Senior U.S. District Judge Roger Vinson recently wrote a decision which illuminates two parts of Florida's bad faith law.
First, he wrote that the duty to investigate is a part of the insurance company's good faith duty and not an independent duty standing by itself apart from the duty of good faith:
An insurer's “duty to investigate” does not exist in a vacuum; rather; it is part and parcel of the overall duty to settle a claim within policy limits wherever possible, thereby protecting the insured from a potential excess judgment.
Welford v. Liberty Ins. Corp., 190 F. Supp. 3d 1085, 1095 (N.D. Fla. 2016), appeal docketed, No. 16-14054 (11th Cir. June 24, 2016).
Second, he ruled that when a liability carrier has a duty to initiate settlement negotiations even without a settlement demand from the injured claimant, it is when the insured's liability is reasonably clear:
It is true, of course, that Powell [Powell v. Prudential Prop. & Cas. Ins. Co., 544 So. 2d 12 (Fla. 3d DCA 1991), review denied, 598 So. 2d 77 (Fla. 1992)] holds that an insurer does not have to sit back and wait for a formal demand (“the lack of a formal offer to settle does not preclude a finding of bad faith”), and, consequently, bad faith can exist if the insurer does not attempt settlement on its own (“an insurer has an affirmative duty to initiate settlement negotiations”). However, Powell itself cautions that the insurer's affirmative duty to initiate settlement negotiations will exist only “where liability is clear.” 584 So.2d at 14 (emphasis added).
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On its face, Powell does not obligate insurers to initiate settlement negotiations whenever an insured is involved in a crash and has some potential liability. Indeed, if that were the law, insurers would have that obligation in virtually every accident case as it is almost always possible that an insured may be found at least partially liable for an injury. But that is not what the Powell Court said. Rather, at the risk of repetition, Powell speaks specifically about an insurer's responsibility when its insured's liability is clear, which generally means: “Free from doubt; sure. Unambiguous.” See Black's Law Dictionary (10th ed. 2014); (further citation omitted).
Welford v. Liberty Ins. Corp., 190 F. Supp. 3d 1085, 1095-96 (N.D. Fla. 2016), appeal docketed, No. 16-14054 (11th Cir. June 24, 2016).
Legal junkies may remember Judge Vinson's lengthy opinion stimulated by the issue of constitutionality of the Affordable Care Act. (The U.S. Supreme Court ultimately disagreed with his holding that the ACA was unconstitutional.) However, Judge Vinson's decision in Welford v. Liberty Insurance stands on firmer ground and it is supported by other authorities, which are cited in the opinion.
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