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Extra-Contractual Liability Law
policy limit and contending that GEICO had breached its fiduciary duty to them. GEICO removed the case to federal court and sought summary judgment. The district court granted summary judgment in GEICO’s favor, holding that the consent judgments entered against Warren and McNamara did not qualify as “excess judgments” and they could not prove causation in their bad faith action. The district court based its holding on the Eleventh Circuit’s unpublished decision in Cawthorn v. Auto-Owners Ins. Co., 791 F. App’x 60 (11th Cir. 2019), where the Court determined that only a judgment following a trial after a verdict qualified as an “excess judgment” for bad faith purposes under Florida law.
On appeal, the Eleventh Circuit reversed the district court’s decision, finding that Florida bad-faith law did allow a consent judgment to constitute an “excess judgment.” The Court found cases decided by the Florida Supreme Court particularly instructive in reaching its decision, specifically Perera v. United States Fid. & Guar. Co., 35 So. 3d 893 (Fla. 2010) and Fridman v. Safeco Ins. Co., 185 So. 3d 1214 (Fla. 2016). In Perera, the Florida Supreme Court never discounted the idea that a final judgment based on a settlement agreement could constitute proof of causation in a third-party bad faith action. Moreover, the Florida Supreme Court expressly held in Fridman that, in the context of a statutory first-party bad faith action, the insured was not obligated to obtain a determination of liability and damages through a trial and could utilize other means of doing so, such as in an agreed settlement or stipulation before initiating a bad faith cause of action. Also significant was the fact that Fridman confirmed that first-party bad faith claims and third-party bad faith claims should be treated in the same manner.
Based upon the reasoning of the Florida Supreme Court, the Eleventh Circuit concluded that, under Florida law, it did not matter that the judgments against Warren and McNamara resulted from stipulated settlements instead of verdicts. The final judgments entered against Warren and McNamara constituted “excess judgments” because they exceeded the policy’s $100,000 available coverage. As a result, both Warren and McNamara could prove causation in their bad faith action. The Eleventh Circuit also specifically declined to follow Cawthorn, noting that the decision incorrectly analyzed Florida bad faith law. In retreating from its prior decision, the Eleventh Circuit expounded upon the fact that a consent judgment is a “judgment,” in the sense that the settlement becomes a court judgment when sanctioned by the judge, thus creating a legal obligation on the part of the insured, against whom the judgment is entered, to pay that amount.
While it is still too early to say with certainty what effect McNamara will have on litigation in Florida, the change may lead to an increase in the number of bad faith claims. The Eleventh Circuit’s decision has greatly expanded an insured’s ability to establish bad faith claims in Florida by removing a significant barrier to demonstrating the causation element. By expressly confirming that a verdict after trial is not a prerequisite for an “excess judgment,” the Eleventh Circuit has potentially emboldened insureds to bring claims that may lead to bad faith actions because an agreed settlement or an agreed stipulation is sufficient to constitute the basis for an “excess judgment” if the amount exceeds available coverage under the applicable insurance policy. However, an insured must still prove the other elements of a bad faith claim and, as noted by the Eleventh Circuit, a consent judgment is enforced against the insurer only to the extent that the judgment itself is reasonable and untainted by bad faith on the part of the insured. See Steil v. Fla. Physicians’ Ins. Reciprocal, 448 So. 2d 589 (Fla. 2d DCA 1984). In light of this decision, and Perera and Fridman, insurers should continue to thoughtfully consider any settlement offers and endeavor to always act in good faith with regard to their insureds.
Michael K. Kiernan is the Managing Partner of Traub Lieberman Straus & Shrewsberry LLP’s St. Petersburg, FL office. Contact him at: Susan L. Deng is an Associate at Traub Lieberman Straus & Shrewsberry LLP’s St. Petersburg, FL office. Contact her at:

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