Insurance Services – Coverage & Bad Faith Litigation

In the first phase of these consolidated appeals, Safeco appealed the final judgment following a directed verdict in Heikka’s favor in her bad-faith claim against Safeco. 

Heikka had been a passenger on a motorcycle that was rear-ended by Safeco’s insured, who was later convicted for driving under the influence of alcohol and leaving the scene of an accident. Heikka suffered severe injuries. 

Safeco’s insured had a policy with a $25,000 limit for bodily injury. Prior to Heikka filing a lawsuit, her attorney and Safeco’s adjuster had been in communication regarding tender of the policy limit and a settlement release. The adjuster sent a release of all claims and a check for $25,000 to plaintiff’s counsel. However, plaintiff’s counsel wanted the release to make an exception for punitive damages or claims against anyone else; therefore, Heikka could not accept the release by Safeco without the requested carve-outs/exceptions as the insured’s policy did not cover punitive damages, and any uninsured or underinsured motorist claim would have been brought against Heikka’s own insurer and not against Safeco. Heikka’s attorney returned the release with the requested revisions. According to Heikka’s attorney, Safeco agreed to his changes. Safeco denied ever receiving the release. 

Heikka’s attorney cashed the check and later filed suit against Safeco for compensatory damages as a predicate to amending to seek punitive damages. Safeco retained counsel for the insured, who advised the insured of his exposure and options. Safeco, believing Heikka agreed to the original release, moved to enforce settlement. In turn, Heikka’s attorney demanded his version of the release—which excluded punitive damages and any other parties—be honored per the prior agreement. He also warned, if his amended release was not accepted, a bad-faith suit would be filed. 

Safeco sought to enforce its release in a declaratory action. The court found no settlement as there was no meeting of the minds, and Heikka was allowed to proceed on both compensatory and punitive damages. 

At trial, the jury returned a verdict of $1,169,292.83 in compensatory damages but did not award punitive damages. Heikka then moved to amend her complaint to add statutory and common law bad-faith claims. 

A trial on the bad-faith claim then ensued, and a directed verdict was entered in favor of Heikka.

On appeal, Safeco argued it could not settle with a carve-out and leave punitive damages open against the insured because its policy did not cover punitive damages. The Fourth District Court of Appeal disagreed with Safeco under the “totality of circumstances” standard. The obligation to settle in good faith requires an insurer to do more than just initiate settlement discussions. Had Safeco analyzed their insured’s potential exposure to a punitive damage claim versus the exposure on a compensatory damage claim and put itself in the shoes of its insured, it would have agreed to settle with the carve-out. The District Court concluded, “Safeco failed to fulfill its duties to act in good faith in accordance with Boston Old Colony [Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980)] when it refused Heikka’s offer to settle her compensatory damages claim for the policy limits, subject to a carve-out for punitive damages. In doing so, Safeco increased the exposure of its insured, as he faced the possibility of both an excess compensatory damages judgment and punitive damages judgment against him.” The directed verdict and judgment were affirmed.

In the second phase of these consolidated appeals, Safeco also appealed the denial of its disqualification motion and the subsequent granting of Heikka’s motion for attorney’s fees and costs. 

Safeco had moved to disqualify Judge Rodriguez following the directed verdict based on the judge’s inappropriate conduct during the trial. The trial court denied the motion and then awarded attorney’s fees and costs to Heikka’s attorneys. 

On appeal, the Fourth District Court of Appeal ruled that Safeco’s motion should have been granted and then reversed the attorney’s fees and costs judgment entered after the erroneous denial of the motion to disqualify. Although Judge Rodriguez engaged in certain conduct which required disqualification, the District Court ruled that reversal of the directed verdict itself was not required. It reviewed the verdict de novo, removing any perceived bias/taint from Judge Rodriguez, and upheld the directed verdict. However, any subsequent proceedings, such as the motion for attorney’s fees and costs, required assignment of a new judge. 

The court also noted that Judge Rodriguez’s assessment of attorney’s fees and costs for the underlying tort litigation was error as a matter of law as Sec. 624.155 does not provide for a plaintiff to recover its own fees for prosecution of the tort suit. Therefore, Judge Rodriguez’s award of $825,000 in fees/costs was reversed, and the court directed a successor judge be appointed to hear all subsequent issues, including the attorney’s fees and costs, but not for the underlying tort litigation. 

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