Supreme Court Rules that a Determination of Damages in an Uninsured Motorist Action is Binding as an Element of Damages in a Subsequent First Party Bad Faith Action Against the Same Insurer
In Fridman v. Safeco Insurance Company of Illinois, the Supreme Court of Florida ruled that an insured is entitled to a determination of liability in the full extent of their damages in an uninsured motorist (UM) action before they file a first party bad faith action. The determination of damages is binding, with the exception that both parties have the right to appeal any properly preserved errors in the verdict.
Adrian Fridman filed a claim with Safeco for the $50,000 limit of his UM policy. Safeco refused to pay the policy limits even after Fridman filed a Civil Remedy Notice (CRN). In February of 2010, Fridman served a proposal for settlement in the amount of $50,000. Safeco again failed to respond and the offer was deemed rejected.
A month before the trial was set to begin, Safeco attempted to confess judgment by tendering a check to Fridman for the policy limits. However, the trial court did not permit Safeco to confess judgment. The trial court relied on the legislative intent of Fla. Stat. §627.727(10) and ruled that Fridman was correct in not filing a UM claim concurrent with a bad faith action. This was crucial because had the court found that a UM claim could be filed concurrently with a bad faith action, then Fridman would have suffered no prejudice from Safeco confessing judgment.
The jury awarded Fridman damages in the amount of $1,000,000. Safeco appealed, arguing that the trial court should have allowed it to confess judgment, and that the trial court should not have reserved jurisdiction for a future bad faith action. On appeal, the Fifth District vacated the jury’s verdict and declined to reserve jurisdiction to consider a bad faith claim. It reasoned that since there was no dispute as to the policy amount, the judgment could not exceed the policy limits. The Fifth District believed that the confession of judgment was sufficient to allow Fridman to pursue a bad faith action, and that the determination of damages should be determined in a subsequent bad faith action. The Supreme Court of Florida disagreed.
The Supreme Court ruled that if the insurer does not respond to the Civil Remedy Notice, then the damages found in a UM action will be binding in a bad faith action. However, an insurer can still argue that it did not act in bad faith in failing to pay the policy limits when demanded. By failing to respond to a CRN, an insurer may be subjecting itself to an excess judgment, and confessing judgment is not a valid means of avoiding a bad faith action. Additionally, the Court ruled once damages are determined in a UM case, an insurer’s only options are to either appeal based on a timely raised error or to show that its actions were not in bad faith in the handling of the UM claim.