VOLUME XVIII, NUMBER 3
March, 2006

PLAINTIFFS' ATTORNEY-CLIENT PRIVILEGE NOT WAIVED IN BAD FAITH ACTIONS ALLEGING FAILURE TO SETTLE

Terrell G. Lee v. Progressive Express Insurance Company , 30 FLW D1997, involved a bad faith claim for failure to settle within the policy limits by an injured party who recovered a judgment in excess of the policy limits. The plaintiff sustained injuries in an auto accident with Progressive Express Insurance Company's insured. After filing suit against the insured, the plaintiff served a demand and Proposal for Settlement offering to settle his claims, costs, and attorney's fees for the carrier's policy limits. After more than thirty days, the carrier requested an extension to respond to the demand. The plaintiff refused the extension and treated the carrier's failure to respond as a rejection of the offer to settle. Months later, the carrier again attempted to settle the case for the policy limits and the plaintiff refused. The case proceeded to trial and the jury returned a verdict for the plaintiff in an amount significantly higher than the policy limits. Thereafter, the plaintiff filed a bad faith action against the carrier for failing to settle.

The carrier believed that the plaintiff's attorney rejected the settlement offers in order to "set-up" the bad faith claim. In its discovery request, the carrier sought communications between the plaintiff's attorney and the plaintiff regarding (1) the attorney's authority to settle the initial case, and (2) regarding fee arrangements for the present bad faith claim. The plaintiff asserted attorney-client privilege and filed a privilege log and a motion for protective order. The carrier argued that the plaintiff waived his privilege by initiating a bad faith action which placed certain communications with his attorney at issue. The carrier also asserted that it needed the requested information to prove that it would not have been able to settle the claim. Additionally, the carrier argued that the plaintiff waived privilege in his deposition by testifying about his attorney's authority to settle the claim. The court points out that the plaintiff's answers in deposition regarding his attorney's authority to settle the case were limited to the timing of his demand, the amount of his demand, and the rejection of Progressive's offer. The plaintiff indicated that all of these matters were decided by the attorney and he followed the attorney's advice. The trial court ordered production of the fee agreements and the documents related to the authority to settle. It reasoned that when the plaintiff testified at deposition about his attorney's authority to settle, he waived privilege. The plaintiff challenged only the trial court's order requiring plaintiff to produce the documents related to the attorney's authority to settle and petitioned the Fourth District Court of Appeal for a writ of certiorari to quash the order.

In granting the plaintiff's petition, the Fourth District held that neither the filing of the bad faith action, nor plaintiff's testimony regarding the attorney's authority to settle, waived privilege. The court noted that although privilege is waived when proving a claim requires privileged matter, merely bringing a claim generally does not waive the attorney-client privilege. Thus, the documents regarding the attorney's authority to settle were not discoverable because plaintiff's and plaintiff attorney's motives in timing the settlement offer and the carrier's rejection of the settlement offer are not elements needed to prove bad faith. Bad faith actions focus on the insurer's conduct in fulfilling its obligations to the insured, not the claimant's actions, as set forth in Berges v. Infinity Ins. Co. , 896 So.2d 665 ( Fla. 2004). Moreover, the court held, the carrier's assertion that the plaintiff may not have authorized a settlement offer due to the fact that plaintiff could not remember many details about the settlement offer, is a defense and the carrier's burden to prove that the plaintiff was unwilling to settle. The Fourth District also noted that despite the carrier's numerous questions during deposition regarding the settlement demand and the rejection of its offer, plaintiff's answers were limited and did not disclose communications with his attorney. Thus, the court held, the plaintiff's answers during deposition did not waive attorney-client privilege.

Anna D. Torres

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FLORIDA SUPREME COURT SETS ORAL ARGUMENT ON CRITICAL ISSUES FOR THIRD-PARTY BAD FAITH CLAIMS

The Florida Supreme Court has scheduled oral argument for February 7, 2006 in the case of Michelle Macola v. Government Employees Insurance Company , originally decided by the U.S. District Court Middle District of Florida. 18 Fla. Weekly Fed C632 (11 th Cir. June 6, 2005). The 11 th Circuit U.S. Court of Appeals certified two important questions to the Florida Supreme Court: Does an insurer "cure" any bad faith under Fla. Stat. §624.155 when in response to a civil remedy notice, it timely tenders the policy limits after a lawsuit is commenced against its insured but before the entry of an excess judgment? If so, does such a cure of the statutory bad faith claim also bar a common law bad faith claim?

This is a federal court case arising out of a Florida state law bad faith claim against Government Employees Insurance Company ("GEICO") in federal court on the basis of diversity jurisdiction. Frances Quigley, a GEICO insured, caused a car accident which injured Michelle Macola. GEICO failed to reach a settlement with Macola and Macola filed suit against Quigley, which eventually resulted in a judgment in excess of GEICO'S $300,000.00 policy limits. After Quigley filed suit but before the verdict was returned, Quigley filed a statutory Civil Remedy Notice ("CRN") alleging that GEICO acted in bad faith by failing to settle within the policy limits when it had an opportunity to do so. After the $1,541,941.61 verdict was returned, both Quigley and Macola filed similar common law bad faith claims against GEICO.

During the sixty day "cure" period (and before the verdict in the underlying case) GEICO attempted to cure its alleged bad faith by tendering the personal injury policy limits to Quigley. A few interesting facts complicate the case. GEICO attempted to tender the bodily injury policy limits prior to suit in response to a timed demand from the claimant. The claimant's demand was not only the bodily injury limits, but also for about $1,300 on the property claim. GEICO's tender did not include any amount for the property on which GEICO requested additional information. For several months, the claimant's attorney did not respond to the tender of the bodily injury limits. Eventually, the draft was returned with a rejection of GEICO's "counteroffer." The lawsuit followed.

The district court held that this tender cured any bad faith on the party of GEICO and granted GEICO'S motion for summary judgment on Quigley's and Macola's claims. The district court further held that Quigley elected the statutory remedy when she filed the CRN and therefore was estopped from pursuing a common law claim. It alternatively held that, should the doctrine of election of remedies not apply, GEICO'S tender fully satisfied any bad faith claim.

It appears from the 11 th Circuit Court's opinion that the court is confident that Quigley's decision to file a CRN did not estop her common law bad faith claim, as the statutory and common law bad faith claims seem to be cumulative, rather than exclusive remedies. The 11 th Circuit expressed less certainty about the effect of GEICO'S tender. The court discussed the Florida Supreme Court's decision in Talat Enterprises, Inc. v. Aetna Cas. & Sur. Co. , 753 So. 2d 1278 ( Fla. 2000) which held that payment by the insurer of all contractual damages within the 60 day "cure" period precluded the bad faith action to recover extra-contractual damages. However, the court distinguished Talat , as it involved a first party bad faith claim in which there was no danger of an excess judgment. The court noted that dicta in the Talat decision leaves open the possibility that an insurer may not be able to effect a cure by tendering the policy limits in the third party context.

As any decision in this case may well impact the development of Florida 's insurance bad faith law, the 11 th Circuit certified these critical issues to the Florida Supreme Court to obtain clear guidance from Florida 's courts.

We anxiously await the Florida Supreme Court's decision in this case as this certainly will impact third-party bad faith claims and how insurers will handle these claims.

Robin B. Rothman

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CORPORATE OFFICERS MAY BE PERSONALLY LIABLE FOR TORTS EVEN WHEN THEY ACT WITHIN THE SCOPE OF THEIR EMPLOYMENT

The First District Court of Appeal recently held in favor of a couple in Duval County in their negligence claim against a Wal-Mart Storet and its manager for injuries she received in a slip and fall at a Wal-Mart Store. Lavetta and Frank White v. Wal-Mart Stores, Inc. and Mike Gregg , 30 FLW, D2803. Case No. 1D05-982

Mrs. White slipped and fell at Wal-Mart. She filed a three-count complaint alleging negligence against the store and against its manager, Mike Gregg, personally. Her husband made a claim for loss of consortium. The store manager sought to dismiss the count against him arguing that he could not be held personally responsible for his acts as manager of the store, because he owed no duty to the plaintiff. The trial court granted the manager's motion to dismiss.

On appeal, the First District reversed the dismissal holding that Mrs. White's complaint sufficiently plead a cause of action against the manager in his personal capacity. According to the court, even where a corporate officer or agent acts within the scope of his/her employment, he/she may still be liable in tort if they commit or participate in the tort. In establishing liability, the claimant must allege that the officer had a duty and breached that duty through personal fault and not technical or vicarious fault. The court noted however, that an officer must be "actively" negligent and not held personally liable simply because of his general administrative responsibility for performance of some function of his/her employment.

Mrs. White's complaint alleged that (1) Gregg was directly responsible for carrying out certain responsibilities, (2) he negligently failed to do so, and (3) as a result, Mrs. White was injured. These allegations were sufficient to withstand a motion to dismiss and also were sufficient to satisfy the requirements of section §768.0710 Florida Statutes, "Burden of proof in claims of negligence involving transitory foreign objects or substances against persons or entities in possession or control of business premises."

Anna D. Torres