Eleventh Circuit: Florida Law Does Not Equate Mere Negligence with Bad Faith

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Kincaid v. Allstate Prop. and Cas. Ins. Co., No. 2:13-cv-014030, 2014 WL 3733758 (11th Cir. Jul. 30, 2014)

The Eleventh Circuit holds that under Florida law, negligence does not equate to bad faith, and under the specific facts of the case, one possible negligent mistake was insufficient to find bad faith where the insurer otherwise consistently acted with due regard for the interest of the insured.

In an unpublished per curiam opinion, the Court of Appeals for the Eleventh Circuit affirmed the grant of summary judgment in favor of defendant-appellee Allstate Property and Casualty Insurance Company (“Allstate”).  The underlying action arose from an April 2006 accident in which plaintiff Joshua Kincaid drove his automobile out of a parking lot and into the path of Deon Vanzyl's motorcycle.  As a result, Vanzyl was placed in an intensive care unit, and he remains partially paralyzed.  Kincaid was legally impaired by alcohol and received a DUI charge for the accident, and admitted that the accident was his fault.

At the time of the accident, Kincaid insured under a policy issued by Allstate with $100,000 in bodily injury liability coverage.  Within one month, Allstate had investigated the claim and mailed Vanzyl a check and release for the full $100,000 bodily injury policy limits, while contacting Kincaid's family and attorney to tell them that although Allstate would try to settle Vanzyl's claim, the claim could exceed the policy limits.

Over the next four months, Allstate contacted Vanzyl's attorney 31 times attempting to negotiate a settlement.  The attorney only responded three times and refused to discuss settlement each time.  On October 13, 2006, Allstate's adjuster received a letter from Vanzyl's attorney proposing a settlement that must be concluded by October 20, 2006.  The letter proposed a settlement for Vanzyl's property injury, but did not mention any settlement for personal injury.  In fact, Vanzyl's attorney specifically noted that he had returned Allstate's $100,000 check for Vanzyl's bodily injuries, and did not request a replacement.

The Court of Appeals noted that the terms of the demand letter were vague with respect to the proposed release.  Despite requesting a “basic mutual general release,” the release Vanzyl's attorney attached to the letter only released Allstate and its insureds from property damage claims.  It did not release Vanzyl from any claims or release anyone from bodily injury claims.  Further, Allstate itself had no “basic mutual general release.”

Upon receipt of the letter, Allstate's insurance adjuster was confused about its terms and immediately hired outside counsel.  The adjuster requested that outside counsel help her comply with the offer and explained that Allstate wanted to do whatever was necessary so long as its insureds were released from all claims.  Although the letter was ambiguous, Allstate understood it as also contemplating settlement of Vanzyl's personal injury claims for the $100,000 bodily injury policy limit.  Allstate’s outside counsel also found the request for the release confusing and thought it was impossible to ascertain exactly what Vanzyl’s attorney was requesting; after multiple unsuccessful attempts to reach Vanzyl’s attorney, Allstate’s outside counsel sent two releases that he believed complied with the request of Vanzyl’s attorney, and included a note stating that the releases were not a material part of the settlement and would consider any proposed changes.

Vanzyl’s attorney did not provide a response until three days later, when he returned the settlement checks and advised that Vanzyl would be filing suit because a satisfactory release had not been provided.  Upon receiving this clarification, Allstate’s counsel drafted the requested release and delivered it to Vanzyl’s counsel, who once again rejected the settlement even though it complied with his requests.

Vanzyl filed a personal injury suit against Kincaid, ultimately winning a $16,299,163.88 final judgment.  After the verdict, Vanzyl entered into an agreement with Kincaid whereby Kincaid would bring this bad faith suit in exchange for a stay of the execution of the judgment and a possible satisfaction if Kincaid succeeded in this suit.  Allstate moved for summary judgment contending that no reasonable jury could find that it acted in bad faith.  The District Court for the Southern District of Florida granted Allstate's motion, and Kincaid appealed to the Eleventh Circuit.

The Court of Appeals rejected plaintiff-appellant Kincaid’s contention that a reasonable jury could find Allstate was negligent because Allstate did not provide the precise release that Vanzyl’s attorney desired.  According to Kincaid, this possibility of negligence also meant that a reasonable jury could find that Allstate acted in bad faith.  The Court of Appeals noted that Florida law does not support this assumption, and rather that the Florida Supreme Court has specifically stated that the standard for liability in an excess judgment case “is bad faith rather than negligence.”

The court continued its inquiry by noting that under Florida law, bad faith is present when an insurer fails to act in “good faith and with due regard for the interests of the insured.”  Negligence could be relevant insofar as negligent claim handling may indicate an insurer who is acting without due regard for the insured.  Therefore, the Court of Appeals examined all of the evidence, including evidence of negligence, to determine whether a reasonable jury could find bad faith on the part of Allstate.

The court found that Allstate’s failure to draft the release in the manner that Vanzyl’s attorney desired was not bad faith, and was at most a negligent mistake (while noting that it was not clear that there was a mistake at all).  Further, the court reasoned that it was “hard to imagine how Allstate could be acting in bad faith when it had already offered the full policy limits, aggressively sought to settle the case at every turn, and even continued to argue at all points that it had reached a binding settlement with Vanzyl.”  In light of the evidentiary record, the Court of Appeals agreed with the District Court’s conclusion that no reasonable jury could find that Allstate acted in bad faith.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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