Insurance Claims and Bad Faith Law Blog

Attorneys at Issue in Bad Faith Cases.

     The past two years have seen two new cases that have shaken Florida Insurance Law.  Neither case has been cited by other Courts -- yet.  This is the time to tell you about them.

     In Barry v. GEICO General Insurance Co., 938 So. 2d 613, 615-17 (Fla. 4th DCA 2006)(subscription required), an Attorney-Expert Witness testified to opinions that GEICO did not act in Bad Faith when it failed to settle the claim in that case, that the injured claimant "made it clear that she was not intending to settle", and that the actions of the Plaintiff and her Counsel "were inconsistent with a willingness to settle."  Here is the official Opinion released by the Florida Appellate Court.  The quoted summary of the Attorney-Expert's testimony appears on page 3 of the attached; see also pp. 5-7:  Download Barry_v. GEICO General Insurance Co. (Fla. 4th DCA Case No. 4D05.206 Opinion Filed Oct. 4, 2006).pdf.

     The U.S. District Court for the Middle District of Florida has expanded Barry's holding.  The District Court denied Plaintiffs' motions "to exclude evidence, argument, and references regarding the motives or conduct" of the claimants' attorney and the attorney's paralegal.  The Federal Court held in yet another Florida Bad Faith failure-to-settle case "that evidence and argument regarding the motives or conduct" of the claimants' attorney and the attorney's paralegal "is relevant and should not be prohibited."  Mendez v. Unitrin Direct Property & Casualty Insurance Co., 2007 WL 2696795 *3-*4 (M.D. Fla. Opinion Filed Sept. 12, 2007)(subscription required).  Here is the Middle District's official Opinion.  Its quoted holding will be found on pages 5-6 of the attached:  Download Mendez_v. Unitrin Direct Property & Casualty Insurance Co. (M.D. Fla. Case No. 8.06.CV.563, Opinion Filed Sept. 12, 2007).pdf.  The Mendez case has an interesting further history.  The case went to Trial which resulted in a Judgment for the Plaintiffs.  Thereafter, the Court's Online Docket shows that the case was settled.  The Federal lawsuit was then dismissed without prejudice in February, 2008.

     As I wrote at the beginning, Barry and Mendez have not been cited by other Courts as yet.  The only case known to include a cite to Barry is Mendez.  No known Court has cited to Mendez -- yet.

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Jury Pools in the Wake of Katrina in Mississippi.

    Bad Faith Cases receive careful attention.  Part of the focus in every Bad Faith Case is the potential Jury Pool, or the Venire.  They are the people deciding issues of fact and who they are is clearly important.

    Before Katrina struck Mississippi, most Mississippians were like most residents of the rest of the Gulf Coast.  Few people carried Flood Insurance.  However, the focus on Insurance Coverage for Katrina Damages Claims can divert attention from the fact that many people did not have Property Insurance Coverage or  Homeowner's Insurance  either.

     They are the people who make up the Venire for Mississippi Bad Faith Cases like the recent case reported in newspaper articles and in a post here on January 15, 2007.

    Briefly, the recent case in Mississippi involved First-Party Bad Faith Claims including Punitive Damages Claims.  A Federal Judge directed a verdict for the full Policy Limits available under a Homeowner's Policy.  The case went to the Jury on the question of Punitive Damages under Mississippi law, which is fully discussed in the January 15, 2007 post.  Without repeating all of that post here, in general terms Mississippi law allows the assessment of Punitive Damages for Bad Faith Breach of Contract and it can be Bad Faith not to pay any part of Damages which are covered.

    It is reported that the Homeowner's Insurance Company in that case never made an offer.

    The Jury assessed $2,500,000.00 in Punitive Damages.

     See the detailed discussion of the situation in which these potential Jury members live today, Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post, Sunday, January 28, 2007, p. A03), and the discussion generally of Venires available for Katrina Cases across the Gulf Coast, in Insurance Claims and Issues.

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Abatement, Bifurcation, and Stay: Make My Mind Up!

    Abatement is a defense.  An Insurance Company asks a Judge to "abate" a Bad Faith Claim when the Insurance Company is also sued for Breach of Contract or other Claims.  Bifurcation is similar.  A party asks a Judge to "bifurcate" one Claim from other Claims that have been alleged against a Defendant. This can include "separate trials" such as under Federal Rule of Civil Procedure 42.  Bifurcation should refer, and often is used as a shorthand way to refer, to separate Trials.  Stay is not a defense, as such.  "Stay" usually means a stay of Discovery on one or more Claims or Issues while proceeding with Discovery on other Claims or Issues.

    Abatement, Bifurcation, and Stay each have their separate requirements.  Three recent Federal District Court decisions illuminate and confuse these requirements.   These three Federal Cases involve all sorts of Claims including "Third Party Bad Faith" Claims, "First Party Bad Faith" Claims, Statutory Bad Faith Claims, and Common Law Bad Faith Claims.  (No wonder the results seem on the surface to be confusing.)

    In CNL Hotels & Resorts, Inc.,  Download M.D. Fla. Case No. 6.06cv324, Opinion Filed October 16, 2006).pdf, the Federal District Judge was confronted with Claims pleaded by a Policyholder for Insurance Coverage and also with Claims pleaded for Statutory Bad Faith and, apparently, for Common Law Bad Faith.  The Insurance Policies at issue were described as "liability policies" and the Policyholder argued that they provided "indemnification in regard to a then-ongoing securities class action case."  However, the Plaintiff and the Defendants could not agree if this lawsuit was a First Party or a Third Party Bad Faith Case.  Regardless, the Federal Judge in CNL, applying Florida law, granted Abatement of the Bad Faith Claims until the issue of Insurance Coverage is determined.  The Court also said that the Bad Faith Claims "should be bifurcated" and "are hereby STAYED pending resolution of the coverage claim."

    In the case of Jones v. St. Paul Travelers, Download N.D. Cal. Case No. C 06-00717, Opinion Filed October 16, 2006).pdf, the parties involved in a case pending in California apparently agree that it involves "Third Party Bad Faith" Claims, but they disagree on whether Georgia or California law applies.  The Plaintiffs in this Federal Case are judgment creditors of a judgment previously recovered against Watkins Engineers & Constructors, Inc.  The Federal District Judge decided to apply California substantive law to the two alleged Claims in that case.  One Claim was alleged under California Insurance Code § 11580, which allows a judgment creditor to pursue an action to shift to the shoulders of the current Defendant-Insurance Company, the previous Judgment entered against a Policyholder or other Defendant.   Specifically, the previous Defendant was Watkins, a subsidiary of the Insurance Company's Policyholder.  The second Claim is a Bad Faith Claim "based upon defendants' allegedly unreasonable refusal to pay the judgment obtained against Watkins."  The Federal District Court ordered that "in light of the potential prejudice to defendants," the two Claims should be Bifurcated for Trial, but that "there is no need to bifurcate discovery".

    Parenthetically, on the date of this post, Wednesday, November 8, 2006, the Court entered an Order insulating a settling Defendant Insurance Company, Zurich, from various Claims of co-Defendants based on the Federal Court's determination that Zurich's settlement was in Good Faith:  Download Jones_v. St. Paul Travelers November 8, 2006 Order  Granting Zurich's Motion For Good Faith Determination of Settlement.pdf.

    The third of three Federal District Court cases illuminating and confusing these areas of Abatement, Bifurcation, and Stay is the recent decision in Hoskins v. Allstate Property & Casualty Insurance Co., Download (E.D. Ky. Case No. 6.06.389, Opinion Filed November 2, 2006).pdf.  That Federal Case involves alleged First Party Bad Faith Claims, and also alleged Contract Claims.  The Federal Judge granted Bifurcation of these Claims for Trial.  The Court further held in that Federal Case that "in order to avoid any prejudice," Discovery will be "stayed" regarding the Plaintiffs' Bad Faith Claims "until the underlying contract issue has been resolved."

    The "third time" is not just "the charm," because each one of these three Federal Cases is based on its own reasoning.  The last of the three mentioned here,  Hoskins, presents a clear picture of when Bifurcation or Separate Trials is likely to be ordered under Federal Rule 42, and when Discovery is likely to be Stayed on Bad Faith Claims when other Claims dependent on first proving Insurance Coverage are also alleged.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR LEGAL ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.