Florida insurance law requires an insurance company to act in good faith in protecting its insured. This seems like a simple, self-evident principle. But what does it really mean in the context of a personal injury claim?
Often the most common areas where questions arise about whether an insurer is acting in good faith pertains to the settlement of claims. In that regard, an insurer has a duty to adjust and settle claims fairly and in a timely fashion. If an insurer does not settle a claim in this way, the insurer can be held liable to the insured for damages arising from the unfair handling. In Florida, as in many states, if the insurer does not act fairly and in a timely fashion, it may give rise to a "bad faith" action.
With regard to settling claims in good faith, an insurer has a duty to try to settle a claim within the limits of available coverage. Failure to do so can impact and cause damages to the insured. Under the right circumstances, the insurer can be held liable for those damages even if they exceed the insurer's policy limits.
Perhaps an example can best explain how this works. Consider a situation where Tom is involved in a serious automobile accident involving a collision caused by Cindy. Tom is gravely injured and ultimately is paralyzed from the waist down. His medical bills exceed $120,000 and he can no longer work in his profession.
Unfortunately, Cindy only has $100,000 in bodily injury liability insurance (sometimes called "BI"). Tom and his wife hire an attorney who writes to Cindy's insurance company and includes with it all of Tom's medical records. The lawyer demands that the insurer "tender" payment of the $100,000 in BI coverage within 45 days. However, Cindy's insurance company decides to try to "save a buck" and try to get Tom to take less than the policy limits. Without any factual support, the insurer claims Tom was at fault and caused the accident. In fact, three witnesses state that Cindy was at fault. The company offers Tom $75,000 but never tenders the full $100,000 BI limits within the 45-day time limit. After 45 days, Tom's lawyer files a lawsuit and ultimately the case is tried to a jury who awards Tom $1.5 million. So can Tom recover this award from Cindy's insurance company?
In the above example, Cindy's insurance company had enough information to know that Tom's injuries greatly exceeded the $100,000 in BI coverage. The insurer could have settled for the $100,000 and gotten Cindy released from further liability. Instead, the insurance company decided to jerk Tom around and refused to tender its limits. Now Cindy faces an excess judgment--more than $1.4 million above her BI insurance coverage.
This scenario can give rise to a bad faith lawsuit against the insurer where Tom seeks to recover from the insurance company the full amount of his damages awarded by the jury. Under these circumstances the insurance company could be found liable for the entire $1.5 million even though its BI coverage was only $100,000. The reason is that the company acted in bad faith by failing to settle within policy limits when it could and should have.
Understanding the nuances of bad faith claims requires having an experienced injury lawyer. Don't try to settle serious injury claims by yourself.