Damages, dismissal, and abatement of insurance bad faith claims

December 3, 2014

Insurance LawWhen are excess damages determined in an insurance bad faith case where the coverage at issue is for damages caused by uninsured motorists?  Are the damages which exceed the available uninsured motorist coverage determined in the underlying case against the uninsured motorist or are the damages determined only in the bad faith case?  In Florida, the answers to these questions determine the remedies available to the UM insured and the defenses available to the UM carrier.

Answers to these questions resolved the defendant’s motion to dismiss, for example, In Lawton-Davis v. State Farm Mutual Automobile Insurance Co.,  (M.D. Fla. November 24, 2014).  The Federal Court saw the central question in the UM excess verdict case this way:  “[D]oes an excess verdict in a UM benefits action fix a plaintiff’s damages in a subsequent bad-faith case?”  A recent Florida case from September, 2014 fixes the answer in the initial action.  Under that decision, for which there is no contrary authority from the Florida Supreme Court nor from any other appellate court in Florida, the plaintiff’s damages in excess of a UM award are determined in the case or proceeding against the uninsured motorist.  In turn, those are the central damages which the plaintiff can seek to recover from the UM carrier in any later bad faith case.

However, the Federal Court abated the plaintiff’s bad faith claim in this case because, well, because that is what the Florida State Courts do in such cases.  As the Federal Court pointed out, in Florida (as in most jurisdictions) abatement is the appropriate procedure where there is a missing element of a cause of action but it can be cured by the passage of time, whereas dismissal is the appropriate procedure where the missing element is contingent on another event that may or may not occur.  “Under that framework,” said the Federal Judge, “a premature bad-faith claim should be dismissed because a requisite element – the prior determination of liability and damages – has yet to, and may never, accrue.”  Even though dismissal rather than abatement seems the appropriate resolution of a motion to dismiss an excess UM claim where liability and perhaps damages have not yet been determined – essential elements to the bad faith claim if any – the Federal Court abated the plaintiff’s bad faith claim in this case.  That is what Federal Courts in Florida do in excess UM/UIM cases for both damages.  Another recent example is provided by a decision under Florida law released the day before Thanksgiving by a different Federal Judge in precisely the same set of circumstances in Dela Cruz v. Progressive Select Ins. Co., (M.D. Fla. November 26, 2014).

The plaintiff’s claim for declaratory relief in both cases was treated differently, however. In the Lawton-Davis case, the plaintiff’s declaratory relief claim was dismissed and not abated.  “Declaratory judgments are discretionary remedies,” the Federal Court held, “through which courts can provide complete relief to parties with an actual case or controversy; Plaintiff’s bad-faith claim is premature and thus the parties are not presently in controversy over it and, in any event, a declaration as to liability and damages would not dispose of all issues necessary to completely resolve the bad-faith claim.”  [Emphasis in original.]  In other words, declaratory relief is not available as a substitute for a bad-faith claim and, further, if a declaratory relief claim is premature then there is no actual case or controversy and thus there is no Federal jurisdiction.  Accord, Dela Cruz v. Progressive Select Ins. Co.

Damages, dismissal, and abatement.  These are the questions in cases arising from underlying awards in tort actions against uninsured/underinsured motorists exceeding the available UM/UIM coverage, in Florida and elsewhere in the nation as well.