In Perera v. United States Fidelity & Guaranty Co., No. 06-10925, 2008 Westlaw 4514388 (11th Cir. Oct. 9, 2008), the Court of Appeals for the Eleventh Circuit certified two, interrelated questions concerning bad faith to the Florida Supreme Court: (1) whether an insured can bring a bad faith claim if an excess judgment was not entered against him; and, if so, (2) whether the claim can be maintained if the insurer’s actions did not even expose the insured to potential liability in excess of aggregate policy limits.
In Perera, after the insured’s employee died in a workplace accident, the employee’s widow filed a wrongful death suit against the insured. The insured sought coverage under three separate policies. The widow settled with two insurers for $10 million. The third insurer issued a reservation of rights, asserting that the intentional acts exclusion in its policy precluded coverage. The widow assigned her bad faith claim against the third insurer to the insured, who sued the insurer for breach of contract and bad faith. The district court granted summary judgment to the insured on the coverage claim, requiring the insurer to pay its $1 million policy limit. However, the court granted summary judgment in favor of the insurer on the bad faith claim, holding that an insured, against whom an excess judgment has not been entered, cannot maintain a cause of action for bad faith. The insured appealed, and the Eleventh Circuit remanded the case for a factual determination as to whether the insurer’s conduct constituted bad faith.
On limited remand, the jury found that the insurer had acted in bad faith. The case was returned to the Eleventh Circuit, which found that the insured had not been exposed to liability in excess of the aggregate limits of its three policies. The Perera court acknowledged the Florida Supreme Court’s holding in Rosen v. Fla. Ins. Guar. Ass’n, 802 So. 2d 291, 294 (Fla. 2001), that the “essence of a bad-faith cause of action is to remedy a situation in which an insured is exposed to an excess judgment because of the insurer's failure to properly or promptly defend the claim,” but found that it was “not clear” whether an excess judgment was a prerequisite for a bad faith claim under Florida law. Further, the Perera court found that, if a bad faith claim could be brought without an excess judgment, then it was also unclear whether an insured, who had not been exposed to potential liability in excess of aggregate limits, could maintain a bad faith claim under Florida law.
Accordingly, the Eleventh Circuit certified these questions:
“1. Can a cause of action for bad faith against an insurer be maintained when there is not an excess judgment against the insured?
2. Even if an excess judgment is not always required, can a cause of action for bad faith against an insurer be maintained when the insurer’s actions never resulted in increased exposure on the part of the insured to liability in excess of the policy limits of the insured policies?”