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Defense Digest

To Plead or Not to Plead: Understanding the Tool of Interpleader Claims in a Post-Tort Reform Florida

Defense Digest, Vol. 30, No. 4, December 2024

December 1, 2024

Key Points: 

  • Shifting the focus on bad faith claims.
  • The procedural impacts of the Tort Reform Act.
  • Complexities and caution when filing interpleader claims.

On March 24, 2023, Florida Governor Ron DeSantis signed House Bill 837, also known as the Tort Reform Act, into law. Predominantly, the Tort Reform Act changed Florida’s comparative fault scheme. The reform was an effort to reshape Florida’s bad faith laws, with the intention of making Florida more business and insurer friendly. However, the Act made other significant changes that impact insurance claims in Florida. One notable change affects bad faith claims and the ability to make interpleader claims.

Prior to H.B. 837, Florida law required that an insurer act with good faith when addressing claims. A failure to do so resulted in statutory and common law ramifications detrimental to insurers. “Good faith” and “bad faith” had no statutory definitions, often causing insurers to be subject to bad faith claims and Civil Remedy Notices for perceived bad faith in the handling of insurance claims. The Tort Reform Act now clarifies what “bad faith” means and gives insurers a roadmap to ensure they do not subject themselves to bad faith claims. 

The Act states, in part:

An action for bad faith involving a liability insurance claim, including any such action brought under the common law, shall not lie if the insurer tenders the lesser of the policy limits or the amount demanded by the claimant within 90 days after receiving actual notice of a claim which is accompanied by sufficient evidence to support the amount of the claim.

Actual notice is “a notice that is given directly to a party or is personally received by a party informing them of a case that could affect their interests.”

This 90-day deadline also impacts insurers’ ability to make interpleader claims. Florida Rule of Civil Procedure 1.240 provides background as to the nature of interpleader claims. “Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability.” 

The Tort Reform Act gives insurers another avenue for tendering the policy limits when an interpleader action is present. Picture a motor vehicle accident involving four vehicles and multiple claimants. The driver who caused the accident is insured by Florida’s Best Insurance Company. Due to the number of parties involved, Florida’s Best may be concerned that there could be four separate lawsuits against their insured and policy limits. To avoid this, Florida’s Best asks their defense attorney to draft an interpleader complaint. Filing such a complaint will act as a shield for Florida’s Best against repeated exposure. It will also require Florida’s Best to deposit its policy limits covering an insured driver with the court in order to preserve these funds and ensure all the involved parties can be paid from these funds. 

A word of warning when relying on the ability to make an interpleader claim following the passage of H.B. 837. The Tort Reform Act absolves insurers of bad faith claims only if, within 90 days of receiving notice of competing claims in excess of available policy limits, the insurer files an interpleader action under the Florida Rules of Civil Procedure. The Act emphasizes that an insurer’s interpleader action does not alter or amend the insurer’s obligation to defend its insured. It further specifies: “The insured, claimant, and representative of the insured or claimant have a duty to act in good faith in furnishing information regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim.”

While an interpleader action may sound like a slam dunk for insurance companies and defense attorneys, there are some cons of which to be aware. Interpleader actions can be procedurally complex. Further, the 90-day deadline imposed by the Tort Reform Act is not a suggestion, it is a requirement. Insurers must act promptly in requesting their defense attorneys file an interpleader claim after receiving actual notice of a claim. When insurers request their defense attorneys file an interpleader action, the attorneys must act quickly to get the action filed ahead of the 90-day deadline. Insurers must respond to their defense attorneys promptly regarding review and edits of a draft interpleader action, and defense attorneys must be responsive and timely with their edits and filings. Failure to do so can expose the attorneys to claims for frivolous lawsuits. The 90-day deadline is considered by critics to be “overly generous,” and neither insurers nor attorneys should wait until the last minute to file, lest they miss the deadline and open themselves up to a true “bad faith” claim. Interpleader actions can be costly and inevitably delay resolution of claims, especially when many claimants and complex claims are involved. 

Insurers and defense attorneys must be aware of Florida’s changing laws and the pros and cons of such claims. They must act diligently to identify and file such claims as requested within the 90-day requirement laid out by the Tort Reform Act. Florida’s Tort Reform Act has provided insurers and defense attorneys the benefit of protecting themselves against exposure from multiple claims, but it is up to the insurers and defense attorneys to determine the cost-benefit analysis of doing so and to ensure that all parties are acting in good faith, at all times.

 

Defense Digest, Vol. 30, No. 4, December 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

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Thought Leadership

The Search-Incident-to-Arrest Doctrine Does Not License Strip Searches

In Beatty v. Gardner, No. 25-2860 (3d Cir. Sept. 16, 2026), Kyle Beatty sued police officers Clinton Gardner and Calvin Irvin under 42 U.S.C. § 1983 after they stopped, arrested, and searched him three times during a drug investigation in Williamsport, Pennsylvania. The officers initially smelled marijuana coming from the car in which Beatty was sitting and observed marijuana residue, giving them probable cause to arrest him. Beatty consented to the first pat-down, and the second search was conducted incident to his lawful arrest; neither search uncovered weapons or contraband. The officers then transported Beatty to the police station solely to strip-search him, but the strip search also revealed nothing. The District Court granted the officers summary judgment, concluding that the initial stop, arrest, and first two searches were reasonable and that qualified immunity protected the officers from liability for the strip search. The Third Circuit affirmed, but held that the strip search itself violated the Fourth Amendment. The court concluded that the search-incident-to-arrest doctrine does not automatically permit officers to strip-search an arrestee outside the jail or prison setting. Because strip searches are highly intrusive and the traditional justifications for searches incident to arrest (officer safety and preservation of evidence) did not justify the search of Beatty, the officers generally needed either the arrestee’s consent, exigent circumstances, or a warrant supported by probable cause to believe that a search beneath the clothing would reveal weapons, contraband, or evidence. Here, the officers had none of those justifications. Nevertheless, the court held that qualified immunity barred damages liability because, at the time of the search, the right against a warrantless strip search of an arrestee outside the institutional setting was not clearly established by Supreme Court or Third Circuit precedent. The court likewise upheld qualified immunity on Beatty’s First Amendment retaliation claim and affirmed summary judgment for the officers.

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Result

Complete Victory Obtained in a Workers’ Compensation Matter

business meeting photo

Result

Summary Judgment Obtained in Insurance Coverage Case

Defense Victory Obtained in Workers’ Compensation Case

Result

Defense Victory Obtained in Workers’ Compensation Case

Thought Leadership

Two Tracks, No Preclusion: Ohio Supreme Court Preserves Separate Damages Claims After Chapter 2506 Appeals

The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. The remaining question for practitioners looking to apply or defend against this exception is when does the statute of limitations begin to run on damages and declaratory relief claims related to an administrative decision on appeal? A takings action in federal court has a 2-year statute of limitations, or as a state claim, 4 years (like the other tortious claims raised therein). Correlating this case with others, an administrative appeal will not likely toll the statute of limitations on claims based on a final decision by a municipal authority. Therefore, practitioners should look for these cases to be brought simultaneously.

Event

CLM 2026 Focus Conference

Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed. 

Thought Leadership

Pennsylvania Supreme Court to Review Whether Legal Malpractice Claims May Be Recast as Breach of Contract Claims

The Pennsylvania Supreme Court recently granted allowance of appeal to consider whether a plaintiff may pursue a breach of contract claim against an attorney based on allegations that the attorney failed to provide competent legal services. The issue is significant in professional liability litigation because it concerns whether a plaintiff may avoid the statute of limitations applicable to professional negligence claims by characterizing the alleged misconduct as a breach of contract. Antoine Poteat retained attorneys Gary Asteak and Nino V. Tinari to represent him in a criminal matter. After his conviction was subsequently overturned through a Post Conviction Relief Act proceeding, Poteat filed suit against his former attorneys alleging that they breached their retainer agreements by failing to provide competent legal services. The attorneys argued that the claims sounded in professional negligence, rather than breach of contract, and were therefore time-barred. The trial court dismissed Poteat’s complaint, but the Superior Court, sitting en banc, reversed. The Superior Court held that the gist-of-the-action doctrine did not bar Poteat’s breach of contract claim because the alleged failure to provide competent legal services could constitute a breach of the parties’ agreement. The Court further held that a legal-services agreement contains an implied duty requiring an attorney to provide competent legal services, even where the agreement does not contain an express provision requiring such services. The Pennsylvania Supreme Court granted review in July 2026 and will consider whether the Superior Court’s decision conflicts with Pennsylvania precedent distinguishing contract and tort claims, including Bruno v. Erie Insurance Co. The Supreme Court will also address whether a plaintiff may maintain a breach of contract claim based on an implied duty to provide competent legal services without identifying a specific contractual provision that was breached. The Supreme Court’s decision could have significant implications for professional liability litigation in Pennsylvania, particularly where plaintiffs seek to characterize claims arising from alleged professional negligence as contractual claims.

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