Ilias v. USAA General Indemnity Company

Eleventh Circuit Court of Appeals

Ilias v. USAA General Indemnity Company
11th Circuit Court of Appeals
3/14/23, Judge Marcus
Topics: Bad Faith

This is a plaintiff-friendly bad faith opinion involving a serious motor vehicle accident. In 2017, Tortfeasor Dunbar lost control of his van while driving in Pasco County, Florida. He jumped the center median, and his car landed on top of Plaintiff Ilias’s car, severely injuring him.

Tortfeasor Dunbar’s policy limits with USAA were $10,000. Even though USAA quickly determined that Tortfeasor Dunbar was at fault and that Plaintiff Ilias was severely injured and his 3 medical costs would almost certainly be over $10,000, USAA delayed settlement negotiations for a month. USAA also failed to answer Ilias’s attorneys’ question about whether Tortfeasor Dunbar lacked additional insurance coverage to satisfy a judgment, which made it impossible for the plaintiff to settle for $10,000 and release Dunbar from liability. Ilias filed suit and obtained a $5 million judgment against Dunbar in state court.

Ilias then filed a Florida common law bad faith claim against USAA, but USAA had the action removed to the Middle District of Florida on the basis of diversity jurisdiction. The district court granted USAA’s motion for summary judgment on the ground that there was no genuine issue of material fact supporting the claim for bad faith. The district court held that, at the most, USAA had only acted negligently in handling the claim.

Ilias appealed, and the Eleventh Circuit reversed. First, the federal court was bound to follow Florida law under the Erie doctrine.

Second, the Eleventh Circuit summarized Florida’s bad-faith common law cause of action as follows:

  • Florida’s bad-faith law “imposes a fiduciary obligation on an insurer to protect its insured from a judgment that exceeds the limits of the insured’s policy,” otherwise known as an “excess judgment.” Harvey v. GEICO Gen. Ins. Co., 259 So. 3d 1, 3 (Fla. 2018). Although this “duty [of good faith] is one that the insurer owes to the insured,” Florida law authorizes the victim -- here, Ilias -- to “sue the insurer directly for its badfaith failure to settle on the insured’s behalf.” Eres v. Progressive Am. Ins. Co., 998 F.3d 1273, 1278 (11th Cir. 2021) (emphasis in original). Any damages claimed by the insured (or the victim standing in his shoes) “must be caused by the insurer’s bad faith.” Am. Builders Ins. Co. v. Southern-Owners Ins. Co., 56 F.4th 938, 945 (11th Cir. 2023) (quoting Harvey, 259 So. 3d at 7).In other words, a bad faith claim under Florida law has two elements: (1) bad faith conduct by the insurer, which (2) causes an excess judgment to be entered against the insured. See Perera v. U.S. Fid. & Guar. Co., 35 So. 3d 893, 899 (Fla. 2010).

Bad faith is determined under a totality of the circumstances standard where the focus is on the actions of the insurer in fulfilling their obligations. “Insurers have obligations to advise the insured of settlement opportunities, to advise as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid the same, as well as to investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” In Harvey, the Supreme Court of Florida emphasized that “the critical inquiry in a bad faith [action] is whether the insurer 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.”

First, USAA unduly delayed in initiating settlement negotiations with Ilias. In cases “[w]here liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations.” The Plaintiff had been seriously injured, and USAA knew it. USAA tried to argue that it had the duty to wait for a global settlement with the other injured parties, but the Eleventh Circuit did not buy that argument because 4 the other injured person had only minor injuries and never even sought treatment. The Plaintiff was hospitalized and put in a coma. USAA knew everything it needed to know to tender the policy limits fairly quickly, and its delay resulted in the judgment in excess of policy limits.

Also, USAA failed to provide the Plaintiff’s side with the information it needed to settle for policy limits when that offer was finally made. Plaintiff’s attorney asked for—but did not receive— confirmation that the driver had no additional insurance coverage. The attorney would have advised the Plaintiff to accept policy limits if USAA had confirmed that there was no other coverage. Section 627.4137, Fla. Stat., requires an insurer, upon request, to disclose “the name and coverage of each known insurer to the claimant,” as well as “[a] statement of any policy or coverage defense which such insurer reasonably believes is available to such insurer.”

Finally, in regard to causation—whether the bad faith “caused” the excess judgment—Florida law requires that Ilias show that the bad faith “directly and in natural and continuous sequence produce[d] or contribute[d] substantially to producing such [damage], so that it can reasonably be said that, but for the bad faith conduct, the [damage] would not have occurred.” Again, failure to confirm that there was no other coverage was key to the attorney pressing forward with filing suit.

Terry P. Roberts
Director of Appellate Practice Fischer Redavid PLLC
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