Hunton Insurance Recovery Blog

In a recently published opinion, the Eleventh Circuit revisited – and departed from – its prior, unpublished decision in Cawthorn v. Auto-Owners Insurance Co., 791 F. App’x 60 (11th Cir. 2019). The Court held that a final judgment that exceeds all available liability policy limits, whether such judgment results from a jury verdict or a consensual settlement, constitutes an “excess judgment” that can be used to satisfy the causation requirement of an insurer bad faith claim in Florida.

In McNamara v. Gov’t Employees Ins. Co., No. 20-13251 (11th Cir. 2021), Erika McNamara was driving Willard Warren’s vehicle when she caused an accident with another driver. Warren was insured under a GEICO policy that provided $100,000.00 in bodily injury coverage. GEICO and the injured party were unable to reach a settlement and Warren and McNamara were sued. During the course of the suit, Warren and McNamara were presented with two proposals for settlement under Fla. Stat. §768.79. The proposals required Warren and McNamara to consent to final judgments in the amount of the proposal and GEICO had to confirm it would not assert that Warren and McNamara had breached the policy by accepting the proposals. GEICO agreed and the proposals were accepted.

Warren and McNamara subsequently sued GEICO for bad faith, seeking to recover the amounts of the final judgments entered against them that exceeded the $100,000.00 policy limit. The District Court granted summary judgment to GEICO based on the Cawthorn decision, holding that the consent judgments were not “final judgments” because they did not result from a verdict, and thus could not be considered “excess judgments” for purposes of a bad faith action in Florida.

On appeal, the Eleventh Circuit noted that the Florida Supreme Court had previously held in Perera v. United States Fidelity & Guaranty Co., 35 So. 3d 893 (Fla. 2010) that an excess judgment can be presented in the form of not only a verdict rendered after a trial, but also in the form of a Cunningham agreement, a Coblentz agreement or a claim by an excess carrier against a primary carrier based on failure to settle. Based on binding Florida precedent, the Eleventh Circuit held that the final judgments entered against Warren and McNamara were excess judgments and that it did not “matter that these judgments resulted from stipulated settlements instead of verdicts.”

The Court then turned to its prior decision in Cawthorn, which was expressly relied upon by the District Court, and stressed that, as an unpublished decision, Cawthorn is not binding precedent. In Cawthorn, the Eleventh Circuit had held, in a reversal of well-established Florida precedent, that only a verdict could satisfy the requirement of an excess judgment in a bad faith action, precluding any actions that were based on a consensual settlement (such as a consent judgment). The Court expressly held that Cawthorn incorrectly analyzed Florida bad faith law.

The McNamara decision is a welcome reversal for policyholders and is a reiteration of the established tenets of the Florida bad faith law.