11th Circuit Declines to Equate Consent Judgments with Excess Judgments in Bad Faith Context
by James L. Pattillo, Partner
November 22, 2019
In Cawthorne v. Auto-Owners Ins. Co. No. 18-12067 (11th Cir. Oct 25 2019), the Eleventh Circuit reviewed the Florida requirement for an excess judgment to exist before litigating a bad faith claim, as well as the three exceptions to that requirement.
In Cawthorne, the carrier tendered its $3 million limit after an automobile accident and continued to defend its insured. The insured agreed for its carrier to pay the $3 million while entering a consent judgment with the plaintiff for $30 million. The carrier was not a party to this agreement. The plaintiff would then pursue the carrier directly for bad faith.
The court declined to recognize a fourth exception based upon the entry of a consent judgment where the insurer both tendered its policy limits and defended the insured in the litigation. In doing so, it held that such consent judgments were not equivalent to excess judgments in the context of bad faith.
This ruling is important for all jurisdictions in that it supports insurers who do everything they are contractually able to do to protect their insured. By timely tendering limits and protecting their insured, they are insulated from a bad faith claim and an examination of their claims handling practices. Philosophically, consent judgments were likened to private contracts between the plaintiff and the insured. In such a case there is not an independent finding of liability and damages by a fact finder. It follows that if there is no true decision regarding liability and damages, there could be no bad faith and no examination into the carrier’s claims handling practices that lead to the judgment.
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