Arbitration & Mediation

Third DCA "Sets the Stage" For Bad Faith Where Insurer Demands Hold Harmless and Subrogation Waiver

By Christopher B. Hopkins, Esq.

What language is "customary" in a settlement release? Apparently not hold harmless and subrogation waiver clauses, at least in a third-party insurance claim settlement according to two of three panel members of the Third District.

In Olga Peraza v. Irma Robles, the plaintiff was injured in a "serious automobile accident" and made a demand against the other driver's insurance carrier for the $10,000 policy limits which was phrased as a "bad faith letter." The insurance company, apparently fairly promptly, returned to plaintiff's counsel a $10,000 check BUT indicated that it should be held in escrow until the insurer received an unaltered signed release which included hold harmless and waiver of subrogation rights terms.

According to cited Florida case law, when a plaintiff demands policy limits, the defendant can insist upon the execution of "customary settlement documents" as part of their acceptance. Two of the three members of the Panel (Schwartz, Suarez but not Cope) deemed the insurance carrier, in this case, made a counter-offer by demanding (apparently non-customary) terms.

In the dissent, Judge Cope noted that the plaintiff acknowledged that the release, itself, was customary but that the plaintiff was disputing the inclusion of the two terms. Cope then suggested that, if there was a dispute over language, it was a matter to be resolved by the trial court -- and that the mere existence of such a dispute should not undo settlement.

Judge Cope also identified that plaintiff's counsel "was fairly direct" in saying that the controversy stems from a desire to set the stage for a bad faith claim; with that in mind, the dissent suggested that rules should encourage settlement, "not thwart."

That dissent notwithstanding, the plaintiff apparently now moves forward with her bad faith claim.

Full post as published by Florida Arbitration Law on May 13, 2008 (boomark / email).