In A Surprising Decision, A Federal District Court, Applying Florida Law, Granted Summary Judgment To An Insurance Company On A “Failure To Settle” Claim Because The Insured’s Liability Was Not Clear

On Behalf of | Nov 25, 2016 | Insurance Law

Florida is a testing ground for creative lawyering designed to set up insurance companies on failure to settle claims. However, in Welford v. Liberty Ins. Corp., 2016 WL 3360431 (N.D. Fla., 6/2/16), at least one Federal District Court refused to countenance yet another attorney’s attempt to create a failure to settle claim against an insurance company under Florida law. In this case, the insurance company tendered its limits within two days after receiving the lawsuit. Nevertheless, the claimant argued that the insurance company had failed to promptly tender the limits earlier in the matter when it was first notified of the accident. The District Court found that no reasonable trier of fact could have determined that the insured’s liability was “clear” when the claim was first reported. The facts before the Court were complicated and disputed.

Under Florida law, insurance companies have an affirmative duty to initiate settlement discussions when liability is clear and damages will likely exceed the policy limit. See Powell v. Prudential Prop. & Cas. Ins. Co., 584 So.2d 12 (Fla. 3d DCA 1991). The Court in Welford rejected the plaintiff’s proffered interpretation of the word “clear” whereby the plaintiff equated the term “clear” with the phrase “some potential” so that, according to the plaintiff, the insurance company had an affirmative duty to initiate settlement discussions when the insured had “some potential” liability. In rejecting this argument, the Court in Welford reasoned that an insurer would have to settle every claim, “as it is almost always possible that an insured may be found at least partially liable for an injury.” The Court found that the insured’s liability was not “clear” under any objective measure of the term.

Steven Plitt is an accomplished author and expert witness, and has been a licensed attorney for 33 years. During his career, he has reviewed and analyzed more than 6,000 claim files from 100 different insurance companies. Based in Phoenix, Arizona, he serves as counselor and expert for insurance coverage and bad faith claims nationwide. For more information or to set up an appointment, please visit his website at