In Aldana v. Progressive Am. Ins. Co., 19-12950, 2020 WL 5843711 (11th Cir. Oct. 1, 2020), the Eleventh Circuit Court of Appeals reversed a trial court’s order granting summary judgment in favor of an insurer in a bad faith case involving catastrophic injuries and a failed attempt at a global settlement. The factually intensive decision is nothing less than a cautionary tale that an insurer’s diligence in attempting to settle a case early on can still leave it open to a bad faith claim when that diligence is not maintained, thereby leaving the insured exposed to an excess judgment.
The decision in Aldanas serves as a sobering reminder to insurers of the importance of having a tender protocol and strategy in place and executing it flawlessly once a decision to tender policy limits has been made. A mere checklist is not enough. You must meticulously document your strategy calls with your insured, the risk and options and ultimate decision-making process using a multi-disciplinary and decision-tree approach because every loss presents its own unique set of circumstances and challenges. Our Time and Policy Limit Demands and Tenders Practice Group can guide you further through best practices to avoid the very situation that occurred in this case. Any questions should be directed to Daniel Santaniello, Esq., at (561) 226-2525 or by e-mail.
On December 6, 2013, Yolanda Aldana and her four minor children suffered severe and permanent injuries when their vehicle was violently rear-ended by Defendant Nathan Pyles. Pyles was insured by Progressive Insurance, with bodily injury liability policy limits of $250,000 per person and $500,000 per occurrence. Progressive almost immediately determined that Pyles was completely liable for the crash and that Aldana and her four minor children had suffered severe injuries.
Progressive pursued a global settlement less than two weeks after the accident by sending a letter to potential claimants offering to tender the $500,000 policy limits in exchange for a release of all claims against Pyles. Progressive’s insurance defense firm was retained and asked if the claimants could decide amongst themselves how to apportion. Progressive’s insurance defense counsel then proposed a global settlement conference with a mediator if the claimants could not come to an agreement, giving them a deadline of January 6, 2014 to decide. The plaintiff’s counsel responded to Progressive’s offer by letter, stating that the Aldanas’ damages “exceeded multiple millions of dollars” and were “way beyond your meager policy limits of $500,000.” The Aldanas’ attorney further wrote that Progressive’s request to try and apportion the $500,000 amongst the individuals by the January 6, 2014, deadline was virtually impossible because each of the children needed a guardian ad litem to overlook the apportionment and distribution of any settlement monies. He further stated that although he understood Progressive’s wish to get an agreement as to apportionment, “out of absolute necessity” the Aldanas needed Pyles to complete a financial affidavit to determine his ability to compensate them for their injuries in excess of the policy limits. He later sought an additional financial affidavit from Pyles’ wife.
Progressive’s insurance defense counsel then attempted to unilaterally set a global settlement conference for January 7, 2014, but it was postponed at the request of the Aldanas’ attorney, who stated that he was still investigating the case and the sources of any recovery in excess of the policy limits. He further informed Progressive that the Aldanas would “not be in a position to make any commitments until our investigation is complete.” On or around January 16, 2014, Progressive spoke with the Aldanas’ attorney by phone and they agreed to follow up in 30 days. Little to no progress was made over the next several months, with Progressive sending multiple, nearly identical, letters to the Aldanas’ and Ang’s attorneys, respectively. The letters: summarized Progressive’s understanding of the parties’ positions; inquired as to whether the claimants were now in a position to discuss settlement and/or attend a global settlement conference; advised that Heffler was not making a claim; reiterated the $500,000 policy limits global offer; and requested medical or billing records.
The Aldanas’ attorney responded to one of these letters, in March 2014, informing Progressive that he was continuing to gather information and that had still not received a response to his request for financial affidavits from the Pyleses. He further advised that the Aldanas’ medical bills were nearing $1,000,000 and that “$500,000 was nothing more than a drop in the bucket.” In the meantime, Progressive was unsuccessful in its attempts to get a response from the Pyleses about the financial affidavit, although in response to each request their personal counsel informed Progressive one reason or another that he did not think they would complete the affidavits. However, aside from asking about the financial affidavits, Progressive did not discuss with them their potential exposure in excess of the policy limits or any other matters regarding the handling of the Aldanas’ and Ang’s claims. Ang was the a claimant in another vehicle who had been struck by the Aldanas vehicle when it was pushed into them.
On July 3, 2014, Ang’s attorney informed Progressive that Ang injured his back in the collision and was still in pain. He also opined that the global settlement conference was an act in futility due to the severity of the Aldanas’ injuries. About two weeks later, Progressive: informed Ang’s attorney that it would still like to go forward with a global settlement conference and would not make an offer to Ang before then; sent another nearly identical letter to the Aldanas’ attorney; and once again asked the Pyleses' attorney whether they were in a position to execute the financial affidavits. In August 2014, the Aldanas changed counsel, who filed suit on August 14, 2014, in Florida state court. After a trial, the jury returned a nearly $52,000,000 verdict in favor of the Aldanas. The court entered a final judgment against Pyles totaling just over $50,000,000. Pyles assigned any and all rights he had against Progressive arising out of the handling of the Aldanas’ claims. The Aldanas then sued Progressive for bad faith failure to settle, and the case was removed to federal court.
Progressive moved for summary judgment, arguing, inter alia, that there was no reasonable opportunity to settle the Aldanas’ claims. In opposition, the Aldanas asserted that Progressive should have offered solely to them the full policy limits to settle their claims and that, had it done so, there was a reasonable opportunity to settle and protect Pyles from an excess judgment. In support of these arguments, the Aldanas filed affidavits from Pyles, Pyles’ attorney, and Yolanda Aldana. Both Pyles and his attorney testified that Progressive failed to inform them of key facts regarding the claims at issue and that, had Progressive done so, they would have told Progressive to exclude Ang and exclusively offer the policy limits to the Aldanas. For her part, Yolanda Aldanas testified that had Progressive offered her and her children the full $500,000 policy limits prior to their filing the lawsuit, they would have accepted it and settled their claims. The Aldanas’ attorney also testified that if Progressive had offered the full policy limits to the Aldanas, “we wouldn’t be here today”. The Aldanas also offered expert opinion testimony regarding Progressive’s claims handling in the case.
Progressive maintained that the Aldanas’ evidence did not create an issue of fact because the Aldanas’ attorney never communicated that the global approach was unacceptable or that the Aldanas would have settled for the full policy limits. The trial court agreed and granted Progressive’s motion for summary judgment. The Eleventh Circuit Court of Appeals reversed, finding that the record evidence provided by the Aldanas created an issue of fact for a jury. In so doing, the court engaged in an exhaustive analysis of bad faith claims under Florida law.
To begin with, the court explained the well-settled principle that when handling claims against its insured, an insurer is duty bound “to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.” This duty includes advising the insured of settlement opportunities and the probable outcome of the litigation. Additionally, the insured has a duty to not only warn the insured of the possibility of an excess judgment, but advise them of any steps he might take to avoid an excess judgment. Id. Finally, the insured must also “investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” The court emphasized that the foregoing requirements are not a mere checklist which, once marked off, will insulate an insurer from liability. “Rather, the critical inquiry in a bad faith case is whether the insurer diligently, and with the same haste and precision as if it were in the insured's shoes, worked on the insured's behalf to avoid an excess judgment. This inquiry is based on the totality of the circumstances. And it is for the jury to decide whether the insurer failed to act in good faith with due regard for the interests of the insured, provided there is competent, substantial evidence to support a finding of bad faith.” Id. (citations omitted).
The court then turned its attention to Florida law specifically aimed at cases involving catastrophic injuries and multiple claimants. First, the court recognize Florida Supreme Court precedent that in cases of catastrophic injuries where liability is clear, an insurer has an affirmative duty to immediately initiate settlement negotiations. (quoting Harvey v. GEICO Gen. Ins. Co., 259 So. 3d 1, 7 (Fla. 2018)). Additionally, the court noted that the focus of the inquiry in a bad faith case must be on whether the insurer fulfilled its obligations to the insured and not on the actions of the claimant or his or her attorney. Second, when multiple claims arise from a single incident, the insurer’s good faith duty to its insured mandates that it “fully investigate all claims . . . keep the insured informed of the claim resolution process, and minimize the magnitude of possible excess judgments against the insured by reasoned claim settlement. . . . Whatever route the insurer pursues, it must undertake a reasonable claims settlement strategy that is in keeping with its good faith duty.”
Applying the foregoing principles, the appellate court held that the trial court erred in concluding as a matter of law that Progressive had no reasonable opportunity to settle the Aldanas’ claims. When viewed in a light most favorable to the Aldanas, the record contained sufficient, competent evidence to sustain a verdict in the Aldanas’ favor. Although the court recognized that no reasonable jury could conclude that Progressive’s initial and timely decision to offer the full $500,000 policy limits to try to globally settle all claims against Pyles was unreasonable or in bad faith, a jury could find that Progressive’s actions in the months leading up to the lawsuit were not in keeping with its good-faith duty to Pyles.
A reasonable jury could find that the damages claimed by the Aldanas
in this bad-faith case were ‘caused by the insurer's bad faith.’
The Aldanas’ expert testified Progressive should have offered the full policy
limits to the Aldanas to comply with its good faith-duty to Pyles. . . .
