In Markuson v. State Farm Mut. Auto. Ins. Co., 48 Fla. L. Weekly D1839 (Fla. 2d DCA September 15, 2023), the underlying case arises from a 2006 automobile accident involving Erik Saterbo and Benjamin Markuson. At the time of the accident, Erik Saterbo was operating a vehicle owned by his father Stephen. Due to his injuries, Markuson sued the Saterbos.
The Saterbos had an insurance policy with State Farm that provided policy limits of $300,000 against liability for bodily injuries sustained in an auto accident. On January 15, 2009, State Farm authorized the Crawford Law Group, P.A.—the firm retained by State Farm to defend the Saterbos—to make a settlement offer to Mr. Markuson to resolve his case for the policy limits. The offer was not accepted.
Instead, in 2011 and 2012, Markuson issued two settlement offers to State Farm's insureds (the first was oral and the second was written) that were largely indistinguishable in their terms. In pertinent part, Markuson's offer would have required State Farm to (1) tender the $300,000 policy limits to Markuson, (2) authorize State Farm's insureds to enter into a consent judgment in the amount of $1.9 million that would not be recorded or enforced against the Saterbos, and (3) authorize the Saterbos to assign their rights in any claims against their insurance agent.
In return, Markuson would execute a release of all his claims against the Saterbos and a satisfaction of the aforementioned consent judgment. The proposal made no indication that State Farm would be released from any bad faith liability. State Farm declined to accept these proposals, and the case continued to trial. Following a jury trial, Markuson recovered a total of $3,084,074, a sum considerably greater than the coverage afforded.
The settlement offered by Markuson formed the basis of a bad faith complaint against State Farm where Markuson and the Saterbos sued with a seven count complaint against State Farm; Crawford Law Group, P.A.; and Larry Walker, State Farm's agent. The alleged bad faith occurred when State Farm failed to settle the personal injury action by declining three of Markuson's proposals for settlement.
The trial court concluded that State Farm had no duty to enter into a consent judgment that was in excess of the policy limits "as a matter of law." The trial court found that "each of the three proposals exposed State Farm to extracontractual claims or payment" and that nothing suggested State Farm would be released by entering into the proposed consent judgments. It further found that State Farm never withdrew its offer of the policy limits. Thus, the trial court determined that "State Farm did not act in bad faith when it did not agree to or negotiate with respect to any of the three proposals."
The thrust of the bad faith case turned on State Farm's refusal to enter into an agreement—that is, State Farm, in the plaintiffs' view, had a duty to authorize its insureds to consent to a judgment more than five times the amount of the policy limit (thereby expediting the availability of a bad faith claim) and to do so without releasing State Farm from liability. Florida law is clear that an insurer has no duty to enter into such an agreement. There is no duty because entering into a consent judgment for purposes of expediting bad faith litigation is indeed the "functional equivalent" of an excess judgment. The obligation to negotiate and settle claims on behalf of its insured is defined by and bounded within the insurance contract itself; an insurer does not ordinarily have a duty to pay a claim in excess of a policy's limit.
The Florida Court of Appeals concluded that, as a matter of law, the trial court correctly determined that State Farm had no duty to enter such an agreement. Thus, where there was no duty to accept the proposals, declining the proposals could not serve as the basis of the bad faith claim. The circuit court erred by entering a final judgment in favor of State Farm to the extent that the plaintiffs' claims raised other theories of bad faith and remanded the case to trial on the other issues.
Liability insurance is a means of protecting against the risk of loss for accidentally injuring a third person up to the limits of the policy. Insurers have no obligation to expose themselves to an excess verdict, and the court of appeals concluded that State Farm had no duty to do so because entering into a consent judgment for purposes of expediting bad faith litigation would force the insurer to pay an excess judgment when its only contractual obligation was to defend its insured and, if there is a judgment, to pay the full limit of liability. To accept the offer that the plaintiff suggested as evidence of bad faith would be to commit financial suicide and violate the clear terms of its policy.
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