(Article from Insurance Law Alert, April 2022)
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Applying Florida law, the Eleventh Circuit ruled that a plaintiff may establish the requisite “excess judgment” for a bad faith claim through a consent judgment, and that a trial verdict is not required. McNamara v. Government Employees Ins. Co., 2022 WL 1013043 (11th Cir. Apr. 5, 2022).
The dispute arose out of an automobile accident. The injured party sued the driver and the owner of the car and later served them with a “demand for judgment” under Florida statutory law. The settlement demand provided for payments by the driver and owner that exceeded the owner’s policy limits and was conditioned upon (1) consent of the owner and driver to final judgment in the prescribed amounts, and (2) confirmation by the automobile insurer that it would not assert breach of contract against the driver or owner by accepting the proposal. The insurer agreed, and the court entered final judgments against the owner and driver. Thereafter, the owner and driver sued the insurer for bad faith, seeking to recover the amounts of the final judgment that exceeded the policy limit.
A Florida district court granted the insurer’s summary judgment motion, ruling that for purposes of establishing causation in a bad faith action, Florida law requires the plaintiff to establish an “excess judgment” resulting from a verdict. The Eleventh Circuit reversed, holding that a consent judgment arising from a stipulated settlement agreement can constitute an “excess judgment” for purposes of asserting bad faith.
The Eleventh Circuit expressly disavowed Cawthorn v. Auto-Owners Ins. Co., 791 Fed. App’x 60 (11th Cir. 2019), an unpublished opinion holding that only a judgment that follows a trial and results from a verdict qualifies as an “excess judgment.”