Blanchard v. State Farm Mut. Auto. Ins.
1991 Fla. LEXIS 429, 16 Fla. L. Weekly Supp. 203, 575 So. 2d 1289 (1991)
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Rule of Law:
An insured's first-party bad faith claim against an insurer for failure to settle an uninsured motorist claim does not accrue until the conclusion of the underlying litigation for the contractual insurance benefits, where the uninsured motorist's liability and the extent of the insured's damages are determined.
Facts:
- Donald Blanchard sustained permanent bodily injuries after being struck by an automobile operated by an uninsured motorist.
- Blanchard and his wife were insured by State Farm Mutual Automobile Insurance Company (State Farm) under a policy that included $200,000 in uninsured motorist (UM) coverage.
- The Blanchards submitted a claim to State Farm for their UM benefits.
- State Farm allegedly refused to make a good faith offer to settle the Blanchards' UM claim.
Procedural Posture:
- The Blanchards filed suit in a Florida state court against the uninsured motorist for negligence and against State Farm to compel payment of uninsured motorist benefits.
- A trial resulted in a verdict of $396,990, and judgment was entered against the tortfeasor for the full amount and against State Farm for its $200,000 policy limit.
- The Blanchards then commenced a new action against State Farm in the United States District Court for the Middle District of Florida, alleging a statutory claim for bad faith failure to settle.
- State Farm filed a motion to dismiss, arguing the Blanchards had improperly split their cause of action.
- The U.S. District Court granted State Farm's motion to dismiss.
- The Blanchards, as appellants, appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit.
- The Eleventh Circuit certified questions of law to the Supreme Court of Florida regarding the accrual of the bad faith claim.
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Issue:
Does an insured's statutory first-party claim against their uninsured motorist carrier for failure to settle in good faith accrue before the underlying litigation for the contractual uninsured motorist benefits is resolved?
Opinions:
Majority - Justice Barkett
No. An insured's claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. A cause of action for bad faith cannot exist until there is a determination of the uninsured tortfeasor's liability and the extent of the insured's damages. If the uninsured motorist is not liable for the insured's damages, the insurer cannot have acted in bad faith for refusing to settle the claim. Therefore, the insured's underlying action for insurance benefits must be resolved favorably to the insured before a cause of action for bad faith in settlement negotiations can accrue.
Analysis:
This decision establishes a clear prerequisite for filing first-party bad faith claims in Florida, creating a two-step process for litigation. First, the insured must resolve the underlying contract claim to establish liability and damages; only then can a separate suit for bad faith be brought. This framework prevents the prejudicial effect of introducing evidence of settlement negotiations into a trial focused on the underlying liability and damages. The ruling provides clarity for both plaintiffs and insurers on the proper timing and sequence of such claims, bifurcating the contract dispute from the tort-like bad faith action.
