The duty of an insurance carrier and adjuster in lieu of the implied covenant of good faith and fair dealings.
Bad faith in the context of an insurance company occurs when such company acts unreasonably in denying or delaying benefits owed to you or a loved one as expressed within the insurance policy. A duty of good faith and fair dealing is imputed into every contract by Florida law. In the context of the personal automobile policy, the duty is particularly defined by Florida law because of the fiduciary relationship that is created when the insured surrenders to the insurer all control over the handling of the claim including all decisions regarding the evaluation of policyholder’s exposure to loss. Boston Old Colony Insurance vs. Guiterrez, 386 So.2d 783 (Fla. 1980.)
The insurer must exercise control over the claim process in good faith and with due regard for its policyholder by placing the policyholder’s interest first. When the insurer fails to satisfy its fiduciary duties to its policyholder, the insurer shall be held liable for any resulting damages including the resulting judgment against the policyholder in excess of the policyholder’s underlying limits. Campbell vs. GEICO, 306 So.2d 525 (Fla. 1975.)
The insurer owes its insured the “utmost good faith” in evaluating and processing claims against its policyholder(s). Baxter vs. Royal indemnity Co., 285 So.2d 652, 655 (Fla. 1st DCA 1973.) The insurer possesses a non-delegable duty to completely and accurately investigate the claim in order to evaluate the claim on behalf of the policyholder.
The duty of good faith arises because the insurer is in a position to completely control the investigation and evaluation of the claim at the exclusion and omission of the input and/or control of the policyholder. This duty requires the insurer to assess facts and evaluate the law as applicable to those facts, so the insured can be apprised when and if the verdict might exceed policy limits. American Fidelity & Cas. Co. vs. Greyhound Corp., 258 F.2d 709, 710-711 (5th Cir. 1958.)
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The insurer must investigate and evaluate the claim in order to communicate with the insured including advising the insurer of all settlement opportunities. Odom., 582 So.2d at 1203. The insurer must advise the insured as to the probable outcome of litigation and warn against the possibility of any excess judgment. In the event there is a potential for excess judgment, the insurer must advise the insured of any reasonable steps that must be taken to avoid an outcome that exposes the insured to any personal loss. Powell vs. Prudential Property & Cas. Ins. Co., 584 So.2d 12, 14-15 (Fla. 3d DCA 1991.) When liability is clear and injuries are serious that may trigger and excess judgment, the insurer has an affirmative duty to initiate settlement negotiations. Id.
The insurer must negotiate in good faith with counsel for the injured party. This duty is triggered when the insurer first receives and/or possesses a reasonable duty to inquire as to the insured’s exposure to loss. The insurer must seek offers and entertain all reasonable offers in making good faith attempts to settle as a function of its fiduciary relationship with the policyholder in order to protect the policyholder’s personal assets. Boston Old Colony, 386 So.2d at 785.
Good faith duties are a by-product of the relationship between the insured and the insurer. Since good faith duties are included in the insurance contract, a bad faith action springs from the insurer’s breach of the implied terms of the policy. When the insured pays a premium, the insurer accepts the premium and makes certain promises to perform in the event of a specified loss arising from a loss. When the insurer has an opportunity to remove the uncertainty regarding the insured’s exposure to loss and settle the claim on behalf of its insured within policy limits but fails to do so, it assumes the risks of an irrational jury, a poor decision, or any other mishap that would increase the insured’s exposure to loss by taking the case to trial. Campbell,306 S.2d at 530.
The duty of Good Faith obligates the insurer to make any reasonable settlement offer within the confines of coverage when exercising the same degree of care and diligence as any person would in the management of his own business. Id. Contrary to the prevalent opinion in the defense industry, an offer to settle is not a pre-requisite to the imposition of liability for an insurer’s bad faith refusal to settle. Powell, 584 So.2d at 14. The insurer possesses a duty to promptly settle. Id; Brookins vs. Goodson, 640 So.2d 110 (Fla. 4th DCA 1994.); Self vs. Allstate Insurance, 345 F. Supp. 191 (M.D. Fla. 1972.) The insurer must act in a manner that puts the “insured’s best interest first.Campbell., 306 S.2d at 525.
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