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Insurer vs. Insurer: Appeals Court Affirms Bad Faith Verdict in Florida Work Injury Case

By Jim Sams | January 6, 2023

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After a job-site injury left independent contractor Ernest Guthrie paralyzed below the waist, two insurers for the contractor that hired him agreed to pay the full policy limits — $1 million each — only one month after receiving a payment demand.

But one of the carriers “largely sat on its thumbs,” a court panel said. Even though Southern-Owners Insurance Co. was the primary insurer for the accident, the company didn’t meet with key witnesses until eight months after the workplace accident, court filings reveal.

The U.S. 11th Circuit Court of Appeals made Southern-Owners pay for its “dawdling” in a panel decision released Wednesday. The appellate court affirmed a verdict by a Florida jury that requires the carrier to pay $1,091,241 to American Builders Insurance Co., one of two insurers that had the foresight to quickly negotiate a settlement with Guthrie’s lawyer.

That amount represents American’s full policy limit plus pre-judgment interest. The final award may be more because the trial court reserved its right to also award attorney fees and court costs.

The appellate panel rejected Southern-Owners’ argument that it failed to settle the claim quickly only because a key witness did not cooperate with its claim investigation.

“American Builders did everything when it came to investigating Guthrie’s claim and deciding whether the insured should make a payment, all while Southern-Owners sat back and watched,” the 3-0 opinion says. “The Florida Supreme Court has been clear on this point: without good faith, an insurer may not avail itself of an affirmative defense based on an insured’s failure to cooperate.”

Beck Construction had hired Guthrie to replace the wood trim around two rooftop decorative windows. On April 1, 2019 he fell off the roof of the luxury home that was being renovated, “while two spotters focused on their phones,” according to the opinion. He would never walk again, the court noted.

Guthrie had purchased a commercial general liability policy from Southern-Owners, but the carrier “did little or nothing” for months, the opinion says.

American Builders insured Beck for up to $1 million per occurrence and Evanston Insurance Co. matched that coverage with an excess policy. Guthrie’s paraplegic status and the $400,000 in medical bills that had been run up so far gave the carriers cause for concern. They quickly agreed when Guthrie’s lawyer, Stuart Cohen, demanded on Nov. 18, 2019 that they pay $1 million each within 30 days.

American Builders asked for a brief timeout so it could inquire if Southern-Owners intended to pay on the claim. The carrier replied that it could not act that fast, contending that an employer liability exclusion might bar coverage.

Southern-Owners also said it had not been able to interview Russell Beck, the owner of the company that had hired Guthrie. American Builders offered to arrange a conference call, but Southern-Owners’ claims administrator insisted on an in-person meeting.

Evanston paid its $1 million policy limit on Dec. 10. American Builders, facing Cohen’s Dec. 18 deadline, quickly followed suit. The insurer then filed a lawsuit against Southern-Owners to demand reimbursement.

A jury for the US District Court for Southern Florida agreed with American’s argument that it was required to pay a portion of the settlement only because Southern-Owners had acted in bad faith.

Southern Owners argued on appeal that Beck Construction had breached its contractual duties by failing to obtain its consent before settling the case. The 11th Circuit, however, affirmed the trial court. The panel said the facts clearly showed the insurer was forced to act quickly to avoid an even more expensive claim if the case went to trial.

“On this record, there was enough evidence to allow the jury to reasonably find that Southern-Owners acted in bad faith because it delayed acting on its duty to investigate and settle Guthrie’s claim,” the panel said.