Hillsborough County v. Star Insurance Company
2017 U.S. App. LEXIS 1924
| 11th Cir. | 2017Background
- In Feb. 2010 a Hillsborough County vehicle was involved in a fatal accident; the estate filed a wrongful-death suit in Florida state court and that action remained pending.
- Hillsborough County had a Star Insurance excess liability policy (Oct. 2009–Oct. 2010) with $2 million limits and a $350,000 self-insured retention limit (SIRL) for auto claims.
- Florida statute § 768.28(5) then capped municipal liability at $200,000 (per-incident aggregate) but allowed settlements "within the limits of insurance coverage" without legislative action; amounts above the cap could be paid only by a special claims bill.
- The County and the estate agreed in principle to a $2.35 million settlement: County to pay $200,000 (statutory cap) + $150,000 (subject to a claims bill) = $350,000 SIRL; Star to pay $2 million — but Star withheld consent to the settlement.
- The district court held (1) a requirement that a legislative claims bill be passed before excess coverage is triggered frustrates the policy and can be excused, and (2) the County cannot unilaterally settle within policy limits without Star's consent; the Eleventh Circuit affirmed the consent holding, vacated the frustration-of-purpose holding, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the County can satisfy the $350,000 SIRL and trigger Star's excess coverage without a special legislative claims bill (frustration of purpose) | County: § 768.28(5) allows settlement "within the limits of insurance coverage" and the County should not need legislature action; the SIRL is an illusory condition if claims bill required | Star: Without a claims bill the County has sovereign immunity above $200,000 so coverage is not triggered; SIRL must be exhausted and the gap requires legislative action | Vacated district court's frustration-of-purpose ruling; on this record court declined to decide interplay of § 768.28(5) and SIRL because the proposed settlement anticipated passage of a claims bill and parties offered no evidence about bargaining/expectations. |
| Whether the County may unilaterally settle within policy limits without insurer consent | County: § 768.28(5) supersedes any policy consent requirement so County can settle within insurance limits unilaterally | Star: Policy requires Star's written consent before it is liable; insurer need not pay absent its consent and SIRL exhaustion | Affirmed that County cannot unilaterally settle within policy limits without Star's consent. |
| Whether the insurer may arbitrarily withhold consent to a settlement within policy limits | Estate/County: Insurer must not be able to veto reasonable settlements; policy should be construed against Star | Star: Insurer has discretion and may refuse to pay if not legally obligated; sovereign immunity may preclude payment absent claims bill | Court: Insurer owes a duty of good faith and cannot arbitrarily reject reasonable settlement offers, but factual issues about reasonableness were unresolved and require discovery/fact-finding. |
| Whether district court erred in denying Star discovery and in resolving policy-breach defenses on summary judgment | Star: Denial of discovery and disposition on sparse record was error; many fact issues (fault, damages, reasonableness, cooperation) remain | County/estate: Parties represented no discovery was needed; issues were mainly legal | Affirmed denial of belated discovery as not an abuse of discretion because parties had told the court discovery was unnecessary and Star delayed request. |
Key Cases Cited
- Hattaway v. McMillan, 903 F.2d 1440 (11th Cir.) (federal court applies sovereign immunity provisions in effect when cause of action accrues)
- Mich. Millers Mut. Ins. Co. v. Bourke, 607 So. 2d 418 (Fla. 1992) (Legislature allowed government entities to settle within limits of insurance without further legislative action)
- Plancher v. UCF Athletics Ass'n, Inc., 175 So. 3d 724 (Fla. 2015) (reaffirmed limited sovereign immunity; court skeptical insurer remains liable for full judgment absent discussion of Michigan Millers)
- Crown Ice Mach. Leasing Co. v. Sam Senter Farms, Inc., 174 So. 2d 614 (Fla. Dist. Ct. App. 1965) (frustration-of-purpose doctrine and its narrow application)
- N. Am. Van Lines, Inc. v. Lexington Ins. Co., 678 So. 2d 1325 (Fla. Dist. Ct. App. 1996) (insurer owes duty of good faith and may not arbitrarily reject reasonable settlements)