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Eleventh Circuit Court of Appeals rules that defendant insurance company did not act in bad faith by including a waiver of subrogation provision in proposed release, finding that plaintiff could not rely on Florida Second DCA case which was decided after alleged bad faith occurred

On June 1, 2021, in Eres v. Progressive American Insurance Company, No. 20-11006, the Eleventh Circuit Court of Appeals affirmed a district court ruling that the defendant insurance company had not acted in bad faith toward its insured when it failed to settle a motor vehicle negligence case. The plaintiff in the case was a woman who suffered permanent injuries and whose son was killed in a drunk driving accident caused by the defendant’s insured. The insurance company had offered the policy limits of $20,000 (10,000 for the mother and $10,000 for the son) within five days of the accident, but the plaintiff rejected the proffer because it included a proposed release of all claims for subrogation, stating that the release parties were given “a full and final release of all claims, including, but not limited to, past, present, or future claims for subrogation arising out of the abovereferenced accident.” After the plaintiff obtained a judgment against the at-fault driver for more than $10 million, she was assigned the at-fault driver’s bad faith claim against the insurance company and filed this action, which the defendant insurance company removed to federal court. The district court judge granted the defendant’s summary judgment motion, adopting the magistrate judge’s conclusion that the insurance company had acted in good faith, noting specifically that when the plaintiff objected to the subrogation language in the defendant’s proposed release, the defendant had offered to redact it. The Eleventh Circuit observed that while bad faith is ordinarily a jury question, both the Eleventh Circuit and Florida courts have granted summary judgment where “[t]here is no sufficient evidence from which any reasonable jury could have concluded that there was bad faith on the part of the insurer,” quoting from Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783, 785 (Fla. 1980). The Court acknowledged that an overbroad release can create a factual dispute regarding bad faith, citing United Auto. Ins. Co. v. Estate of Levine, 87 So. 3d 782, 787–88 (Fla. Dist. Ct. App. 2011)and Otaola v. Cusano’s Italian Bakery, 103 So. 3d 993, 997 (Fla. Dist. Ct. App. 2012). However, the Court rejected the plaintiff’s argument that the subrogation provision created such a dispute, pointing out that the release did not include express hold-harmless or indemnification language, which has been found to constitute overbroad language in previous decisions. See Maharaj v. GEICO Cas. Co., 996 F. Supp. 2d 1303, 1314–15 (M.D. Fla. 2014); Gov’t Emps. Ins. Co. v. Prushansky, 2014 WL 47734, at *10 (S.D. Fla. Jan. 7, 2014). Although the plaintiff pointed out that the Florida Second DCA had in fact resolved this very question -- whether a waiver-of-subrogation clause is in the nature of a hold-harmless or indemnification provision -- in the plaintiff’s favor in the course of this litigation (see Villareal v. Eres, 128 So. 3d 93, 101 (Fla. Dist. Ct. App. 2013), the Eleventh Circuit found the Second DCA case irrelevant because it was decided after the alleged bad faith occurred and the defendant consequently could not have relied upon it in determining its appropriate course of action.

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