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Florida High Court: Insured’s Assignee Cannot Recover $4 Million As Bad Faith Damages

TALLAHASSEE, Fla. - (Mealey's) An employer's liability insurer's actions neither caused the damages claimed by an insured nor resulted in exposure of the insured to liability in excess of the policy limits of three policies issued to the insured, the Florida Supreme Court held May 6, answering a rephrased certified question from the 11th Circuit U.S. Court of Appeals in the negative in finding that a cause of action for third-party bad faith against the insurer cannot be maintained (Pamela Perera v. United States Fidelity and Guaranty Co., No. SC08-1968, Fla. Sup.).

Mitchell Perera was killed when a piece of equipment fell on him at his workplace at Estes Express Lines Corp.  As the personal representative of his estate, Mitchell Perera's wife, Pamela Perera, filed a wrongful death suit against Estes and certain Estes employees.

Estes maintained three liability insurance policies, including a workers' compensation/employers liability policy issued by United States Fidelity and Guaranty Co. (USF&G) with a limit of $1 million after Estes' self-insured retention of $350,000; a commercial liability policy issued by CIGNA Property and Casualty Insurance Co. with a limit of $1 million and a $500,000 deductible; and an excess liability policy issued by the Chubb Group of Insurance Cos. with limits of $25 million.   Perera, Estes, Chubb and CIGNA eventually reached a settlement of Perera's claims for $10 million.  CIGNA contributed $500,000; Estes contributed $750,000; and Chubb contributed $3.75 million.

Perera, as Estes' assignee, then filed suit in the U.S. District Court for the Middle District of Florida against USF&G for breach of contract and bad faith.  The District Court granted summary judgment to Perera on the coverage obligation, which required USF&G to pay its policy limit of $1 million.   The court also granted summary judgment to USF&G on the bad faith claim, holding that without an excess judgment against the insured, there can be no cause of action for bad faith.  Perera appealed the bad faith decision to the 11th Circuit, which remanded the suit to the District Court to determine if the insurer's conduct amounted to bad faith.  A jury determined that USF&G's conduct did rise to the level of bad faith.  USF&G appealed.

This time, the appeals court certified two questions to the Florida Supreme Court, which reframed the questions as:  "May a cause of action for third-party bad faith against an indemnity insurer be maintained when the insurer's actions were not a cause of the damages to the insured or when the insurer's actions never resulted in exposure to liability in excess of the policy limits of the insured's policies?"

Justice Barbara J. Pariente wrote for the high court, which concluded that "regardless of whether USF&G should have promptly paid its policy limits, there is no causal connection between USF&G's bad faith and the damages claimed."

"The following facts are important to the resolution of this question:  there was a substantial excess policy protecting Estes, Chubb was willing to negotiate a settlement without contribution from USF&G, Estes did not face exposure to liability in excess of the combined policies, and Chubb did not choose to either bring a bad-faith claim against USF&G or assign its claim to Perera," the high court said.

The high court answered "no" to the certified question, remanding the case to the 11th Circuit.

"Based on the facts of this case, we conclude that USF&G's actions did not cause Estes to sustain the claimed damages of $4 million or to be exposed to liability in excess of its policy limits.  Accordingly, Perera, as Estes' assignee, is not entitled to recover the unpaid portion of the consent judgment," the high court said.

[Editor's Note:  Full coverage will be in the May 20 issue of Mealey's Emerging Insurance Disputes.  In the meantime, the opinion is available at or by calling the Customer Support Department at 1-800-833-9844.  Document #13-100520-001Z.  For all of your legal news needs, please visit]

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For more information, call editor Jennifer Hans at 610-205-1149, or e-mail her at