Opinion
Case No. 8:20-cv-2204-T-30TGW
2021-03-09
Daniel Lee POTTER and Joleen Potter, Plaintiffs, v. PROGRESSIVE AMERICAN INSURANCE COMPANY, Defendant.
Khalil Easa Farah, Farah & Farah, PA, Jacksonville, FL, for Plaintiff Daniel Lee Potter. Michael Stanley Rywant, Kerry C. McGuinn, Jr., Rywant, Alvarez, Jones, Russo & Guyton, PA, Tampa, FL, for Plaintiffs. B. Richard Young, Jordan Marshall Thompson, Megan Alexander, Joshua John Cecil Hartley, David Michael Angley, Young, Bill, Boles, Palmer & Duke P.A., Tampa, FL, for Defendant.
Khalil Easa Farah, Farah & Farah, PA, Jacksonville, FL, for Plaintiff Daniel Lee Potter.
Michael Stanley Rywant, Kerry C. McGuinn, Jr., Rywant, Alvarez, Jones, Russo & Guyton, PA, Tampa, FL, for Plaintiffs.
B. Richard Young, Jordan Marshall Thompson, Megan Alexander, Joshua John Cecil Hartley, David Michael Angley, Young, Bill, Boles, Palmer & Duke P.A., Tampa, FL, for Defendant.
ORDER
JAMES S. MOODY, JR., UNITED STATES DISTRICT JUDGE
THIS CAUSE is before the Court upon Defendant's Motion for Summary Judgment (Dkt. 18), Plaintiffs’ Response in Opposition (Dkt. 34), and Defendant's Reply (Dkt. 36). The Court, having reviewed the motion, response, reply, record evidence, and being otherwise advised in the premises, concludes that Defendant's motion should be granted because the record is undisputed that an element of this bad faith insurance action—an excess judgment (or its functional equivalent)—is lacking as a matter of law.
BACKGROUND
This is a third-party bad faith insurance action brought by Plaintiffs Daniel Lee Potter and Jolene Potter against Defendant Progressive American Insurance Company. Plaintiffs allege that Progressive acted in bad faith in its handling of a bodily injury ("BI") claim that Plaintiffs asserted against Progressive's insured, Ronald Dale Evans, arising from an automobile accident that occurred on November 10, 2016.
On September 25, 2020, Progressive filed a Motion to Dismiss for failure to state a claim, arguing that Plaintiffs failed to obtain an excess judgment or its functional equivalent in order to assert the present third-party bad faith action. On October 19, 2020, Plaintiffs filed their Response in Opposition. On October 22, 2020, the Court entered an Order converting Progressive's Motion to Dismiss to a Motion for Summary Judgment. (Dkt. 17). The Court subsequently permitted the parties to conduct discovery on the narrow issue of whether an excess judgment or its equivalent was obtained in the underlying action. The parties conducted this discovery and now this matter is ripe for the Court's disposition.
SUMMARY JUDGMENT STANDARD
Motions for summary judgment should be granted only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotation marks omitted); Fed. R. Civ. P. 56(c). The existence of some factual disputes between the litigants will not defeat an otherwise properly supported summary judgment motion; "the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The substantive law applicable to the claimed causes of action will identify which facts are material. Id. Throughout this analysis, the court must examine the evidence in the light most favorable to the nonmovant and draw all justifiable inferences in its favor. Id. at 255, 106 S.Ct. 2505.
Once a party properly makes a summary judgment motion by demonstrating the absence of a genuine issue of material fact, whether or not accompanied by affidavits, the nonmoving party must go beyond the pleadings through the use of affidavits, depositions, answers to interrogatories and admissions on file, and designate specific facts showing that there is a genuine issue for trial. Celotex , 477 U.S. at 324, 106 S.Ct. 2548. The evidence must be significantly probative to support the claims. Anderson , 477 U.S. at 248–49, 106 S.Ct. 2505.
This Court may not decide a genuine factual dispute at the summary judgment stage. Fernandez v. Bankers Nat'l Life Ins. Co. , 906 F.2d 559, 564 (11th Cir. 1990). "[I]f factual issues are present, the Court must deny the motion and proceed to trial." Warrior Tombigbee Transp. Co. v. M/V Nan Fung , 695 F.2d 1294, 1296 (11th Cir. 1983). A dispute about a material fact is genuine and summary judgment is inappropriate if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ; Hoffman v. Allied Corp. , 912 F.2d 1379, 1383 (11th Cir. 1990). However, there must exist a conflict in substantial evidence to pose a jury question. Verbraeken v. Westinghouse Elec. Corp. , 881 F.2d 1041, 1045 (11th Cir. 1989).
DISCUSSION
As the Court stated previously, to prevail in a bad faith case, there must be "a causal connection between the damages claimed and the insurer's bad faith." (Dkt. 17) (citing Perera v. U.S. Fid. & Guar. Co., 35 So. 3d 893, 903–04 (Fla. 2010) ; Cunningham v. Standard Guar. Ins. Co. , 630 So. 2d 179, 181–82 (Fla. 1994) ("[A] third party must obtain a judgment against the insured in excess of the policy limits before prosecuting a bad-faith claim against the insured's liability carrier.")). If a plaintiff can show breach and causation, he can show injury. The amount of liability that exceeds the policy limits is the injury. United Servs. Auto Ass'n v. Jennings , 731 So. 2d 1258, 1259 n.2 (Fla. 1999). An excess judgment is required before the bad faith case can proceed. "Causation is a prerequisite for the claim: for an insured to bring a bad faith claim, the injured party must first win an excess judgment." Cawthorn v. Auto-Owners Ins. Co. , 791 F. App'x 60, 64–66 (11th Cir. 2019) (citing Cunningham , 630 So. 2d 179 at 181–82 ).
There are three exceptions to the excess judgment rule that are deemed "functional equivalents" of an excess judgment under Florida law. Cawthorn , 791 F. App'x at 64-66 (citing Perera v. U.S. Fid. & Guar. Co. , 35 So. 3d 893, 899 (Fla. 2010) ). The first exception is called a Cunningham agreement, wherein the insurance company and the injured third party agree to try the bad faith claim first, and, if the jury finds no bad faith, the parties agree to settle for the policy limits. Cunningham , 630 So. 2d at 182.
The second exception is called a Coblentz agreement. Coblentz agreements arise when the insurance company fails to defend the insured and, in response, the insured and the injured third party agree to settle the suit and allow the injured third party to sue the insurance company on a theory of bad faith. See Cawthorn , 791 F. App'x at 64 (citing Coblentz v. Am. Sur. Co. of N.Y. , 416 F.2d 1059, 1062-63 (5th Cir. 1969) ); Steil v. Fla. Physicians’ Ins. Reciprocal , 448 So. 2d 589, 591 (Fla. 2d DCA 1984).
The third exception occurs when an excess carrier incurs damages because the primary carrier acted in bad faith. In such cases, an excess carrier may bring a bad faith claim against a primary insurer "by virtue of equitable subrogation." Perera , 35 So. 3d at 900. In summary, the salient issue is whether there is an excess judgment or its functional equivalent. The Court concludes, after interpreting the record in a light most favorable to Plaintiffs, that there is not because none of the delineated exceptions apply here.
The record reflects that Plaintiffs filed a lawsuit against Evans in Pasco County, Florida, Case No. 17-CA-000561 ("the underlying action"). Progressive, pursuant to the terms of the subject policy, proceeded to defend Evans in the underlying action and retained attorney Stuart Freeman to represent Evans. It is undisputed that at no time did Progressive withdraw its defense of Evans, nor did Evans reject Progressive's defense.
On April 20, 2018, Plaintiffs’ counsel, Raymond Haas, wrote a letter to Freeman. Haas wrote in relevant part that it would be a "realistic solution" for the parties to stipulate "for the entry of a judgment, assignment of benefits and agreement to prosecute the bad faith case by Mr. Evans against the insurer." (Dkt. 18 at Ex. D).
On June 4, 2018, Progressive responded directly to Haas’ April 20, 2018 letter. Progressive stated that "we will not agree to a stipulation for the entry of a judgment, assignment of benefits and agreement to prosecute the bad faith case." (Dkt. 18 at Ex. E).
On July 23, 2018, Plaintiffs served a Proposal for Settlement in the underlying action in the amount of $125,000. Two days later, on July 25, 2018, Plaintiffs served two separate Proposals for Settlement: one from J. Potter to Evans in the amount of $35,000 and one from D. Potter to Evans in the amount of $90,000. On August 8, 2018, Progressive made a note indicating that "WE WILL ALLOW THE PFS(S) TO EXPIRE EMAIL TO DEF. ATTY. CONF. SAME." (Dkt. 18 at Ex. C: PRG 0014).
On August 14, 2018, Freeman sent Evans correspondence, confirming a telephone conversation the two had regarding the Proposals for Settlement. Therein, Freeman wrote "[a]s I explained to you, on July 25, 2018, both Plaintiffs served Proposals for Settlement wherein Daniel Lee Potter agreed to settle the case for $90,000.00, and Joleen Potter agreed to settle the case for $35,000.00, for a total of $125,000.00." Freeman further noted: "If these Proposals for Settlement are accepted, Progressive will only pay its policy limits of $10,000.00, leaving $115,00.00 unpaid, and a judgment will be entered against you in that amount." Freeman also stated in the letter that "Progressive has advised that should you accept these Proposals for Settlement, your acceptance will not constitute a waiver of any claims that you may have against Progressive for its negligence or bad faith." (Dkt. 18 at Ex. H).
It is undisputed that Progressive was not a party to the Proposals for Settlement, Progressive was not a party to the stipulated Final Judgment, and Progressive did not agree to be bound by either the Proposals for Settlement or the stipulated Final judgment. The Court concludes that these facts establish that no excess judgment was obtained as a matter of law. See McNamara v. Gov't Employees Ins. Co. , No. 8:17-CV-3060-T-23CPT, 2020 WL 5223634, at *3–*4 (M.D. Fla. July 29, 2020) (granting summary judgment in favor of the insurer in a third-party bad faith action and holding that stipulated judgments entered against the insureds, pursuant to the insureds’ acceptance of proposals for settlement from the claimant, did not constitute an excess judgment or its "functional equivalent" for purposes of maintaining a bad faith action).
Although there is no binding law directly on point to the extent that the facts involve an acceptance of a proposal for settlement, McNamara is instructive. In McNamara , the injured plaintiff served the insureds with two separate proposals for settlement that were for amounts in excess of their insurance policy limits. Id. at * 1. The insureds’ retained counsel was of the opinion that the amounts of the proposals for settlement would have been "far below" what a jury would likely award at a subsequent trial. Id. at *1-*2. Like the instant case, the insurance company advised the insureds’ retained counsel that, while it would not agree to be a party to the settlement, it would not assert that the insureds breached the subject policy if they chose to accept the proposals for settlement. Id. at *2. The insureds accepted the proposals for settlement and stipulated final judgments were subsequently entered against each insured. Id. The insureds then filed a third-party bad faith lawsuit against the insurance company. Id.
In granting the insurance company's motion for summary judgment, the court held "[b]ecause in this action no adjudication by a fact finder imposes liability exceeding the policy limit and because no other ‘functional equivalent’ of an excess judgment appears, an ‘open and shut’ application of Cawthorn appears to demand summary judgment in [the insurer's] favor." Id. at * 3. The court rejected the plaintiffs’ argument that the insurance company implicitly consented to the judgment, holding that "an insurer's agreeing to waive a condition of an insurance policy cannot alone bind the insurer to a settlement of a third-party's claim against the insured." Id. The court also rejected the argument that, because the insurance company retained counsel to defend the insureds, the insurance company controlled the acceptance of the proposals for settlement and the stipulated final judgment. Id. (holding that "[i]n this circumstance, the action of a lawyer appointed to defend the insured ‘cannot be said to bind the insurer’ "). Id. (citing Pratt v. Gov't Employees Ins. Co. , No. 8:18-CV-1607-T-36AEP, 2020 WL 3618448, at *13 (M.D. Fla. July 2, 2020) ); Marlin v. State Farm Mut. Auto. Ins. Co. , 761 So. 2d 380, 381 (Fla. 4th DCA 2000).
Here, just as in McNamara , Evans, not Progressive, decided to accept the Proposals for Settlement. Plaintiffs argue that Progressive should be bound by the stipulated Final Judgment because Progressive was in ultimate control—it retained counsel to defend Evans and had the ability to accept the Proposals for Settlement. As stated above, the McNamara court rejected a similar "control" argument and the Court agrees with the McNamara court's conclusion that this fact does not "bind" Progressive. 2020 WL 5223634, at *3.
Plaintiffs also argue that this case is distinguishable because Freeman specifically advised Evans that acceptance of the proposals of settlement would not waive any subsequent bad faith claim. The deposition testimony of Progressive's representatives also substantiate Plaintiffs’ point that Progressive agreed to this non-waiver language and was aware that Evans was not waiving any subsequent claim he may have against Progressive. Plaintiffs’ argument follows that Plaintiffs, who are standing in the shoes of Evans, may pursue this bad faith action against Progressive because it was not waived. The Court disagrees with this logic because, even assuming Progressive affirmatively agreed that Evans was not waiving his right to file a subsequent bad faith action, this agreement is not tantamount to Progressive conceding that an excess judgment or its functional equivalent is established. In sum, the record is undisputed that Progressive was not a party to the Proposals for Settlement and Progressive never agreed to be bound by the stipulated Final Judgment. See Cawthorn v. Auto-owners Insurance Co. , 2018 WL 1996835, at *9 (M.D.Fla. 2018) (stating that an insurer's "silence could not manifest assent" to a settlement agreement between its insured and third-party claimant); see also Schultz v. Gov't Employees Ins. Co. , No. 1:15CV172-MW/GRJ, 2018 WL 7185324, at *4 (N.D. Fla. Dec. 7, 2018) ("There was no excess judgment in this case, nor were there any of the widely recognized functional equivalents. Moreover, there is no reason to recognize Schultz's Agreement as a new type of functional equivalent (in fact, there is reason to hold otherwise)"). Accordingly, the Court, like the McNamara court, concludes that Plaintiffs have not established an excess judgment or its functional equivalent as a matter of law.
It is important to acknowledge that the orders granting summary judgment in McNamara and Pratt are currently on appeal. Perhaps the Eleventh Circuit will certify this question to the Florida Supreme Court because Florida law appears unsettled on the issue of what constitutes the "functional equivalent" of an excess judgment. This Court's order granting summary judgment in Pelaez v. Government Employees Insurance Company , 460 F.Supp.3d 1259 (M.D. Fla. 2020) is also on appeal. Pelaez involved a consent judgment, not an acceptance of a proposal of settlement and subsequent stipulated final judgment, but the Court's order similarly applied Cawthorn . See id. ("GEICO did not neglect its duty to defend, did not agree to be bound by the terms of the consent agreement/judgment, and was not a party to the consent agreement.").
It is therefore ORDERED AND ADJUDGED that:
1. Defendant's Motion for Summary Judgment (Dkt. 18) is granted.
2. The Clerk of Court is directed to enter Final Judgment in favor of Defendant and against Plaintiffs.
3. The Clerk of Court is directed to close this case and terminate any pending motions as moot.
DONE and ORDERED in Tampa, Florida, this March 9, 2021.