In what is becoming a commonly-litigated issue in the United States, another state court has weighed in on whether an excess insurance carrier has an affirmative duty to initiate settlement talks in certain situations. The problem that frequently arises in this context involves an insured who has both a primary policy and an excess policy where the claim exceeds the limits of the primary policy. In certain catastrophic incidents, it is clear that the limits of the primary policy are insufficient, and the excess policy will be necessary to supplement payment of the claim. The question that often has been litigated is whether the excess insurance carrier must initiate settlement negotiations with the insured claimant. Frequently, the insurer will attempt to wait until it receives a settlement offer before initiating negotiations.
Results Vary Across the Country
Some states have found that an excess insurer has no affirmative obligation to initiate settlement negotiations regardless of the circumstances unless the policy specifically indicates the excess insurer is assuming such a duty. Courts in California, Illinois, Texas, New York, and Missouri have all ruled that their statutes do not impose an obligation on excess insurers to investigate claims or initiate settlements before being presented with some demand for settlement because the excess insurer is not a “primary insurer.” Oklahoma recently became another state to adopt this view. In these states, the excess insurer is not bound to investigate or initiate settlement talks until it has been notified of a loss; the primary insurance policy limits are likely to be exhausted; and a demand for payment of the excess policy limits is made.
Conversely, states like Louisiana, Wisconsin, Georgia, and New Jersey have all found that an excess insurer does have an obligation to settle a claim in good faith even if the excess insurer never receives a settlement demand. These courts impose this obligation generally on the basis of the excess insurer’s duty to act in good faith and deal fairly with the insured and/or claimant. Under this view, once an excess carrier has reason to know of a loss and has reason to know the primary insurance company’s policy limits are likely to be exhausted without fully satisfying the claim, the excess insurer must initiate its own investigation and/or settlement negotiations even without a request.
How Would Florida Rule?
Florida courts have not yet had an opportunity to rule on this specific issue. If our state appellate courts did address the duty of excess insurers in this situation, it is likely that Florida courts would place an affirmative duty on excess insurers to initiate settlement talks. Some of the states that do not impose this affirmative duty have statutes that speak of a duty to investigate and initiate settlements that the “primary insurer” has placed upon them. Based on this express language, the courts of these states conclude that their legislatures did not intend to impose the same obligations on excess insurers. If they intended to do so according to this reasoning, the legislature could have easily said as much. Like states taking the alternative view, Florida’s bad faith statute does not speak in terms of “primary insurers” but only “insurers.” This leaves the door open for an argument to be made that an excess insurer has the same duties and obligations as a primary insurer to investigate and initiate negotiations.
If you have questions about an insurance claim, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney. My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.