Zenith Insurance Company issued a Worker's Compensation and Employer Liability Insurance Policy. The policyholder was Lawns Nursery & Irrigation Design, Inc. The Estate of a deceased Employee of Lawns, sued Lawns for Wrongful Death and obtained a Judgment of $9,525,000.00. The Estate and the Employee's individual Survivors then sued Zenith, claiming that Zenith owed Lawns Liability Coverage which included a duty to negotiate settlements of claims against Lawns, just like the Wrongful Death Lawsuit.
The Plaintiffs sued Zenith for (1) Declaratory Judgment, (2) Breach of the Lawns Insurance Contract (Zenith initially defended Lawns but pulled its defense and refused to indemnify Lawns in the Wrongful Death lawsuit), and (3) Common Law Third-Party Bad Faith in Settlement. Zenith defended against all three Counts on the basis of the Florida Statutes of Limitations.
The Federal Court granted Zenith's Motion to Dismiss the Common Law Bad Faith Claim as barred by Florida's Statutes of Limitations, in part here pertinent. (The Federal Court also granted Zenith's Motion to Dismiss the Count for Declaratory Relief, but denied the Motion to Dismiss as to the breach of contract claim holding that that claim was filed "timely.") Morales v. Zenith Insurance Co., Download Morales v. Zenith Insurance Co. (M.D. Fla. Case No. 8.10cv00733, Opinion Filed June 8, 2010) also published as 2010 WL 2293199 *1-*2 (M.D. Fla. June 8, 2010)(Westlaw subscription required to access Westlaw).
The Federal Court held that, in Florida, "[c]ommon law bad faith claims are governed by a four year statute of limitations pursuant to either Fla. Stat. § 95.11(3)(a) for an action founded on negligence, or alternatively § 95.11(3)(p) for any action not specifically mentioned in the statute." Id. at *2. Failure-to-Settle Claims of Third-Party Bad Faith accrue in Florida at the conclusion of the underlying litigation if any, at which time there is (ordinarily) a determination both of the Insured's liability and of the injured Claimant's damages. The Final Judgment in the underlying Wrongful Death Case against Lawns "was more than four years from the date the Plaintiffs filed this claim against Zenith," and so the Federal Court held that "the common law bad faith claim is barred by the statute of limitations." Id.
Statutes of Limitations Defenses in Bad Faith Cases are examined in reported decisions from across the country, by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 5:20, 5:35, 5:54 (Claims regarding Settlement, Refusal to Defend, and Inadequacy of Defense, respectively, in Third-Party Bad Faith Cases) and § 11:15 (First-Party Bad Faith Cases) (Shepard's/McGraw-Hill First Edition; West Publishing Company Second Edition and 2010 Supplement).
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