Steven Plitt, Expert Witness

Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Phone: 602-322-4038
Steven Plitt, Expert Witness

Steven Plitt, Expert Witness

Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

BAD FAITH SET-UP FAILS

On Behalf of | Nov 18, 2021 | Bad Faith

The recent case of Eres v. Progressive American Insurance Co., 998 F.3d 1273 (11th Cir. 2021) demonstrates the failure of a questionable attempt to set up the insurance company for bad faith. In this case, the insured driver caused a motor vehicle accident which killed a young child and permanently injured the child’s mother. Just four days after the accident, the tortfeasor’s insurer, Progressive, learned about the accident, and on the same date tendered its policy limits. At the time, the mother was not represented by an attorney and no estate had been set up for the deceased child. The mother told Progressive that she was not ready to receive the settlement checks and that she wanted to await the results of the DUI manslaughter charges that were brought against the tortfeasor insured driver. Two years went by before the mother’s new attorney got involved and informed Progressive that the injured mother was ready to settle the claim. The settlement demand issued by the new attorney included various conditions, one of which prohibited any “hold harmless” and “indemnity” conditions, as well as imposing a 15-day acceptance deadline on the settlement demand. Within the 15-day deadline, Progressive tendered its policy limit through payment. Progressive’s proposed release reserved the mother’s right to pursue and recover future health and medical expenses from other parties, but had a reservation carve-out for subrogation claims. The enterprising attorney decided that he had sprung the trap of bad faith on the insurance company by taking the position that the subrogation rights provision was the functional equivalent of a hold harmless or indemnification agreement which constituted a counteroffer and, thereby, a rejection of the settlement demand. Progressive promptly offered counsel the opportunity to strike the waiver of subrogation language. The attorney refused and sued the tortfeasor, winning a $10 million judgment. The attorney then filed a third-party bad faith lawsuit against Progressive.
In the bad faith lawsuit, cross-motions for summary judgment were filed. The federal magistrate judge granted Progressive’s motion in the bad faith claim. The 11th Circuit Court of Appeals affirmed.
The magistrate judge had found that no reasonable jury could find bad faith given the fact that Progressive offered to tender its policy limits within five days of the accident and then followed up periodically for the next two years, letting it be known that its policy limits were on the table. When Progressive sent its proposed release to plaintiff’s counsel, Progressive wrote to plaintiff’s counsel that if counsel wanted changes to the release, that counsel was invited to strike out any objectionable language, which would include the subrogation provision. The Article 3 judge adopted the magistrate’s report and recommendation regarding granting summary judgment in favor of Progressive. The 11th Circuit Court of Appeals affirmed.
The 11th Circuit began its opinion by noting that the critical inquiry in any bad faith action is whether the insurance company 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. In making that determination, a review of the totality of the circumstances was required. In that regard, the Court of Appeals agreed with the lower court’s conclusion that Progressive acted diligently on behalf of its insured by tendering its policy limits to avoid an excess judgment. The Court then found that Progressive’s inclusion of a waiver of subrogation clause in the proposed release did not support a bad faith claim as a matter of law. Noting that the Florida appellate court in the underlying tort action had labeled the waiver of subrogation clause as being tantamount to a hold harmless or indemnity provision, the 11th Circuit found that the case law relied upon by the Florida appellate court was from 2012. There had been several decisions since then where subrogation waivers were distinguished from hold harmless clauses. According to the 11th Circuit, at worst, Progressive’s initial failure to appreciate the strict compliance language in the demand letter might be negligence, but was nothing approaching bad faith.
Finally, the Court criticized plaintiff’s counsel for his insistence on a mirror image response to the demand. The Court found that plaintiff’s counsel’s “singular focus on the allegedly overbroad release language” ignored that Progressive had promptly offered to strike the objected language.

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Steve Plitt