The Fiduciary Duty of Florida Auto Insurance Companies to Settle within Policy Limits

When you are involved in a motor vehicle accident that is allegedly caused by your negligent driving, injury victims in your vehicle or the other vehicle are likely to file a lawsuit.  The damages awarded to the injured party may include medical expenses, lost income, pain and suffering, property damage, diminished earning capacity and other forms of harm.  The damages awarded by a jury for serious injuries can easily reach hundreds of thousands or even millions of dollars.  When you are sued by a party who claims substantial physical injuries, the interest of you and your insurance company can start to diverge. 

Because of the inherent conflict between policyholders and their insurance company, insurance companies owe their insured a fiduciary duty to protect an insured’s interest when defending a policyholder in a personal injury lawsuit.  While the policyholder benefits if the lawsuit is settled at or below policy limits, the insurance company is on the hook for any such settlement.  This can create a financial incentive for the insurer to risk a judgment at trial because the insurance company has little or nothing to lose by taking its chances.  Florida insurance attorney J.P. Gonzalez-Sirgo has provided some key facts you should know if you need your auto accident insurance carrier to defend you against a personal injury lawsuit.

Florida Insurance Companies Owe Policyholders a Fiduciary Duty

Your insurance company owes you a fiduciary duty similar to that owed by a trustee to protect and manage the funds in a trust prudently for the benefit of the beneficiaries.  The basis for imposing this duty stems from the fact that your policy will generally allocate the right to control the defense of your personal injury case to the insurance carrier.  The Florida jury instructions characterize this duty in the context of bad faith insurance lawsuits as an obligation to act fairly and honestly toward a policyholder with due regard to the insured’s interests.

Examples of Bad Faith in the Context of Defending an Insured in Litigation

There are a number of ways that an auto insurance company defending an insured driver can breach this fiduciary duty to act in good faith toward an insured which include:

  • Lack of adequate investigation that results in harm to the policyholder
  • Imposing unreasonable conditions on settlement that would prevent excess liability
  • Ignoring the advice of a defense attorney or claims supervisor to settle a claim within policy limits
  • Declining to pay up to the limits of the policy which would have resulted in a settlement within policy limits
  • Not disclosing a settlement offer that is below the limits of the policy
  • Non-disclosure to the insured of conditions imposed on a settlement offer within policy limits that leads to non-acceptance
  • Not settling the case within policy limits when it was appropriate to do so given the circumstances
  • Non-disclosure of the probable risk of liability beyond policy limits or the appropriate steps to avoid such excess liability

Verdicts That Exceeds Policy Limits Do Not Necessarily Constitute Bad Faith

There are factors other than bad faith that may legitimately justify not settling a lawsuit within policy limits.  An exorbitant and unanticipated jury verdict, changes in outlook regarding liability during the discovery process and other circumstances might justify not offering policy limits when demanded by the plaintiff.  The test is whether the insurance company acted honestly and fairly and with due regard for the interest of the insured given the totality of the circumstances.

If you have questions about your insurance company’s handling of a personal injury liability claim, experienced Florida insurance attorney J.P. Gonzalez-Sirgo can analyze your situation and advise you of your options.  Mr. Gonzalez-Sirgo handles disputed claims in Miami and throughout Florida.  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.

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