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Eleventh Circuit Court of Appeals rules in insurance bad faith case that consent judgment memorializing a settlement agreement between the plaintiff and the adverse driver constituted a qualifying “excess judgment”

On April 5, 2022, in McNamara, et al. v. GEICO, No. 20-13251, the Eleventh Circuit Court of Appeals reversed a district court’s summary judgment for the defendant insurance company in an insurance bad faith case. The district court had granted the summary judgment after concluding that a qualifying “excess judgment” must be based on a jury verdict following a trial. The Eleventh Circuit disagreed, concluding that the consent judgment memorializing a settlement agreement between the plaintiff and the adverse driver constituted a qualifying excess judgment as well. The Eleventh Circuit noted that in Fridman v. Safeco Insurance Co.,185 So.3d 1214, 1224 (Fla. 2016).the Florida Supreme Court expressly held, in the context of a statutory first-party bad-faith action, that “the insured is not obligated to obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration, or stipulation before initiating a bad faith cause of action.” The Eleventh Circuit also cited Perera v. United States Fidelity & Guaranty Co., 35 So.3d 893 (Fla. 2010), in which the Florida Supreme Court laid out three “functional equivalent[s]” of an excess judgment: (1) a “Cunningham” agreement, in which the insurer and the injured party agree to try the bad-faith issues first; if no bad faith is found, the injured party agrees to settle for policy limits, thereby preventing the insured from facing an excess judgment; (2) a “Coblentz” agreement, in which the insured, forced to defend against the injured party’s claims on his own, agrees to settle with the injured party for policy limits; the injured party can then sue the insurance company on a bad-faith theory; and (3)an “equitable subrogation” situation, in which an excess carrier can bring a bad-faith claim against a primary carrier if the excess carrier incurs damages because the primary carrier acted in bad faith.

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