The Eleventh Circuit finds that a qualifying “excess judgment” for bad faith may be based on a consent judgment, rather than a verdict


Insurance Coverage Language

By: Mary-Kate Planchet

In Erika L. McNamara, Willard F. Warren and Kenneth Bennett v. Government Employees Insurance Company, 2022 U.S. App. LEXIS 9090 (11th Cir. Apr. 5, 2022), the United States Court of Appeals for the Eleventh Circuit determined whether a qualifying “excess judgment” for bad faith must be based on a verdict or may be predicated on a consent judgment memorializing a private settlement agreement.

This issue arose from the Florida law requiring an insured who brings a bad faith claim against an insurer to prove, among other things, that the insurer’s conduct caused the insured’s loss.

In McNamara, a driver negligently changed lanes and caused a collision that seriously injured another driver. The owner of the vehicle that caused the collision had a GEICO policy that provided bodily-injury coverage up to $100,000 per person. After the parties failed to reach a deal, the injured driver sued the vehicle owner and the negligent driver. She presented them with settlement proposals in excess of the policy limit, conditioned on their consent to the entry of final judgments against them in those amounts. The vehicle owner and negligent driver’s attorney informed them the proposals were less than what a jury would award. As a result, they accepted the proposals.

After the court awarded the judgment for the injured driver “pursuant to the stipulation,” the vehicle owner and the negligent driver sued GEICO for bad faith, seeking to recover the amount of the final judgment that exceeded the policy limit.

The district court granted GEICO’s motion for summary judgment, following the Eleventh Circuit’s prior reasoning in an unpublished opinion, Cawthorn v. Auto-Owners Insurance Co., 791 F. App’x 60, 65 (11th Cir. 2019). In Cawthorn, the Eleventh Circuit held that only a judgment resulting from a verdict qualifies as an “excess judgment” for bad faith purposes under Florida law. The Eleventh Circuit reversed, holding that its reasoning in the unpublished opinion misinterpreted Florida law.

In reversing its prior reasoning, the Eleventh Circuit found that a jury verdict is not a prerequisite to an excess judgment in a bad faith action. The Eleventh Circuit cited the Florida Supreme Court’s holding in Perera v. United States Fidelity & Guaranty Co., 35 So.3d 893 (Fla. 2010), which established that while showing the existence of an excess judgment from a verdict generally is the most straightforward way to prove causation for bad faith, there is no single way of proving causation. Notably, in Perera, there was no verdict. Rather, the parties entered a stipulation to settle that formed the final judgment. The Florida Supreme Court never doubted that a final judgment based on a settlement agreement constituted proof of causation in a third party bad faith action.

Therefore, per Florida law, it did not matter that the judgment in the present case resulted from a stipulated settlement rather than a verdict. Because the vehicle owner was subject to an excess judgment, he could prove causation in his bad faith case.

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