Eleventh Circuit Court of Appeals issues favorable decision for insurers in Florida bad faith case

Insurers facing increased exposure to Florida bad faith claims in recent years received some relief with the Eleventh Circuit Court of Appeals’ decision in Heather Eres v. Progressive American Insurance Co., No. 20-11006 (11th Cir. June 1, 2021).  The Eleventh Circuit affirmed summary judgment  for Progressive American Insurance Company.  In doing so, the court found that Progressive did not act in bad faith toward its insured in attempting to settle Heather Eres’s bodily injury claim. 

In Eres, Progressive’s insured, Eli Villareal Alvarez, while intoxicated, rear-ended Eres’s vehicle, pushing it  into an oncoming train.  Eres suffered catastrophic injuries and her minor son died as a result of the accident.

Progressive learned about the accident four days after it occurred.  One day later, Progressive offered its full policy limits - $20,000 - to settle claims of Eres and the minor’s estate.  Eres’s then attorney advised Progressive that Eres would not settle until Villareal’s criminal proceedings concluded.  Throughout that process, Progressive informed Eres’s counsel that Progressive was prepared  to settle for the policy limits.

Two years after the accident, Villareal pleaded guilty to DUI manslaughter.  Eres’s new counsel informed Progressive that Eres would settle for policy limits, subject to “strict compliance” with the following requests: (1) that Progressive disclose insurance-coverage information required by Florida law; (2) that Villareal provide an affidavit that he had no other coverage for the accident; and (3) that Progressive pay $650 to reimburse the minor’s belongings lost in the crash.  Eres’s new counsel also demanded that any release should only release the claims against Villareal, and not include “hold harmless” and “indemnity” provisions.  Counsel demanded that Progressive respond within two weeks.

Two days after receiving the offer, Progressive requested a check for policy limits.  Progressive also retained outside counsel to assist the insured and to respond to the demand. 

Progressive sent a written response to Eres’s counsel before the deadline expired.  The response enclosed a policy disclosure, a check for $20,000, additional payment for the son’s belongings, and proposed releases naming only Villareal.  The releases also reserved Eres’s rights to pursue future medical expenses from other responsible parties.  The reservation expressly excluded “the party(ies) released who is/are given a full and final release of all claims, including but not limited to, past, present, or future claims for subrogation arising out of the above-referenced accident.”  Progressive expressed that it had satisfied all conditions of the offer, and that if Eres disagreed, to immediately advise so that Progressive could address the issue.

Less than a week later, Eres’s counsel replied that she viewed Progressive’s release as a rejection of the settlement offer because of the subrogation language.  Two days later, Progressive advised that if Eres’s counsel was uncomfortable with the subrogation language, she could strike it from the releases.

Eres did not respond to Progressive’s letter.  Instead, she filed a personal injury lawsuit against Villareal in state court.  In that case, the Second District Court of Appeals ultimately affirmed the trial court’s order granting partial summary judgment to Eres and final judgment of over $10 million, finding that Progressive failed to satisfy all of the terms of Eres’s demand.  The court found Progressive’s subrogation language was similar to a hold harmless agreement, which Eres said she would not agree to.  The court concluded that Progressive had made a counter-offer and refused to enforce the settlement.

Eres then filed a bad-faith lawsuit against Progressive in state court, which Progressive removed to federal court in the Middle District of Florida.  The parties filed cross-motions for summary judgment. 

The court denied Eres’s motion and granted Progressive’s motion.  The court found that the Second District Court of Appeals’ decision in the personal injury lawsuit did not decide the issue of bad faith.  Moreover, the court concluded that considering the totality of the circumstances, Progressive “acted with good faith and with due regard[] for the interests of its insured.”

The Eleventh Circuit Court of Appeals affirmed summary judgment for Progressive.  The court found that while Eres may have identified some ways that Progressive might improve its claim-processing practice, she had not clearly shown negligence, let alone bad faith. 

In reaching its decision, the Eleventh Circuit Court of Appeals reviewed Florida’s bad faith law, specifically discussing the Florida Supreme Court’s holding in Harvey v. GEICO General Insurance Co., 259 So. 3d 1, 6 (Fla. 2018).  Citing Harvey, the court explained that “[t]he ‘critical inquiry’ in a bad-faith action is ‘whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment.’”  The court went on to explain that the answer to this inquiry depends on the “totality of the circumstances.” 

The Eleventh Circuit noted that negligence is relevant to the question of good faith.  The court also acknowledged that bad faith is ordinarily a question for the jury, but that summary judgment is appropriate where no reasonable jury could conclude that there was bad faith on the part of the insurer. 

The court found that Progressive’s actions in attempting to settle met the standard set forth in Harvey as a matter of law and, thus, there was no question of fact for a jury to decide.  The court was persuaded by Progressive’s prompt and continuous communications with Eres’s counsel, and Progressive’s offer to strike the subrogation language from the releases.

The court rejected  Eres’s argument that Progressive’s overbroad release was evidence of bad faith.  First, the court stated that this argument ignored the “totality of the circumstances.”  More particularly, this argument ignored that Progressive offered to strike the subrogation language.  Second, the court found that Progressive’s proposed release did not include express hold-harmless language, stating that case law in effect at the time that Progressive sent the proposed release did not establish that a waiver-of-subrogation clause is in the nature of a hold-harmless or indemnification provision.

The court found that any failure by Progressive to appreciate the significance of the “strict compliance” language in the offer letter and failure to closely review the proposed releases in light of the demand that the releases not contain a hold-harmless or indemnification clause, “[a]t worst, . . . show[s] some negligence—but nothing approaching bad faith.”  The court relied upon Mesa v. Clarendon National Insurance Co., 799 F.3d 1353 (11th Cir. 2015), one of its pre-Harvey decisions, for the proposition that even if an insurer might have been negligent, the insurer may be entitled to summary judgment on the issue of bad faith. 

Comment

The Eres decision appears to be a departure from the unfavorable direction bad faith law has taken for insurers in Florida since the Harvey decision in 2018.  Since Harvey, Florida federal and state courts have been more reluctant to grant summary judgment to insurers in bad faith cases where there is any indication that the insurer may have been negligent in its claims handling.  The Eleventh Circuit’s decision suggests that an insurer may still be able to obtain summary judgment on bad faith claims, even if the insurer’s claims handling was not perfect or was even negligent.  Though it remains to be seen if or how Florida courts will respond to this ruling, the fact that the Eleventh Circuit affirmed the trial court’s decision not to send a bad faith case against an insurer to a Florida jury is certainly a positive development for the time being.