For insurers doing business in Florida, a recent appellate court decision reaffirms the importance of a timely offer of settlement even in extremely challenging conditions to protect against bad-faith liability.

Goheagan v. American Vehicle Ins. Co. involved a bad-faith claim against American Vehicle Insurance Company (“AVIC”) following a motor vehicle accident in which AVIC's insured, traveling at a high rate of speed with a blood alcohol of .19, rear-ended another vehicle.  The driver of the rear-ended vehicle sustained catastrophic injuries and remained hospitalized in a coma until she died ten weeks later.

AVIC’s claims adjuster appears to have moved quickly upon the claim once she was notified of the accident.  She immediately told the insured of the policy limits applicable, and informed him that every effort would be made to settle the bodily injury claim.  However, before she could actually make an offer, several weeks had elapsed, and in that time a lawsuit had been filed against the insured on account of the injuries sustained by the driver of the rear-ended vehicle.  The result of that lawsuit was judgment against the insured for nearly three million dollars.

The insured sued AVIC, claiming it acted in bad faith by allowing those few weeks to pass before an offer of settlement was made.  AVIC contended in its summary judgment motion that it acted fairly and honestly toward its insured with due regard for his interest, but was prevented from entering into settlement negotiations for two reasons.  First, the injured driver was in a coma, and, therefore, there was no one to make the offer to.  Second, since AVIC had been made aware of the fact that there was a lawyer involved, communications regarding settlement had to flow through counsel, regardless of the delays that came with tracking down counsel, making a settlement offer, and tendering the claim.  The trial court granted summary judgment to AVIC on the first of these arguments: namely, that as the driver was in a coma, and no guardianship had been set up prior to her death, there was as a matter of law no one to whom to make an offer.

The appeals court disagreed.  It analogized the financial exposure to the insured to a “ticking financial time bomb” and said that any delay in making an offer, even where there was no assurance that the claim could be settled, could be viewed by a fact finder as evidence of bad faith.  Further, it noted that Florida law permits a guardian or personal representative who has not yet been appointed to negotiate a settlement on behalf of a deceased claimant.  Presumably, this meant that the AVIC claims adjuster could have negotiated with the driver’s parents and tried to settle the claim with them.  At a minimum, the Court said there was a dispute of material fact as to the timeliness of AVIC’s efforts, requiring the issue to be decided by a fact finder

.This decision suggests that under Florida law, where liability is clear and injuries are serious, an insurer may face exposure for not making an offer of settlement promptly, even under extremely challenging circumstances.  The appellate decision can be found here.