Fridman v. Safeco Ins. Co. of Illinois, 2016 WL 743258 (Fla. 2016) arose out of an insured’s demand for the $50,000 uninsured/underinsured motorist (UM/UIM) limit on his auto policy. The insured filed a Civil Remedy Notice pursuant to Florida’s bad faith statute after the insurer refused to pay the UM/UIM limit and subsequently filed a complaint against the insurer to determine liability under the UM/UIM policy, including the full extent of his damages.
Three years later, on the eve of trial in that lawsuit, the insurer tendered the UM/UIM policy limit and moved for a “confession” of judgment. At the hearing on the motion to confess judgment, the insured’s attorney argued that he intended to file a bad faith action against the insurer, but had not done so due to the understanding that a judgment in excess of the policy limit was needed as a condition precedent.
The trial court denied the motion to confess judgment and allowed the case to proceed to trial. Based on the jury finding the underinsured motorist liable and that the insured sustained damages in the amount of $1 million, final judgment was entered against the insurer for the $50,000 UM/UIM limit, with the court reserving jurisdiction to determine bad faith following the insured’s amendment of the complaint to add the bad faith claim and determination of bad faith damages based on the $1 million jury finding.
The insurer subsequently appealed the trial court ruling, arguing that its motion for entry of confession of judgment should have been granted and the trial court could not reserve jurisdiction to later determine bad faith. The Florida 5th District Court of Appeals vacated the jury’s $1 million verdict based on its view that the judgment on the underinsured’s liability could not exceed the policy limit and that the insured had to seek the full measure of his damages in a subsequent bad faith action.
On review, the Florida Supreme Court reversed the Court of Appeal ruling. Based on Florida law, the Florida Supreme Court found that: (1) the insured is entitled to a jury determination of the full amount of damages before litigating the first-party bad faith claim and his tender of the UM/UIM policy limit did not render moot the jury’s determination of damages; (2) the jury determination of damages is binding on the insurer in a subsequent bad faith action; and (3) the trial court’s procedure of entering the jury verdict as a final judgment and retaining jurisdiction to later consider the bad faith claim appropriately addressed how the parties can review the jury determination of the extent of the damages prior to it being used in the subsequent bad faith litigation as an element of damages.
The Florida Supreme Court explained that if the jury verdict were not binding in the bad faith action, an insurer could confess to judgment for its policy limit at the last hour to avoid a jury determination of damages and it would promote one side or the other trying to take a second bite at the apple and re-litigating the issue of damages.
Breach of the duty to settle generally involves evidence of the insured’s exposure in excess of the policy limit. The case illustrates the application of those principles in the first-party UM/UIM context and emphasizes the fact that a delayed tender of the policy’s limits will not cure a failure to settle situation.