Foy BAXTER and Annie Smith Baxter, Petitioners,
v.
ROYAL INDEMNITY COMPANY, Respondent.
Supreme Court of Florida.
J. Ben Watkins, of Watkins & Hill, Miami, for petitioners.
J. Lewis Hall, Tallahassee, for respondent.
J.B. Spence of Spence, Payne & Masington, and Robert Orseck of Podhurst, Orseck & Parks, Miami for The Academy of Florida Trial Lawyers, amicus curiae.
ENGLAND, Justice.
This case is here on a petition for certiorari to the First District Court of Appeal, asking us to review an opinion reported at
Petitioners brought an action against their automobile insurance carrier after they had received the full amount payable under the uninsured motorist clause contained in their policy, seeking compensatory and punitive damages in excess of the policy's limits. Their second amended complaint was dismissed for failure to state a cause of action, and the First District Court of Appeal affirmed the dismissal.[2] A complete recital of the basis for petitioners' suit is set forth in the opinion below.
In denying petitioners the legal opportunity to recover more than the policy limits *726 from respondent, the district court held that there is no fiduciary relationship between the insureds and their insurer with respect to the carrier's liability under the uninsured motorist clause of an insurance contract, and that the parties occupy a debtor-creditor type relationship for purposes of this class of insurance protection.[3] In so deciding the district court recognized as valid, but distinguished, the body of law which has developed in this state to the effect that a fiduciary obligation does exist between insured and insurer under the bodily injury and property damage liability provisions of an automobile insurance contract.
Our review of the authorities alleged to establish the jurisdiction of this Court fails to reveal any conflict in appellate decisions which would authorize our review.
(1) Petitioners allege conflict with the decision of this Court[4] which holds that an insurance company must exercise good faith in order to invoke a contract appraisal (arbitration) clause as a defense to the claim of its insured. The Court in that case, however, merely held that an insured was privileged to come into court to enforce its insurance policy where the carrier invoked a damage-setting arbitration clause in bad faith, i.e., for the purpose of resolving both damages (which was proper under the contract clause) and liability (which was not). Nothing in that case conflicts with the district court's determination that no "excess" cause of action arises from a carrier's bad faith invocation of an arbitration clause expressly designed to fix both damages and liability, prior to paying the policy limits demanded.
(2) Petitioners allege conflict with the line of decisions which hold that insurance companies have a fiduciary obligation to their insureds[5] and to persons who stand in the legal shoes of their insureds.[6] All of those cases involve the carrier's liability for bodily injury or property damage, however, which are precisely the cases which the court below distinguished on policy grounds and did not disturb. Obviously those cases cannot be in conflict with the case now brought here for certiorari review.
(3) Petitioners allege conflict with the case law of Florida which authorizes the imposition of punitive damages in a common law action for fraud or malice,[7] and in tort for malice or an intentional wrong.[8] There is no direct conflict between these non-insurance cases and the district court's determination that no cause of action for punitive damages can be predicated on a carrier's insistence on contract arbitration.
(4) Finally, petitioners allege conflict with Government Employees Insurance Co. v. Whitaker,
There being no "direct conflict with a decision of any district court of appeal or of the supreme court on the same question of law",[9] we are without jurisdiction to consider the merits of petitioners' case. The writ of certiorari to the First District Court of Appeal is discharged.
ROBERTS, BOYD and OVERTON, JJ., concur.
DEKLE (Retired), J., dissents with opinion with which ADKINS, C.J., and McCAIN, J., concur.
DEKLE, Justice, Ret. (dissenting):
Can an insurer be held liable to its own insured for a bad faith refusal to settle a claim under an uninsured motorist provision of its policy?
That is the question presented here on conflict certiorari from the First District Court of Appeal opinion reported at
Since the cause comes to us in the posture of a dismissal of the complaint for failure to state a cause of action, it must be determined whether the facts alleged in the complaint are sufficient to support recovery of the money judgment sought under any theory of law, without being concerned at this point with the question of the factual correctness of these allegations, but merely their sufficiency to support a cause of action. On this basis, the facts are as follows: The vehicle owned by petitioners, and insured under the policy in question, was struck by another vehicle negligently operated by an uninsured motorist who was solely at fault, resulting in the death of petitioners' minor son and serious permanent injury to petitioners' minor daughter. Petitioners made demand on the insurer (respondent herein) for payment to them of the full amount of uninsured motorist coverage provided by the policy they held, which demand was refused by the insurer until the existence and amount of liability imposed upon it were fixed by arbitration as provided by the policy,[1] despite only minimum coverage of $20,000.00 under uninsured motorist coverage, and in the face of one death and a serious injury, and an investigation showing the uninsured motorist to be at fault for the accident. Arbitration proceedings, nevertheless, were conducted at *728 respondent's insistence and not surprisingly resulted in an order in favor of petitioners, awarding them the full amount of coverage provided by the policy for the death and injuries of the children, just as they had offered to accept at the outset. The amount awarded by the arbitrators was thereupon paid by the insurer, following which the action sub judice was instituted.
In a two-count complaint petitioners allege that the insurer was guilty of bad faith in negotiating, evaluating and paying the benefits due them under circumstances where the insurer owed a legal duty to act in good faith; that because of such bad faith, petitioners seek judgment for the full amount of damages suffered by them as a result of the death and injuries sustained by their children (in excess of policy limits). Secondarily, they allege that as a result of the bad faith negotiations of the insurer, they were caused to incur additional expenses in the collection of benefits due them under the policy and further suffered great mental stress and physical pain as a result of such conduct. Whether the last asserted item of damage is recoverable in such a cause of action is not considered here. The complaint also alleges that the insurer's bad faith and wanton handling of petitioners' claim were motivated by malice sufficient to warrant the imposition of punitive damages.
The trial court held that the complaint failed to state a cause of action upon which any relief could be granted and accordingly entered a judgment of dismissal.[2] The First District Court of Appeal affirmed, holding that under such circumstances the insurer was entitled to invoke the arbitration clause for whatever reason it desired and that there was no fiduciary relationship between insurer and insured under the circumstances. Petition for certiorari was filed, and we tentatively accepted jurisdiction on the basis of conflict of decisions. Art. V, § 3(b)(3), Fla. Const.
The question presented, as the district court aptly summarized it at
"When an automobile insurance policy contains an `uninsured motorist' clause and the insured is involved in an accident with an uninsured motorist; reasonable investigation reveals that the uninsured motorist was solely at fault, and the damages clearly exceed the policy limits; the insured offers to settle with his insurer within the policy limits but the latter willfully, maliciously, and for its own selfish interest and gain, refuses to settle until the existence and amount of liability is fixed by arbitration; is the insurer liable for punitive damages or for actual damages in excess of the policy limits plus legal interest?"
The district court answered in the negative. For the reasons set forth below the question should, in my judgment, be answered in the affirmative, as Judge Spector put it so well in his able dissent to the DCA opinion. A brief review of some of the major decisions of the courts of this state dealing with an insurer's obligations to its insured and to third parties will support such an affirmative answer, and will also demonstrate conflict for our jurisdiction.
In New Amsterdam Casualty Co. v. J.H. Blackshear, Inc.,
The landmark case of Shingleton v. Bussey,
In Thompson v. Commercial Union Ins. Co.,
Turning to the case at hand, I fail to perceive a valid distinction between the Thompson and Shingleton third party right of action and a cause of action in favor of the insured for his insurer's bad faith failure to settle an uninsured motorist claim filed by the insured, notwithstanding the contractual arbitration provisions. See also our recent Campbell v. Government Employees Ins. Co.,
It is clear that, had the accident in question involved a motorist who had insurance, and had that motorist's insurer acted in bad faith in failing to negotiate petitioner's claim, petitioner, as a third party beneficiary of the other motorist's insurance policy, would have had a cause of action against that insurer.[3] The difference presented by our case is solely that the other motorist was uninsured, thus placing *730 petitioner's own insurer in the position of the other motorist's hypothetical insurer, under the provisions of the policy. This does not lead to a difference in result, since it is the public policy of this state that every insured is entitled to recover under the uninsured motorist provisions of his policy for the damages he or she would have been able to recover if the offending motorist had maintained a policy of liability insurance.[4]
In holding that the insurer could not be charged with the commission of a tort "merely because it elected to exercise a lawful option open to it under the contracts," regardless of bad faith or malice, the DCA opinion conflicts with the rule stated in Government Employees Ins. Co. v. Whitaker,
The insurer makes much of the adversary nature of the relationship between itself and its insured under the uninsured motorist provisions of the policy, contending that because of this adversary situation, it does not have any fiduciary duty toward its insured to act in good faith in the settlement of his claim, despite the relationship of insurer and insured existing between them. Yet surely it cannot be argued that this relationship is more adverse than that existing between insurer and a third party claimant with whom the insurer has no contractual ties. Such a third party claimant is clearly entitled under the law to bring an action against the insurer for bad faith in settlement negotiations, either with or without an assignment of the cause of action from the insured,[5] despite the lack of any fiduciary obligation of the insurer toward such a third party. Even in a case where a third party claimant is not damaged by the failure to settle, and is in fact benefitted to the extent of the excess of the verdict over the rejected settlement offer, the third party may nonetheless maintain the action for the insurer's breach of his obligation of good faith.[6]
The State's public policy is to place the insured in the same position as if the uninsured motorist had maintained a liability policy with the statutorily-prescribed minimum limits.[7] Accordingly, in a situation involving an accident between its insured and an uninsured motorist, the insurer stands in the shoes of the hypothetical insurer of the uninsured motorist, and owes its actual insured at least the same obligation of good faith it would owe if it in fact were the insurer of that motorist. The public policy involved is thereby fulfilled when the insurer assumes such position of the uninsured motorist's hypothetical liability insurer, who in turn owes to *731 petitioners an obligation of good faith dealing.
Basically, the insured, in contracting to purchase uninsured motorist coverage, entered into a covenant with the insurer to obtain insurance coverage to protect his interests in the event of an accident involving an uninsured motorist; this agreement contains an implied obligation that the insurer will handle such a claim in good faith. Government Employees Ins. Co. v. Whitaker, supra. It would be anachronistic to hold that an insurer owes a duty of good faith in handling the liability claim of a third person totally unrelated to the parties to the contract of insurance[8] while at the same time holding that the insurer owed no such obligation of good faith to its own insured, who has paid premiums for the uninsured motorist coverage for the specific purpose of protecting himself from damages inflicted by an uninsured motorist.
It is clear that the insurer owes a duty of good faith in settlement negotiations to third party beneficiaries. Thompson v. Commercial Union Ins. Co., supra. It is also clear that an insurer owes its own insured a duty of good faith in handling the insured's claims under his own policy. New Amsterdam Casualty Co. v. J.H. Blackshear, Inc., supra; Government Employees Ins. Co. v. Whitaker, supra. If anything, more reason for the existence of a duty of good faith is present in the case of an uninsured motorist claim by the insured than in the case of a liability claim by a third party beneficiary, since the additional factor is present that the insured has parted with consideration for the coverage in paying the premium; he is not a stranger to the contract of insurance, but a party to it who has paid his money to the insurer in the reasonable expectation that a good-faith claim will receive good-faith treatment. An obligation of good faith is inherent in the provisions of a liability insurance policy, implied by law.[9] If the facts recited in the complaint sub judice are accurate, this obligation of good faith has been breached; and for that breach, a cause of action arises.
Just as an insured can sue his own insurer for "bad faith failure to settle" a claim under the liability provisions of his policy,[10] so too should he be able to maintain a cause of action, in appropriate circumstances, for his insurer's "bad faith failure to settle" his own claim under the uninsured motorist provisions of his policy. Justice, public policy, and the implied obligation of good faith in dealing with one's own insured under the contractual provision, all demand the same result. In my view, therefore, petitioner's amended complaint did in fact state a cause of action upon which relief could be granted, and hence the trial court, in dismissing the amended complaint, and the DCA, in affirming that judgment, were in error.
I would accordingly quash the decision of the First District Court of Appeal at
I, therefore, most respectfully dissent.
ADKINS, C.J., and McCAIN, J., concur.
NOTES
[1] Fla. Const., art. 5, § 3(b) (3).
[2] In this legal posture we must accept as true the allegations of the complaint that respondent acted in bad faith in refusing to pay on petitioners' demand the full policy limits under their contract, and insisting on the contract right of arbitration.
[3] "The legal relationship existing between the insured and his insurer on claims for ... damages caused by uninsured motorists is that of debtor and creditor in which no fiduciary relationship is present." Baxter v. Royal Indemnity Co.,
[4] New Amsterdam Casualty Co. v. J.H. Blackshear, Inc.,
[5] See Campbell v. Gov't Employees Insur. Co.,
[6] Thompson v. Commercial Union Insur. Co.,
[7] E.g., Holbein v. Rigot,
[8] E.g., Griffith v. Shamrock Village, Inc.,
[9] Fla. Const. art. 5, § 3(b)(3).
Notes
[1] In connection with the uninsured motorist coverage, the policy stated:
"... provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration."
[2] Third Dist. has now held similarly, citing First Dist. Baxter, in Midwest Mutual Ins. Co. v. Brasecker,
[3] Thompson v. Commercial Union Ins. Co.,
[4] Harmon v. State Farm Mutual Auto. Ins. Co.,
[5] See footnote 3.
[6] Id.
[7] See footnote 4.
[8] Auto. Mut. Indemnity Co. v. Shaw,
[9] American Fire & Cas. Co. v. Davis,
[10] Government Employees Ins. Co. v. Whitaker, supra, and Auto Mutual Indemnity Co. v. Shaw, supra, and Campbell v. Government Employees Ins. Co., supra.