Hunton Insurance Recovery Blog

Hunton Andrews Kurth LLP recently wrote about the Eleventh Circuit decision in McNamara v. Gov’t Employees Ins. Co., 30 F.4^th 1055 (11th Cir. 2022) (“McNamara”), where the court held that a consensual settlement (such as a consent judgment) serves as an excess judgment for the purposes of a bad faith claim.  In a follow up decision, the Eleventh Circuit extended its McNamara reasoning to a case involving an accepted proposal for settlement.  In Potter v. Progressive American Insurance Company, No. 21-11134 (11th Cir. 2022), Daniel Lee and Jolene Potter brought a third-party bad faith action against the insurer, Progressive.  The Potters were involved in an automobile accident with Progressive’s insured, under an automotive liability policy with bodily injury limits of $10,000 per person.  The Potters sued Progressive’s insured and ultimately served a proposal for settlement, pursuant to Fla. Stat. § 768.79, totaling $125,000.  The insured accepted the proposal, a final judgment was entered, and the Potters sued Progressive for bad faith.

In the bad faith action, the trial court granted summary judgment in Progressive’s favor, citing to the subsequently overturned district court decision in McNamara v. Gov’t Emps. Ins. Co., No. 8:17-CV-3060-T-23CPT, 2020 WL 5223634, at *3–4 (M.D. Fla. July 29, 2020), rev’d and remanded, 30 F.4th 1055 (11th Cir. 2022), which relied heavily on the unpublished decision in Cawthorn v. Auto-Owners Ins. Co., 791 F. App’x 60 (11th Cir. 2019) (holding 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).  The trial court found that there was no excess judgment because there was no judgment after trial.  On appeal, the Eleventh Circuit reversed that ruling and reaffirmed its holding in McNamara that third-party bad faith claims should not be limited solely to judgments after an actual trial.  In reversing the trial court’s ruling, the Eleventh Circuit noted that the acceptance of a proposal for settlement and the subsequent entry of a final judgment that exceeded the policy limits qualified as an excess judgment.

Potter forecloses any argument that a consensual judgment, whether a consent judgment or by settlement, cannot be used as an excess judgment for purposes of a bad faith claim.