11th Circuit upholds bad faith verdict in lawsuit filed by one insurance company against another

After independent contractor Ernest Guthrie was paralyzed from the waist down as a result of a workplace injury, the two insurance companies of the contractor who hired him agreed to pay the full amount of the policy – $1 million each – just one month after receiving the payment request.

On the other hand, the carrier that insured Guthrie “was pretty much sitting on its hands,” the federal appeals board said. Although Southern-Owners Insurance Co. was the main casualty insurance company, the company didn’t even meet with key witnesses until eight months after the workplace accident, court documents show.

The 11th Circuit Court of Appeals made southern owners pay for “idleness” in the group’s decision posted on Wednesday. The appeals court upheld the Florida jury’s verdict, which ordered the carrier to pay $1,091,240.92 to American Builders Insurance Co., one of two insurance companies that prudently managed to quickly negotiate a settlement with Guthrie’s attorney.

This amount is the full limit of the US policy plus interest until a decision is made. The final amount may be higher as the trial court retained the right to also award attorneys’ fees and court costs.

The appeals panel rejected Southern-Owners’ argument that it was unable to quickly settle the lawsuit simply because a key witness was not involved in the investigation of his lawsuit.

“American Builders did their best to investigate Guthrie’s claim and decide whether the insured should pay out, while Southern-Owners sat back and watched,” the 3-0 score concluded. “The Florida Supreme Court has been clear on this point: without good faith, an insurer cannot take advantage of a non-cooperative positive defense.”

Beck Construction hired Guthrie to replace the woodwork around two decorative skylights. According to the report, on April 1, 2019, he fell off the roof of a luxury home that was being renovated “while the two onlookers were focusing on their phones.”

Guthrie purchased a commercial civil liability policy from Southern-Owners, but the carrier did “little or nothing” for several months, the report said.

American Builders insured Beck for up to $1 million per incident, and Evanston Insurance Co. matched this coverage with an additional policy. Guthrie’s paralysis and the $400,000 in medical bills that have been accrued so far have raised havoc among carriers. They quickly agreed when, on November 18, 2019, Guthrie’s attorney Stuart Cohen demanded that they pay $1 million each within 30 days.

American Builders has asked for a short timeout to see if Southern-Owners intends to pay the lawsuit. The carrier responded that it could not act so quickly, arguing that the exclusion of employer liability could interfere with coverage.

Southern-Owners also said it was unable to interview Russell Beck, the owner of the company that hired Guthrie. American Builders offered to arrange a teleconference, but the Southern-Owners claims administrator insisted on a face-to-face meeting.

Evanston paid its $1 million limit on December 10. American Builders, facing the December 18 deadline set by Cohen, quickly followed suit. The insurer then filed a lawsuit against Southern-Owners seeking reimbursement.

A jury in the U.S. District Court for South Florida agreed with the American’s argument that he was required to pay part of the settlement only because Southern-Owners acted in bad faith.

The southern owners argued on appeal that Beck Construction violated its contractual obligations by not obtaining its consent before settling the case. The 11th Circuit, however, confirmed the trial court. The group said the facts clearly showed that the insurance company was forced to act quickly to avoid an even more costly claim if the case went to trial.

“There was sufficient evidence in this record to allow the jury to reasonably find that Southern-Owners acted in bad faith because it delayed its duty to investigate and resolve Guthrie’s claim,” the panel said.

The top photo is for illustrative purposes only.

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