334 (April 27, 2004). (Reported in Toxic Law Reporter, page 478, Volume 19, Number 21, Dated May 20, 2004).

40.  State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408 (2003).

September 08, 2015 PublicationThe Ongoing Struggle Over Removal Of First-Party Bad Faith Cases In Florida

The critical fact that seems to have been glossed over by all of the courts considering this question is the fact that once a final judgment has been entered by a Florida trial court, the court loses jurisdiction to do anything further.

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April 27, 2015 PublicationRicky's Believe It Or Not: Part Two

In the January 26, 2015 edition of this publication, I shared a collection of excerpts from documents authored by attorneys. Given the sheer volume of paper which crosses my desk in reviewing claims for coverage and bad faith, I inevitably come across some very humorous (though not intentionally so) mistakes in the various documents reviewed. This month, I share some of the funniest entries I've seen in deposition transcripts and medical records.

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January 26, 2015 PublicationRicky's Believe It Or Not

As an attorney for more than sixteen years, and a practitioner of insurance bad faith for nearly eleven years, I have seen virtually every kind of bad faith set-up one could imagine. I have shared my observations through various articles published in this fine periodical as well as other publications. The law of insurer bad faith is obviously one which is constantly in flux. Therefore, it would be a simple matter to wax eloquent upon the latest pronouncement from the high court of one of our many state and federal courts. However, I feel compelled to digress from the usual stately discussion of the intricacies of bad-faith law and share some of the more amusing things I have come across during my review of tens of thousands of documents contained in claim files, medical records and correspondence, done in connection with representing insurers in this field.

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December 22, 2014 PublicationChallenging Consent Judgments As Unreasonable Or Tainted By Bad Faith

Generally, if an insurance company refuses to defend its insured against a claim, the insured may protect himself by entering into a stipulated agreement with the claimant and holding the insurance company responsible for paying the claimant the agreed-to amount.

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November 24, 2014 PublicationThe Coverage Action 'Fixed' Bad Faith Damages: Are The Total Damages Binding?

Florida state and federal courts struggle with excess damage verdicts in first-party bad-faith actions arising out of uninsured motorist/underinsured motorist (UM) coverage. Recent case decisions produce mixed results for insurers. But mention UM coverage, bad faith, and total damages, and Florida Statute Section 627.727(10) immediately comes to mind. Comments by two judges framed the Section 10 debate.

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October 27, 2014 PublicationThree Is A Crowd: Revisiting The Third Party Beneficiary Doctrine

This article examines the third party beneficiary doctrine in conjunction with the approaches courts follow with regard to the collection of an excess judgment from a liability insurer.

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September 22, 2014 PublicationCourts' Different Views On Additional Insureds' Duties Under Liability Policy Notice Provisions

Liability policies typically require the insured to provide prompt notice of a claim or suit. Notice is regarded as a condition precedent to the insurer's duty to defend or indemnify. The notice provisions in a typical liability policy seem straightforward. However, issues surrounding notice become complicated when an additional insured, who is typically not a party to the insurance contract and sometimes unnamed in a policy, is involved. Under those situations, courts have had to address, among other issues, the sophistication and resources of the additional insured, whether the additional insured is aware that coverage potentially exists or even that policies potentially exist, whether the jurisdiction requires the additional insured to actually tender the claim or suit or whether another insured's tender of the claim or suit is sufficient and whether there was late notice or no notice at all by the additional insured. Different jurisdictions have reached different results. 

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August 25, 2014 PublicationWall Of Confusion: GEICO General Insurance Company v. Bottini And Its Ill-Begotten Progeny

On July 20, 2012, a three-judge panel of Florida's Second District Court of Appeal released what, on its face, appeared to be a relatively innocuous opinion in Geico General Insurance Company v. Bottini . The Bottini appeal arose as a result of Geico's appeal of a jury verdict in the amount of $30,872,266 rendered against it in an uninsured/underinsured motorist (‘‘UIM'') case. Consistent with precedent, the trial court entered a judgment against Geico in the amount of the policy's limit of liability, $50,000. Because the huge verdict had the effect of fixing the plaintiff's damages in a subsequent bad faith case, Geico naturally sought review of that verdict. The panel opinion concluded simply, ‘‘Based on the evidence presented, we are satisfied that even if Geico were correct that errors may have affected the jury's computation of damages, in the context of this case and the amount of the judgment, any such errors were harmless.''

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June 26, 2014 PublicationUninsured Motorist Bad-Faith Claims: Separate Action, Separate Trial, Separate Damages

First-party bad-faith claims arising from uninsured motorist (UM) coverage are separate and independent actions, too. If the uninsured motorist coverage action is truly separate and distinct from bad faith, one naturally expects a separate trial on bad-faith liability and extracontractual damages. However, there is a unique problem confronting first-party bad-faith claims arising from uninsured motorist coverage under Florida Statute Section 627.727(10). One decision characterizes the problem as a ‘‘conundrum'' created by Florida law.

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May 22, 2014 PublicationBurden Of Proof Issues In Consent Judgments

When a carrier refuses to defend its insured, the insured may consent to entry of a stipulated judgment. 1 In most jurisdictions the insured (or claimant) bears the burden of proof to show coverage exists as a prerequisite to recovery of an excess judgment. 2 The burden of proving coverage for a consent judgment can sometimes create problems. Consent judgments raise many other issues beyond the scope of this article. 3  

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April 25, 2014 PublicationAn Insurance Carrier's Good Faith Obligations Toward Its Insureds In Liability Settlements Where Not All Of the Insureds Are Released

Generally, liability insurers must secure a release of all of their insureds when settling claims against their insureds. However, some courts have recognized circumstances where an insurer may settle for an insured at the exclusion of another while still maintaining its good faith duties toward all of its insureds. Other courts have seemingly rejected the notion that an insurer can ever settle for one of its insureds at the exclusion of others. These release issues occur most prevalently in automobile accidents involving insured owners and additional insured drivers.  

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March 27, 2014 PublicationAnother Item For Your Checklist: The Bad Faith Concerns Related To Overreaching Proposed Releases

A common scenario: claimant's counsel issues a time limit demand for policy limits and the insurer decides to accept the demand and tender the limits. Once the decision is made to accept the demand, the insurer should go through its checklist of concerns to make sure that each element of the time demand is met, while ensuring that the insured is adequately protected.

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March 13, 2014 PublicationBad Faith And Ordinary Negligence: Distinguishing The Excusable From The Culpable

Bad faith and ordinary negligence typically involve two very different standards of care. In most jurisdictions, courts agree that proof of bad faith requires a showing of insurer culpability greater than ordinary negligence.

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December 19, 2013 PublicationRecent Cases Discussing The Advice Of Counsel Defense: The Good, The Bad, And The Discovery

The gravamen of a third-party claim of bad faith is that the insurer failed to settle a claim against an insured when it had the opportunity to do so. The essence of the claim is that the insurer acted solely on the basis of its own interests, failed to properly and promptly defend the claim, and thereby exposed the insured to an excess judgment. However, a claim based on insurer negligence is insufficient to establish bad faith

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November 21, 2013 PublicationThis Mediation Is Confidential, Right?

Mediation is an effective dispute resolution tool because it allows participants to openly discuss all aspects of a dispute without the fear of recourse or retribution. Confidentiality is a critical component of this process. Litigants and insurers participating in mediation often proceed under the assumption that all communications and conduct occurring during mediation will be cloaked with protection. However, exceptions to confidentiality are slowly eroding what is commonly referred to as the absolute ‘‘mediation privilege.''

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October 24, 2013 PublicationSeparating Fact From Fiction: Strategies For Contesting The Excess Consent Judgment

Few legal maneuvers generate greater skepticism – among courts and insurers – than the excess consent judgment, an increasingly common settlement device used In liability cases.

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September 26, 2013 PublicationSome Considerations In Addressing Time-Limit Demands

Liability insurance carriers should be prompt and proactive when they receive a time-limit demand from a claimant. Time is usually not on the carrier's side when it comes to these settlement communications.

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August 22, 2013 PublicationCausal Friday: Better To Be Lucky Than Good

Sometimes it is better to be lucky than good, as the insurers in the following cases learned. These cases demonstrate that, even where the facts indicate that the insurer acted in bad faith, it is still possible for the insurer to escape extra-contractual exposure. In the absence of a causal link between the excess judgment and the insurer's actions, bad faith liability cannot exist as a matter of law.

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July 25, 2013 PublicationAn Insurer's Liability For A Hospital Lien After Settlement Of A Claim That Impairs The Lien

Over forty states have hospital lien laws. Those laws typically allow hospitals to recover against parties, including insurers, who impair their liens. In many states, the hospital lien laws do not clearly identify the type and extent of damages a hospital can recover against a party who impairs a hospital lien. The damages a hospital can recover from a party who impairs a lien depends upon the language of the applicable hospital lien law and the courts' interpretations of that law. Results vary from state to state. 

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June 27, 2013 PublicationWhy Sue For Bad Faith When Consequential Damages Are Available?

Bad faith aside, insurers often assume a claim's ‘‘total" exposure under the insurance contract is the policy's limit.  Courts traditionally allow insureds to recover contractual damages based on the limit, plus legal interest.  However, a new trend is emerging in some jurisdictions.

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May 23, 2013 PublicationIs The Bad Faith Claim A Part Of The Package?

In an effort to create yet another way to present a claim for bad faith against an insurance company, plaintiff attorneys have been submitting ‘‘package deal'' demands on behalf of multiple claimants who have all incurred damages as a result of the same occurrence.

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April 25, 2013 PublicationRevisiting The Litigation Privilege And Its Application In Bad-Faith Cases

Over the last 25 years, courts have wrestled with the issue of whether to apply an absolute privilege to preclude bad-faith lawsuits based on an insurance company's conduct during the litigation of an underlying first-party or third-party claim. Some courts still refuse to recognize a bad-faith claim against an insurance company based upon its post-litigation conduct.  However, the prevailing trend seems to suggest that courts will find that some of the insurer's conduct remains relevant and admissible, while the conduct of the insurer's attorneys in defending the claim remains privileged.

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March 28, 2013 PublicationWho Is Entitled to the Claims File?

The United States Supreme Court has recognized the "attorney-client privilege" as "one of the oldest recognized privileges for confidential communications," the purpose of which is to encourage "full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice."

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February 28, 2013 PublicationNavigating The Southern Bad-Faith Buffet: Extra-Contractual Liability In The Absence Of Breach Of Contract

In the Southeast, catastrophic natural disasters have become all too common, and the physical and financial consequences are borne by the entire region. Five of the top ten costliest hurricanes to hit the United States have impacted North Carolina, and with approximately $159.6 billion in insured coastal assets, North Carolina continues to have significant loss exposure.

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January 31, 2013 Publication‘Bad-Faith' Discovery: Claim Files, Training Materials, Personnel Files, And The Kitchen Sink

A recent discovery order in the federal court case of Signature Development, LLC v. Mid-Continental Casualty Company is illustrative of our liberal discovery. Note, this liability insurer has yet to be found liable or guilty of any wrongdoing.  Signature alleges, however, that the corporate defendant insurer breached the contract of insurance, committed ‘‘bad-faith,'' breached its fiduciary duty to its insured, committed unfair trade practices, intentionally inflicted emotional distress and vexatiously refused to pay. Based upon these allegations alone, the court addressed the scope and burden of discovery. 

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November 21, 2012 PublicationMediation (Resolving Cases With Extra-Contractual Exposure)

By definition, mediation begins with ‘‘me.'' Once conflicting parties have resorted to litigation, they naturally act purely in their own respective self-interest. When a mediation involves allegations of insurer ‘‘bad faith,'' this is especially so. The parties are initially polarized. 

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October 25, 2012 PublicationSquare Pegs In Round Holes: When The Adjustment Process Meets The Evidence Code

If given the chance, most property adjusters would skip the aspect of their job involving litigation. Avoiding lawyers, depositions, and, of course, trials would alleviate much stress. Unfortunately, dealing with lawyers and litigation is an unavoidable job hazard for most adjusters.

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September 27, 2012 PublicationThe Troubles Of Trafalgar : Bad Faith In the Absence Of Breach Of Contract

How can a first-party insurer be legally liable for insurance ‘‘bad faith'' if it has already been found not to be liable for breach of the insurance contract? According to at least one Florida appellate court, by paying an Appraisal Award timely.

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August 23, 2012 PublicationScary Stuff: Insurance Claim Files And Exceptions To The Attorney-Client Privilege

Are all attorney-client communications contained in such claim files that were thought to be confidential now discoverable because the insurer lost the underlying first-party claim, litigation, or appeal

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July 26, 2012 PublicationThe Vanishing Right To Federal Jurisdiction In Bad Faith Claims In Florida

On April 25, 2012, the United StatesDistrict Court for the Southern District of Florida issued its opinion in Moultrop v. GEICO General Ins. Co., remanding a bad faith claim to state court pursuant to the one-year ‘‘repose'' provision of 28 U.S.C. § 1446(b). The Moultrop decision is one more in a growing line of cases which refuse insurers access to a federal forum based on the repose provision, under the anomalous reasoning that the right to removal expired before the cause of action for bad faith accrued. Unfortunately for the insurers, 28 U.S.C. section 1447(d) precludes appellate review of an order granting a motion to remand.

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May 24, 2012 PublicationProtecting Confidential Communications: Application Of The Attorney-Client Privilege In First-Party Insurance Bad-Faith Cases

Discovery of the insurance company's entire claim file—including confidential communications between the insurer and its attorney—is often the first target on the insured's agenda in a first-party bad-faith lawsuit. In any other context, a party's request for discovery of the opposing party's confidential attorney-client communications would be viewed by courts as a brazen and inappropriate attempt to obtain information obviously protected by the attorney-client privilege; however, in the context of bad-faith litigation, this type of request has been dignified by courts who often look for ways to permit discovery of the insurer's attorney-client communications.

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April 26, 2012 PublicationCreative Methods Used To Set-Up ‘Bad Faith' Claims — Use Of Multiple Coverage Demands

In the past decade, the bad-faith environment has rapidly shifted from a useful tool used by consumers to protect themselves from arguably egregious actions to an elaborate trap set by personal injury plaintiff attorneys to reap outrageous awards from seemingly innocent conduct by claims professionals. Insurance companies now fear multi-million dollar verdicts based on policies written for insureds who did not want more than the absolute minimum coverage allowed. Based on technicalities, clever plaintiff attorneys attempt to convince courts to rewrite insurance policies, allowing for unlimited recoveries.

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March 22, 2012 PublicationA Liability Insurer's (Almost Absolute) Right To Settle Claims Without The Insured's Consent

Many cases hold that a liability insurer can settle a claim against its insured without the insured’s consent because the policy language gives an insurer the right to settle even when an insured may not want to settle.1 For the most part, courts in California, Florida, and Louisiana allow insurers to settle claims without the insured’s consent where the policy gives the insurer the right to settle as it deems expedient. However, courts may nonetheless consider whether a settlement may have adversely impacted the insured to determine whether an insurer acted in good faith.

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February 23, 2012 PublicationBullock v. Philip Morris USA, Inc.: Where ‘Reprehensibility' As An Exception To Constitutional Protections And the Ratio Guidepost Includes The Wealth Of The Defendant

On November 30, 2011, the California Supreme Court exercised its discretion and let stand a $13.8 million punitive damage award that was more than 16 times the compensatory damages awarded by the jury. The case, Bullock v. Philip Morris, 1 (Bullock) involved a smoker diagnosed with lung cancer who filed suit against the cigarette manufacturer, seeking damages based on products liability, fraud, and other theories.

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January 26, 2012 PublicationWho Killed Reverse Bad Faith? And Why It Could Make A Comeback

In every state in the union an insured can seek some form of compensation for an insurer’s ‘‘bad faith’’ in adjusting a claim.Yet only one state, Tennessee, currently allows an insurance company to recover damages caused by the insured’s bad faith.This imbalance has allowed ‘‘bad faith’’ litigation to become big business.The tendency of courts to treat insureds like a disadvantaged class has created an uneven playing field for insurance companies in claims adjustment.

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December 22, 2011 PublicationA Wolf In Sheep's Clothing (Insurers Should Be Vigilant In Florida)

[ Editors note: Alan J. Nisberg, Esq., is a partner with the law firm of Butler Weihmuller Katz Craig LLP, which has offices in Tampa, Chicago, Charlotte, Mobile, Tallahassee, and Miami. He is an experienced trial and appellate attorney, specializing in extra-contractual, class action and complex coverage litigation. This commentary, other than the quoted material, expresses the authors opinions -  not the opinions of Butler or Mealey's. Copyright © 2011 by the author. Responses are welcome. ] 

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November 23, 2011 PublicationProximate Causation In Third-Party Bad Faith: Not Every Bad Decision Is A Bad-Faith Suit

Proximate causation is an element of a claim for bad faith. An often-overlooked element, but an element nonetheless. Even claims with grievous claim-handling errors and high excess judgments can still be very defensible if there is no proximate causation between the two. This article examines the element of the bad-faith cause of action that is most often glossed over. 

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October 27, 2011 PublicationRecent Application Of State Farm v. Campbell In Bad-Faith Cases

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 25, #10 (September, 2011). © 2011 

[ Julie A. Simonson is an associate with the law firm of Butler Weihmuller Katz Craig LLP, which has offices in Tampa, Chicago, Charlotte, Mobile, Tallahassee, and Miami. She is active in the firm's Extra-Contractual and Liability Departments. Any commentary or opinions do not reflect the opinions of Butler or Mealey's. Copyright © 2011 by Julie A. Simonson. Responses are welcome. ]

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August 25, 2011 PublicationApplying The Litigation Privilege In Bad-Faith Cases

[BrianD.Webb,Esq.,is a partner with the law firm of Butler Weihmuller Katz Craig LLP, which has offices in Tampa, Chicago, Charlotte, Mobile, Tallahassee, and Miami. He is an experienced trial and appellate attorney specializing in extra-contractual and complex coverage litigation. This commentary expresses the author's opinions–not the opinions of Butler or Mealey's. Copyright#2011 by Brian D. Webb. Responses are welcome.] 

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July 28, 2011 PublicationThe Insurer's Bill Of Rights (A Balance Of Power)

[Editor's Note: Alan J. Nisberg is a partner in the Tampa office of Butler Weihmuller Katz Craig LLP, which also has offices in Chicago, Charlotte, Mobile, Tallahassee, and Miami. He is an experienced trial attorney and appellate lawyer, specializing in extra-contractual, class action, and complex coverage litigation. This commentary, other than the quoted material, expresses the author's opinions - not the opinions of Butler or Mealey's. Copyright#2011 by the author. Responses are welcome.] 

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June 23, 2011 PublicationChoice-Of-Law Principles Affecting Insurance Bad-Faith Claims

[R. Steven Rawls is a partner and Ryan K. Hilton is a senior associate with the law firm of Butler Weihmuller Katz Craig LLP, which has offices in Tampa, Chicago, Charlotte, Mobile, Tallahassee, and Miami. This commentary expresses the author's opinions–not the opinions of Butler or Mealey's. Copyright © 2011 by R. Steven Rawls and Ryan K. Hilton. Responses are welcome.] 

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February 24, 2011 PublicationThe Duty to Initiate Settlement Negotiations: Where Does it Begin and How Far Does it Go

In some jurisdictions, including Florida, the courts recognize a duty in some circumstances for a liability insurer to initiate settlement negotiations with a third-party claimant before the claimant has ever made a demand. This duty is a relatively recent invention in the common law and has yet to be fully defined. While most articles on the subject tend to focus on whether or not this duty should exist in the first place, this article skips that threshold question and delves into the particulars that apply in the jurisdictions that recognize it. What triggers the duty? What is required of the insurer to discharge it? What are the defenses to a claim for bad-faith failure to initiate settlement negotiations? This article tackles these emerging questions and more in attempt to define this nascent duty.

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December 23, 2010 PublicationDoes Policy Reformation Create A Retroactive Bad-Faith Claim?

[Editor's Note: Laura A. Turbe-Capaz is a senior associate in the Tampa office of Butler Weihmuller Katz Craig LLP, which also has offices in Chicago, Charlotte, Mobile, Tallahassee, and Miami. She is an experienced trial attorney in the firm's Extra-Contractual, Third-Party Coverage, and Liability Departments. Copyright#2011 by Laura A. Turbe-Capaz. Responses are welcome.] 

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December 09, 2010 PublicationSplitting The Baby: The Insurer's Duty To Notify The Insured Of The Need For An Allocated Verdict

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 24, #15 (December 9, 2010). © 2010  

[Editor's Note: Fay E. Ryan is a partner the Tampa office of Butler Weihmuller Katz Craig LLP, which also has offices in Chicago, Charlotte, Mobile, Tallahassee and Miami. She is an experienced trial attorney in the firm's Extra-Contractual, Third-Party Coverage, and Liability Departments. Kimberly N. Gorak is a senior associate in the Tampa office of Butler , also practicing in the firm's Extra-Contractual, Third-Party Coverage, and Liability Departments. Any commentary or opinions do not reflect the opinions of Butler or Mealey's. Copyright © 2010 by Fay E. Ryan and Kimberly N. Gorak. Responses are welcome .]

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November 24, 2010 PublicationPitfalls For The Unwary: The Use Of Releases To Preserve Or Extinguish Any Potential Bad-Faith Claims Between The Primary And Excess Insurance Carriers

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 24, #14 (November 24, 2010). © 2010 

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September 23, 2010 PublicationWe Said What We Meant And We Meant What We Said! — Enforcing Contract Language Despite Assertions Of Bad Faith And Insurer 'Misconduct' During The Adjustment Of The Claim

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 24, #10 (September 23, 2010). © 2010  

[Editor's Note: John V. Garaffa is a Partner and Jason M. Seitz is an associate with the law firm of Butler Weihmuller Katz Craig LLP in Tampa, Florida.  Any commentary or opinions do not reflect the opinions of Butler or Mealey's Publications. Copyright © 2010 by Jason M. Seitz and John V. Garaffa. Responses are welcome.]

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August 26, 2010 PublicationChinese-Drywall Cases And Their Impact On Liability-Insurance Carriers In Settling Multiple Claims In Good Faith Against Their Insureds In Certain State Courts

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 24, #8 (August 26, 2010). © 2010  

[Editor's Note: Steve Rawls is a partner and Ryan K. Hilton is a senior associate with the law firm of Butler Weihmuller Katz Craig LLP in Tampa, Florida. Any commentary or opinions do not reflect the opinions of Butler or Mealey's Publications. Copyright © 2010 by R. Steve Rawls and Ryan K. Hilton. Responses are welcome.]

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July 29, 2010 PublicationBad Faith - Variations On A Theme

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 24, #6 (July 29, 2010). © 2010  

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May 27, 2010 PublicationBad Faith and Beyond: A Business Law Primer For Insurers

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 24, #2 (May 27, 2010). © 2010  

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May 13, 2010 Publication(Almost) Twenty Years After Powell: Case Studies On A Liability Insurer's Duty To Initiate Settlement Negotiations

The Florida Third District Court of Appeal’s 1991 decision in Powell v. Prudential Property & Casualty Insurance Co. recognized a duty, in some circumstances, for a liability insurer to initiate settlement discussions with a third-party claimant who has not made a demand. The case proved to have a strong ripple effect, bringing about a sea change in bad-faith jurisprudence for the next twenty years. This article examines the expansion of Powell from a unique facts-driven anomaly to an entire branch of bad-faith jurisprudence and discusses early indications that the courts may be retreating again to applications more in line with the original case.

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March 25, 2010 PublicationBreaking Down Privileges: Discovery of the Claim File In Florida Bad-Faith Actions

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 23, #22 (March 25, 2010). © 2010  

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February 25, 2010 PublicationExtracontractual Recovery Without Bad Faith

Insurance intermediaries (insurance agents and insurance brokers) are especially vulnerable to claims by insureds. While bad-faith actions continue to be the favored method of pursuing recovery beyond a policy limit, some litigants turn to claims against insurance intermediaries (and the insurers they represent) for extracontractual recovery. In addition to bad-faith law, insurers need to know what kinds of claims can be brought in relation to the procurement of the insurance policy itself and what defenses can be raised. This article delves into this often-misunderstood area of the law and illuminates some legal issues with which every insurer should be familiar.

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January 28, 2010 PublicationA Look Back At Some Of 2009s Significant Bad Faith Decisions

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 23, #18 (January 28, 2010). © 2010

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October 22, 2009 PublicationDoes An Insured Owe A Duty Of Good Faith To Its Insurer When The Insured Is Responsible For Defense Costs In A Self-Insured Retention?

Many businesses are increasingly utilizing insurance policies with large self-insured retention endorsements in order to exercise better control over the defense of claims. In these circumstances, an issue may arise regarding whether an insured who is responsible for defense costs under a self-insured retention ("SIR") owes a duty of good faith to its insurer.

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August 27, 2009 PublicationFairly Debatable?

On August 5, 2009, the South Dakota supreme court joined an exceedingly small minority of courts in the United States that have imposed a duty to conduct a reasonable investigation into first-party claims in order to avoid "bad-faith" liability.2 As they say, the road to Hell is paved with good intentions. This decision certainly affirms the truth of that old saw

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July 30, 2009 PublicationWrit Of Certiorari Dismissed As Improvidently Granted -- The Ambiguous End To Philip Morris USA, Inc. v. Williams

On March 31, 2009, the United States Supreme Court dismissed, as improvidently granted, a writ of certiorari in Philip Morris USA, Inc. v. Williams. While the reason for the court's action remains a mystery, it seemed to signal an end to the court's interest in the central constitutional issue in the case: punitive damages. Unfortunately, the court's decision to abandon the issue leaves both the litigants and observers wondering what, if anything, had been gained by years of decisions, reversals and remands.

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April 23, 2009 PublicationArbitrary and Capricious

In Grilletta v. Lexington Insurance Company,8 the United States Court of Appeals for the Fifth Circuit reviewed the insurer's handling of a Hurricane Katrina property claim.9 Mr. Xavier Grilletta and Mr. Randy Lauman owned a vacation lakehouse on the southeastern shore of Lake Pontchartrain, a lake bordering New Orleans to the north. 

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March 26, 2009 PublicationFlorida's Bad Faith Quagmire: Is Summary Judgment Ever Available?

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 22, #22 (March 26, 2009).

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February 26, 2009 PublicationIs Abnormal Becoming The New Normal In Alabama?

This is one of a series of articles originally published in Mealey's Litigation Report: Insurance Bad Faith, Vol. 22, #20 (February 26, 2009).

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November 25, 2008 PublicationUnreasonable Consent Judgments; What Next?

The scene is all too familiar: an insured, disenchanted with its insurer's refusal to defend an action the insured believes is within coverage, decides to enter into a "consent judgment" with the plaintiff, in return for which, the plaintiff agrees only to pursue satisfaction of the "judgment" against the insurer. 

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August 28, 2008 PublicationTorts for Tots (Bad Faith And Other Independent Torts)

The responsibility of caring for a child is not one to be taken lightly. Our society demands vigilance from those who bring new life into rld, and rightly so. We are held to a higher standard in dealing with our offspring than with others. The special relationship between a parent and a child is built upon trust and an expectation that one (the parent) will give security tothe other (the child). So too is the bond between insurer and insured.

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July 15, 2008 PublicationExxon Shipping Co. v. Baker: Sailing Into The Confluence Of Common Law And Constitutional Standards For Punitive Damages

On June 25, 2008, the United States Supreme Court issued its much anticipated opinion in Exxon Shipping Co. v. Baker. The Supreme Court reduced the punitive damage award from $2.5 billion dollars to $507 million dollars, an amount approximately equal to the jury's award of compensatory damages. While the decision certainly warmed the hearts of Exxon's previously discomfitted stockholders, the Court's opinion provides only limited encouragement to defendants involved in the current punitive damage lottery.

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June 17, 2008 PublicationConsequential Damages Under the Insurance Contract -- The New "Bad Faith?"

The ability of an insured to recover consequential damages under an insurance contract allegedly caused by failure or delays in the insurer making payments has traditionally been controversial. Jurisdictions have been divided in their approach as noted in the following annotation cited by the district court in Indiana

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January 22, 2008 PublicationRipe for Campbell Review: A Florida Uninsured Motorist Claimant's Statutory Right to Recover Excess Verdict Damages in a Bad Faith Action

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.

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December 18, 2007 PublicationPunitive Damages - the Rationale of Ratios

Since the Supreme Court’s decision in State Farm Mutual Automobile Insurance Company v. Campbell, courts have struggled to define when the Campbell court’s presumptive limit of 9 to 1 ratio of punitive damages to compensatory damages is appropriate. The Supreme Court stated that the "most important indicium of the reasonableness of a punitive damages award" was the highly subjective measure of the "degree of reprehensibility." Wrestling with such an amorphous concept trial courts and appellate courts have sought to justify various punitive damage awards on the basis of a sliding scale, doing little more than subjectively comparing the "reprehensibility" in the case being reviewed, to other recent cases decided before it. The result is a marked disparity from one court to the next as to what constitutes behavior falling within the five (5) factors of reprehensibility discussed in Campbell.

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July 24, 2007 PublicationOxymoronic ("Tortious Breach of Contract")

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, #6, p. 32 (July 24, 2007).

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June 19, 2007 PublicationWilliams v. Philip Morris Inc. II – The Fog of Legal Rationale

On February 20, 2007, the United States Supreme Court issued its much-anticipated second opinion in the negligence and fraud suit brought by the widow of Jesse Williams against Philip Morris. Mrs. Williams had asserted that the company had purposefully taken actions to obscure the dangers of smoking and, as a result, her husband was deceived into believing smoking was not harmful, a 47 year delusion that ultimately led to his illness and death.

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March 20, 2007 PublicationCaveat Insuror

On December 21, 2006, the Florida Supreme Court released its opinion in Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co.[FN1] In Dadeland, a bare majority of the high Court, led by Justice Lewis, held that an obligee under a performance bond qualifies as an "insured" within the meaning of section 624.155, Florida Statutes (1999). The Court's decision resulted from the following question certified to it by the Eleventh Circuit Court of Appeals:

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September 19, 2006 PublicationRemanded in Light of State Farm v. Campbell: The Opportunity For Further Illumination Presented by Williams v. Philip Morris Inc.

On May 30, 2006, the U.S. Supreme Court again granted a petition for writ of certiorari in the ongoing dispute between Philip Morris and the widow of Jesse Williams, an Oregon resident who died of lung cancer after smoking cigarettes for about 47 years.

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June 15, 2006 PublicationSelected Third-Party Bad Faith Liability Standards Governing Failure to Settle Cases

Under liability insurance policies, insurance companies assume the obligation of defending their insureds. In so doing, carriers can settle and foreclose their insured's exposure or refuse to settle, leaving the insured potentially exposed to damages that exceed the policy limits.  Most courts find that this obligation places insurers and insureds in a fiduciary (or fiduciary-type) relationship.  Accordingly, courts recognize that an insurer owes a duty to the insured to refrain from acting solely on the basis of the insurer's own interests in settlement. This duty extends to situations where an insurer has an opportunity to settle a third-party liability claim against its insured within policy limits and requires an insurer to pay an excess judgement against an insured, where the carrier in good faith should have settled.
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April 18, 2006 PublicationAchilles' Heel: First-Party Property "Bad-Faith" Damages

Insurance "bad-faith" is recognized throughout the United States. In the setting of first-party property insurance, the relationship between the insured and insurer commences contractually. However, that contractual relationship can also provide exposure for tort damages in a first-party "bad-faith" action. Indeed, the threat of facing a first-party property "bad-faith" tort action commonly influences insurers to resolve litigation out of fear, rather than for substantive purposes based on the merits. One of the "Achilles' Heels" of such causes of action is the inability of the insured to prove any measurable "bad-faith" damages. The identification and measurement of "damages" in first-party property "bad-faith" actions varies greatly depending on the jurisdiction. This commentary will discuss certain jurisdictional differences relating to damages in first-party "bad-faith" actions, exclusive of punitive damages.[FN1]

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February 21, 2006 PublicationThe Implied Covenant of Good Faith and Fair Dealing

Until the 20th Century, insurance contracts were treated the same as any other contract, with recovery generally limited to the damages contemplated by the parties when they entered into the contract. Insurance contracts, like any other, were enforced by their explicit terms, and courts were reluctant to substitute their own judgment for the terms upon which the parties agreed absent some independent tort or injustice. By the end of the 19th Century, however, the judiciary in the United States began to recognize a general obligation of good faith performance implied in every contract.  By the 1930s, the implied covenant of good faith became a standard doctrine. This duty of good faith and fair dealing originated to resolve disputes over agreements that were not explicit on pivotal contract terms, or left discretionary power in the hands of one of the contracting parties.

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June 07, 2005 PublicationAn Insurer's Liability For Punitive Damages In An Excess Judgment

Ging v. American Liberty Insurance Company, 423 F.2d 115 (5th Cir. 1970) is a case often cited for the proposition that third party insurers who act in bad faith could be held liable for punitive damages awarded against their insureds. However, the strength of this proposition appears to depend upon the extent to which a jurisdiction would permit the insurability of punitive damages. Those jurisdictions that permit coverage for punitive damages would also likely permit recovery of those damages later as a result of the carrier's bad faith. Jurisdictions whose public policy precludes insuring against punitive damage awards, may be more reluctant to permit recovery in a later bad faith action, depending upon the nature of the liability giving rise to the punitive damage award.

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April 19, 2005 PublicationDetours: Campbell Stops At The Willow Inn

Dealing with punitive damage claims is like driving down a road that is constantly under repair. The road is dangerous, uncomfortable, and full of detours. Although the United States Supreme Court has issued a rather clear and accurate map to help us through this rocky road, in some respects the map is already outdated, just as the road darkens and your interior auto light dims.

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March 22, 2005 PublicationThe Timely Demise of Excess Judgments (Probate Nonclaim Statutes)

Imagine your insured is at fault in an accident that kills her and causes devastating injury to another individual. You (the insurer) fail to meet a settlement demand within policy limits. Liability is clear and excess exposure is inevitable. The claimant files a civil lawsuit naming the "estate" of the insured as the defendant. However, the estate of the insured is not set up yet. Having no entity to actually serve with the complaint, the claimant petitions the probate court for administration of the decedent's estate, has a personal representative appointed, and immediately serves legal process on that representative. A multi-million dollar excess judgment is obtained in the civil action.

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January 18, 2005 PublicationPiece Of Mind: The Utah Supreme Court's Response To Campbell

Given that the Utah Supreme Court (“Utah”) previously reinstated a $145 million punitive damages award in favor of the Campbells, it is not surprising that on remand from the U.S. Supreme Court, this same state high court goes to great lengths to justify the largest punitive damages award it believes could possibly survive further constitutional review.

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November 16, 2004 PublicationHospital Lien Laws and Personal Injury Settlements

Many jurisdictions have hospital lien laws. These laws ensure payment to hospitals for the beneficial services they provide. Some jurisdictions liberally interpret these laws so that technical deficiencies in establishing or seeking enforcement do not defeat payment to the hospitals. Other jurisdictions are less likely to ignore such deficiencies.

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January 21, 2004 PublicationDo Liability Insurers Have A Duty To Make An Offer Where There Is No Claim Against The Insured?

A liability insurer has a duty to handle and settle claims made against its insured in good faith. Courts have grappled with whether this duty requires an insurer to make a settlement offer when there is no claim against the insured.

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October 15, 2003 PublicationJuggling Multiple Claims With Inadequate Limits

Everyone knows that an insurer has to act in good faith to its insured when settling claims with third parties. However, when an insurer is faced with multiple claims exceeding the limits of coverage, the insurer is faced with tough choices. Insurers are frequently called upon to defend these choices in “bad-faith” actions. Can an insurer get summary judgment on the issue of “bad-faith” in multiple claimant/inadequate limits cases? Will the insurer be forced to litigate the “bad-faith” issue through a trial? This article attempts to answer these questions and provide guidance to insurers on meeting their duty of good faith when met with multiple claims, the sum total of which exceed policy limits.

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August 13, 2003 PublicationReflections – Thirty Years After Gruenberg v. Aetna Ins. Co.

It has long been accepted that parties to an insurance contract have an obligation to deal with each other fairly and in good faith. As early as 1914, this obligation was found to be grounded within an implied covenant within the contract between the insurer and its insured.  If a denial of benefits under the policy was ultimately resolved by a suit on the contract of insurance, a policyholder who prevailed would receive the amount due plus interest. The recognition of a cause of action for the tortious breach of the duty of good faith and fair dealing in the context of the first-party contract of insurance is relatively recent.

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July 16, 2003 PublicationWhat is a "Reasonable" Settlement When There Are Multiple Claimants?

Sometimes several people sustain injuries in an accident. This article addresses a recent decision of Florida's Fourth District Court of Appeal, Farinas v. Florida Farm Bureau General Insurance Company, that discusses what liability insurers should do when several people sustain injuries in an accident caused by the insured and the value of most, if not all, of each individual claim exceeds policy limits. This article discusses the basis for the Farinas holding and identifies some questions raised by Farinas.

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June 18, 2003 PublicationAppraising Windstorm Claims

Once again the annual “hold-your-breath” season is upon us. In Hartford, New York, and London weather channels are beating “sitcoms” on the “Nielson” ratings. Internet strikes on weather.com are out-numbering those for kournikova.com – well, maybe this is a slight exaggeration. But the point remains; that is, CAT losses, especially windstorm, commonly called Hurricanes, make or break a property insurer's profitability, not just in the year of the occurrence, but typically with a two to three year tail.

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April 16, 2003 PublicationThe Current State of Comparative Bad Faith

In most every jurisdiction, the basis for a claim of insurer bad faith is the recognition of a duty of good faith and fair dealing inherent in any contract of insurance. See, e.g., Boston Old Colony v. Gutierrez, 386 So. 2d 783 (Fla. 1980). The focus in such cases is usually the question of whether or not the insurer has violated that duty. Inevitably, the question arises as to whether or not the actions of the insured can be considered bad faith and, if so, whether such actions can be raised as an affirmative defense to a claim of insurer bad faith. 

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March 19, 2003 Publication"Advice of Counsel" – Defense or Defeat

The involvement of legal counsel to provide advice concerning the settlement of property and liability claims has become increasingly commonplace. This is primarily due to the general proliferation of litigation and specifically "bad-faith" claims. As the involvement of legal counsel becomes more prevalent, so does the "defense" of "advice of counsel." This commentary will address this so-called "defense" in the context of "bad-faith" cases.

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February 19, 2003 PublicationInstitutional Bad Faith: Individual Or Class Action Litigation (All For One? - Or - One For All?)

In 1844, Alexandre Dumas, one of the most famous French writers of the nineteenth century, shared his vision of comradery and unified ambition. In his classic, The Three Musketeers, set under the seventeenth century rule of Louis XIII, a small association of elite combatants swore their allegiance to a common purpose . . . and to each other: All for one, and one for all! Is this sense of nobility and uniformity present in the battle cry of plaintiff lawyers brandishing their swords in modern day litigation against the insurance industry?

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January 22, 2003 PublicationAnger And Punishment

Horace once wrote: “Anger is a brief madness.” Such human condition apparently has not changed in over 2000 years.

USA Today's January 9, 2003 editorial page began with the topic sentence: “Horror stories abound about huge damage awards turning courts into lotteries, transforming plaintiffs and their lawyers into instant winners.” In addressing a recent Ohio Supreme Court decision, the editorial stated

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December 18, 2002 PublicationCan It Be 'Bad Faith' For An Insurer To File A Declaratory Action?

In recent months, insurance company clients of the author have faced allegations that the filing of a declaratory action, by an insurer, to determine or cut off coverage, is bad faith. This is a somewhat novel and, as it turns out, disfavored cause of action. To begin with, a “declaratory judgment action is the preferred manner of deciding a dispute between an insured and insurer over the construction and effect of the terms of the insurance contract.”

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October 23, 2002 PublicationTime Bombs

Insurers find nothing more frustrating than paying for unearned indemnification dollars. In a first-party context this may result from unreported values causing a deflated premium. In other words, the insurer's actual exposures require more premium than charged -- usually over many policy years. In a third-party context this unearned protection is the result of an excess judgment that the liability carrier is required to pay. In most jurisdictions this is the consequence of the liability insurer's failure to settle within policy limits when it had the opportunity to do so. 

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September 18, 2002 PublicationSpoliation As Bad Faith

What happens when an insurer's employee, insured, adjuster or attorney alters or destroys critical evidence? Can spoliation of evidence also constitute bad faith? Although there is no published decision directly on point, it appears that some courts may be willing to extend an insurer's exposure to include extra-contractual damages for such conduct

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April 17, 2002 PublicationSeventh Circuit Court Of Appeals Finds "Independent" Insurance Broker To Be Intermediary Of Insured, Barring Coverage And Bad Faith Claims

The Seventh Circuit recently addressed the question of whether an independent insurance broker, who provided clients to the insured, was their intermediary, thus barring coverage and bad faith claims. (First Insurance Funding Corporation v. Federal Insurance Company, No. 01-2855 (7th Cir. March 28, 2002)).

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November 21, 2001 PublicationRecognizing Subtle Exposures To Avoid Bad Faith Claims

“The insurer does not . . . insure the entire range of an insured's wellbeing outside the scope of and unrelated to the insurance policy, with respect to paying third party claims. It is an insurer, not a guardian angel.”

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October 17, 2001 PublicationJustices: Please Take This Case!

Two recent state court decisions jeopardize the right of insurers to consult legal counsel when considering whether to pay or deny the claim of a policyholder. The Arizona and Ohio state supreme courts have issued opinions eroding, even abrogating, the attorney client and work product privileges. In one of these decisions, Boone v. Vanliner, 744 N.E.2d 154 (Ohio 2001), the insurer has petitioned the United States Supreme Court to issue the writ of certiorari, hear the case and reverse the Ohio Supreme Court. The undersigned urges the United States Supreme Court to take the Vanliner case for the reasons stated below.

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September 19, 2001 PublicationAdditional Insured Coverage And Bad Faith

Coverage determinations regarding the nature of policy duties that liability insurers owe to additional insureds may create bad faith exposure for the unwary insurer. Bad faith liability frequently arises when an insurer fails to recognize the scope of defense and indemnification obligations it owes to an additional insured. Issues also arise when additional insureds compete with named insureds for limited policy proceeds which cannot adequately protect the interests of both. This article highlights the source of the dilemma – the scope of the coverage afforded to an additional insured – and provides illustrations of bad faith exposure in the wake of claims asserted against additional insureds.

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April 18, 2001 PublicationResolution of the Underlying Claim as a Prerequisite to Bad Faith

In every jurisdiction that has considered the issue, a claim for bad faith does not accrue until there has been a final determination of the underlying claim for insurance benefits or third party damages. Taylor v. State Farm Mutual Automobile Ins. Co., 913 P.2d 1092 (Ariz. 1996); Blanchard v. State Farm Mutual Automobile Ins. Co., 575 So. 2d 1289 (Fla. 1991). Thus, before a plaintiff can sue an insurance company for bad faith, he must first finally resolve the claim which he contends the insurance company failed to settle in good faith. What constitutes a resolution of that claim varies with the type of claim asserted and the jurisdiction in which it is brought, but it can generally be broken down into three categories: excess judgment, settlement of the underlying claim, and judgment below policy limits.

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March 21, 2001 PublicationDiminished Value In Auto Damage Claims

We have seen, in recent years, a spate of actions for bad faith, and class actions, on the issue of so-called diminished value. These suits claim payment by the insurance company of the actual cash value of a property loss - or the cost to repair a loss - does not make the insured whole. This is because of some intangible quality in the property that cannot be restored by repair. Before the loss it was pristine or original. Afterward it is corrupted or compromised. It is worth less in the market.

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February 21, 2001 PublicationPossible Bad Faith In The Allocation Of Coverage For Third Party Continuous Loss Claims

An insured causes damage or injury that results in a third party claim for continuous loss spanning three years. The third party makes a claim under the policy in effect at the time of the loss. The policy covers the same three years as the loss and provides $300,000.00 for each year. In other words, the policy provides a total of $900,000.00 aggregate coverage over three years. We will assume the claim is settled for $300,000.00.

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October 24, 2000 PublicationRaising the Coverage Defense in the Bad Faith Case

In representing insurers in bad faith litigation, from time to time one will find a coverage issue that was not raised in the underlying litigation. The question to be addressed in this article is whether the coverage issue may be raised for the first time as a defense to the bad faith litigation.

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August 22, 2000 PublicationIs It Bad Faith to Settle Covered Claims Only?

It is beyond dispute that the duty to defend, under liability insurance, is contractual, and is broader than the duty to indemnify. National Grange Mut. Ins. Co. v. Continental Cas. Ins. Co., 650 F. Supp. 1404 (S.D.N.Y. 1986). Even if some allegations of the complaint clearly are outside the scope of coverage, the insurance company is obligated to defend the entire suit. Id. See also, Aerojet-General Corp. v. Transport Indemnity Co., 948 P.2d 909 (Cal. 1997).

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July 25, 2000 PublicationLevel The Playing Field: Abate Or Stay The Bad Faith Action Pending Resolution Of The Underlying Liability Or Coverage Case

Before resolution of a first-party action for coverage or a third-party action to establish an insured's liability, a plaintiff will often initiate an action for bad faith. By doing so, the plaintiff attempts to gain an unfair advantage in discovery and at trial. This article outlines some of the reasons why the bad faith action should be abated in its entirety or, at the very least, stayed pending resolution of the underlying claim.

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June 20, 2000 PublicationThe Public Adjuster's Perspective

Mr. Lesser is a prominent public adjuster. His business office is located in Miami Beach, Florida. The views and opinions stated by Mr. Lesser in this interview are his own. Neither Mr. Craig, nor Butler , necessarily approve or agree with any of them.

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May 19, 2000 PublicationContractors' Bonds: Who Can Sue The Surety For Bad Faith?

A contractor's performance and payment bond creates rights and obligations among three parties ­ the principal, the obligee and the surety. The principal may be the general contractor or a subcontractor. The obligee (under a performance bond) usually is the owner of the project or (under a payment bond) the subcontractors, materialmen and equipment suppliers. The surety most often is an insurance company or financial institution engaged, among other things, in the business of issuing performance and payment bonds.

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April 18, 2000 PublicationThree Reasons Why Loss Reserves Ought Not Be Admissible In A Bad Faith Case

In the trial of a bad faith case, plaintiff often tries to put into evidence the reserves the insurance company set for the claim. This article contends that evidence ought not be admissible. It will outline three reasons why not.

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March 01, 2000 PublicationIssue Revisited: Who Can Sue The Surety For Bad Faith Under A Construction Bond?

In this journal, in May 2000, the author discussed the then recent decision in Ginn Construction Co. v. Reliance Insurance Co., 51 F. Supp. 2d 1347 (S.D. Fla. 1999). He argued that, contrary to a suggestion in Ginn, an obligee under a general contractor's performance bond ought not be allowed to sue the surety for bad faith. This article will look at some decisions handed down since. The trend is toward no bad faith liability by a surety to either an obligee or a principal under a surety bond.

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February 15, 2000 PublicationPerfunctory Defense

per-func-to-ry   per-fúngk'te­re   adj.   Done or acting routinely andwith little interest or care. The American Heritage Dictionary, NewSecond College Edition (1983).

The Scenario

Consider a common scenario. An insurance company issues a liability policy. The policyholder does something, or fails to do something, as a result of which a partyis injured. The injured party becomes the plaintiff, and the policyholder the defendant,in a tort action. The insurance company reviews the tort action and sees right awaythat probably it is not covered. It retains a defense attorney to handle the tort action butsends a reservation of rights letter to the policyholder and files a separate declaratoryaction to determine coverage. So far so good. See, e.g., Insurance Co. of the West v.Haralambos Beverage Co., 195 Cal. App. 3d 1308, 1319 (1987).

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December 21, 1999 PublicationMalicious Defense

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. 13, #16, p. 25 (December 21, 1999). © Copyright Butler 1999.

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November 16, 1999 PublicationWhy A First Party Insurer Is Not A Fiduciary

Courts, commentators, lawyers and others have applied the word "fiduciary" to insurance companies and insurance claims in a loose manner. The result has been bad law and confusion over if and when an insurer is a fiduciary. This article will argue that an insurer does not, and ought not, owe a fiduciary duty to an insured who has presented a first party claim.

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October 19, 1999 PublicationThe Duty of Good Faith: Continuing Into Litigation

First-party bad faith cases are typically based on conduct or events (e.g., settlement offers, investigations and evaluations) occurring during the time period after a claim is made but before any litigation is commenced. Once a breach of contract or declaratory action is filed, it is generally understood that the insured and insurer stand in an adversarial relationship which presumably entitles each party to zealously pursue its litigation tactics and strategy. Thus, courts generally will not permit an insurer's litigation conduct to be admitted as evidence of bad faith. Over the years, however, a significant number of courts have held an insurer owes a continuing duty of good faith to an insured throughout the litigation process and, therefore, an insurer's post-filing conduct may be admitted as evidence of bad faith. This article is a brief review of some of the leading cases addressing the continuing duty of good faith and its ramifications affecting insurance companies and defense counsel.

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September 21, 1999 PublicationGood Faith Settlement of Claims in Excess of Policy Limits Against Multiple Insureds


Insurers and insureds alike may find themselves in the dark when claims against multiple insureds exceed policy limits. Only a few jurisdictions explicitly have addressed how policy proceeds should be allocated in this situation. The jurisdictions that have addressed the issue have split into two general camps. Some hold that carriers must allocate proceeds proportionately among all insureds. Other jurisdictions hold that a carrier need only act in "good faith" and may settle on behalf of fewer than all insureds. The manner of proportional allocation and the characteristics of a "good faith" settlement under such circumstances are not well described in the case law.

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August 17, 1999 PublicationMultiple Claims Exceeding the Policy Limits

When courts and state legislatures expand the duties owed by liability insurers to insureds there is a commensurate expansion of the grounds for extracontractual claims. One area of expansion has been in cases involving multiple third-party claimants - with liability clear and damages exceeding the policy limits. These cases make difficult issues for claims professionals.

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July 20, 1999 PublicationAdvice of Counsel: Insurance Companies' First and Last Line of Defense / Mealey's Litigation Reports: Bad Faith

The dynamic nature of bad faith law throughout the country practically mandates that insurers have ongoing legal advice to protect the interests of the company, the shareholders and all insureds. Such advice can prevent unwitting misconduct by the insurer. The "advice of counsel defense" in the context of insurance bad faith litigation issimply an insurer asserting, as proof that it did not act in bad faith, that it reasonably relied on the advice given by its legal advisors.

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July 01, 1999 PublicationStandard of Care in First Party Bad Faith Actions: Is "Fairly Debatable" Fair?

Since the early 1970s, when first-party bad faith actions came into being, a considerable body of law has developed on the standard of care for insurers to avoid liability. In creating and defining such standards, courts have struggled to balance the interests of insureds and insurers. This article is a general review of those decisions and standards.

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March 16, 1999 PublicationStatute of Limitations in a Bad Faith Action: Which One Applies and When Does It Accrue?

Determining which statute of limitations governs a cause of action against an insurer for bad faith is complicated. It depends on whether the action is a first or third party action. It depends also on whether the controlling jurisdiction deems the action to be one sounding in tort or contract.

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January 19, 1999 PublicationDuty of Insurers to Advise Insureds of Policy Benefits

This article considers whether an insurer has a duty to advise an insured of policy benefits not claimed. Some courts require insurers to protect an insured's interests affirmatively by informing the insured of available benefits. Other courts have refused to impose this duty upon insurers. Recent cases suggest a trend toward imposing this duty.

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December 15, 1998 PublicationFederal Preemption of Extracontractual Claims Under Flood Insurance Policies

During the past year, numerous areas in the United States have experienced severe and, at times, unprecedented flooding. Whether the flooding occurred as a result of the active Atlantic hurricane season or the effect of "El Nino" on national weather patterns, the result for insurers is the same: an increase in the number of claims under flood insurance policies. With this comes a corresponding increase in the likelihood of extracontractual or bad faith claims.

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December 14, 1998 PublicationSupplement to Federal Preemption of Extracontractual Claims Under Flood Insurance Policies

This is a supplement to the December 1998 article published in Mealey's Litigation Reports: Bad Faith on "Federal Preemption of Extracontractual Claims Under Flood Insurance Policies" following the U.S. Third Circuit Court of Appeals reversal of its decision on rehearing in Van Holt v. Liberty Mutual Fire Insurance Co. This supplement was originally published in Mealey's Litigation Report: Bad Faith, Vol. 12, #18, p. 27 (Jan. 19, 1999). Copyright Butler 1999.

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November 17, 1998 PublicationThe Expanding Scope of Discovery in Bad Faith Cases

Bad faith litigation is complex and the stakes are high. In such cases, the discovery process has become critical as litigants struggle for advantage. The litigation often raises issues outside the facts of the particular case or claim. The conduct of the insurance company as a whole sometimes is placed on trial.

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October 20, 1998 PublicationDoes a Liability Insurer Have a Duty to Initiate Settlement Negotiations?

Liability insurance policies typically provide the insurer with complete control over the defense and settlement of third-party claims against the insured. This control imposes upon the insurer a duty to exercise good faith in settling claims. When the claimant makes a reasonably prudent offer to settle within the policy limits, courts generally agree the good-faith duty owed an insurer will require the insurer to settle the case. 

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August 18, 1998 PublicationChoice of Law in Bad Faith Cases

The substantive law of bad faith is not uniform from state to state. Some states treat bad faith as a breach of contract; some as a tort. In some states, punitive damages are available. In others, they are not. Some allow claims for emotional distress, while others reject them.

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July 21, 1998 PublicationRecovery of Damages for Emotional Distress in Tort, Contract and Statutory Bad Faith Actions

Emotional distress damages may be the most significant aspect of any bad faith action in jurisdictions that allow them. This article outlines the several theories that justify the recovery of such damages. It discusses also the impact of a recent Florida Supreme Court decision which authorized recovery for emotional distress under that state's bad faith statute.

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Key Points