Bad Faith - Third-Party Bad Faith Cause of Action Not Precluded By Tendering Policy Limits Under Florida Bad Faith Statute Prior to Excess Judgment
The Florida Supreme Court recently held in Macola v. Government Employees Insurance Co., No. SC05-1021 (Fla. Oct. 26, 2006), that an insurer’s tender of the policy limits to an insured in response to the filing of a
civil remedy notice under section 624.155, Florida Statutes (2005), after the lawsuit against the insured was filed but before entry of an excess judgment, does not preclude a common law cause of action against the insurer for third-party
bad faith.
In Macola, a common law cause of action for bad faith was brought by the injured third party, Macola, and the insured, Quigley, against GEICO. Macola was injured in an automobile accident caused by the insured’s
husband. Macola sought a settlement from GEICO for the bodily injury liability limit of $300,000 under the policy and $1,377.81 in property damage. GEICO did not accept this settlement offer and Macola filed suit against
Quigley. After the suit was filed, but before an excess judgment was entered, Quigley filed a statutory Civil Remedy Notice of Insurer Violation with the Department of Insurance against GEICO for failure to settle for policy
limits when GEICO had the opportunity to do so.
Within 60 days after the civil remedy notice was filed, GEICO sent a letter to Quigley’s counsel enclosing a check for the policy limits and a policy release, and claiming that the Civil Remedies Complaint was cured.
Quigley’s attorney acknowledged receipt from GEICO, but did not accept GEICO’s offer. Ultimately, a final judgment was entered in excess of policy limits against Quigley. Thereafter, Macola filed a bad faith
suit against GEICO for failure to settle. Quigley also filed a party bad faith action against GEICO, and the two cases were consolidated.
GEICO filed a motion for partial summary judgment in the consolidated case, arguing that it had cured any statutory bad faith claim when it tendered the bodily injury liability limits within 60 days of the civil remedy notice.
The District Court granted GEICO’s motion. The plaintiffs appealed, arguing that GEICO’s tender of policy limits did not constitute an adequate cure and, in any event, it did not bar a common law third-party bad
faith action. The Eleventh Circuit certified these issues to the Florida Supreme Court.
The Florida Court explained that, under section 624.155 of Florida Statutes, an insurer has the opportunity to “cure” an alleged violation of its duty of good faith within 60 days after a claimant provides notice.
The Court also noted that, although the statute does not preempt common law bad faith actions in the third-party context, if a claimant accepts the cure, then he cannot proceed with a common law bad faith claim.
Differentiating between third-party and first-party bad faith causes of action, the Court reasoned that allowing an insurer to preclude a bad faith cause of action by tendering policy limits to the insured when the underlying tort
action is still pending would put the insured in a dire position because it would not eliminate the insured’s exposure to an excess verdict. Additionally, the Court held that such a holding would be inconsistent
with the plain language of 614.155, which does not preempt common law bad faith actions. Therefore, the Court held that although tendering policy limits under section 624.155 before the entry of an excess judgment but after
a lawsuit has been initiated could be used as evidence of good faith, it does not preclude a third-party bad faith action against the insured because it does not eliminate the underlying tort action.