In a published decision issued on June 1, 2021, the U.S. Court of Appeals for the 11th Circuit, applying Florida law, found that the insurer (Progressive) did not act in bad faith. The decision, Eres v. Progressive, highlights the importance of responding to each and every request made in a settlement demand, and also provides guidance on how the inclusion of relatively innocuous language in a release can be viewed as a rejection of a settlement demand.
While intoxicated, Progressive’s insured Villareal caused a car accident that left Heather Eres with permanent injuries and resulted in the death of her eight-year-old son. Five days after the accident, Progressive offered the full $20,000 limits of Villareal’s policy to settle the claims by Eres and her son’s estate. Eres would not agree to settle until the related criminal proceedings against Villareal were concluded, however. During the approximately two-year period during which the criminal case was pending, Progressive repeatedly reached out to Eres and reiterated its willingness to settle.
After the criminal proceedings concluded, Eres, represented by a new lawyer, sent a settlement demand to Progressive containing several conditions and requiring strict compliance with the conditions. Among the conditions were that (1) Progressive provide an affidavit from Villareal of no other insurance and (2) any release proposed by Progressive must release only Villareal and not contain any hold harmless or indemnity provisions. The demand indicated that if the release contained such provisions, or released anyone other than Villareal, it would be considered as a rejection of Eres’ demand.
Progressive responded to the demand two days before the established deadline and enclosed, amongst the other requested documents, an affidavit of no other insurance and a proposed release naming only Villareal. The release reserved Eres’ rights to pursue future health and medical expenses from other responsible parties, but indicated that “[s]aid reservation does not include the party(ies) released [i.e., Villareal] who is/are given a full and final release of all claims, including but not limited to, past, present, or future claims for subrogation” arising from the underlying accident. Progressive requested that Eres’ counsel advise it of any required changes to the release.
Four days after the demand deadline, Eres’ counsel advised that he viewed the language in Progressive’s release as a rejection of Eres’ settlement demand, since he considered the language waiving all subrogation claims as akin to a hold harmless or indemnity agreement. Progressive responded two days later, and offered to strike that language from the release. Eres did not respond, but filed suit against Villareal and ultimately obtained a judgment against him in excess of $10 million. In that litigation, the court found that Progressive had not settled Eres’ claims against Villareal because it had not met all the conditions of the demand, as the court concluded that the language releasing all subrogation claims was “in the nature of a hold harmless or indemnification agreement.” Eres then filed a separate bad faith lawsuit against Progressive to collect the judgment against Villareal. Summary judgment was granted to Progressive, and Eres appealed.
The 11th Circuit affirmed summary judgment to Progressive, concluding that no reasonable juror could find that Progressive acted in bad faith. In particular, the court noted that Progressive immediately sought to settle the claims of Eres and her son and then repeatedly reiterated its offer to settle over the two-year period during which the criminal proceedings involving Villareal were pending. As to Eres’ settlement demand, the 11th Circuit found that Progressive worked diligently to meet all of the conditions of the demand and then, after Eres’ counsel objected to the release language, it offered to strike the objectionable language.
In particular, the 11th Circuit rejected Eres’ argument that Progressive’s release created an issue of fact as to whether Progressive acted in bad faith because the release was “overbroad” and not a “mirror-image” response to her demand. While noting that an overbroad release could in certain circumstances create a fact issue regarding bad faith, the court found that the Progressive release did not create a fact dispute because (1) it did not contain an express hold harmless or indemnity provision and (2) Progressive offered to remove the objectionable language. Notably, because the 11th Circuit found that at the time Progressive prepared the release, no Florida court had decided whether a waiver-of-subrogation clause was the equivalent of a hold harmless or indemnification provision, Progressive had no reason to believe that its inclusion of the waiver of subrogation language in the release would constitute a rejection of the demand.
Lastly, the 11th Circuit rejected Eres’ arguments that Progressive had not acted reasonably in preparing the release in response to Eres’ demand and had used a form release to prepare the release to send to Eres. The court concluded that at most, these facts identified some ways in which Progressive could improve its claims process, but did not establish Progressive acted negligently or in bad faith.
The decision reaffirms the importance of identifying each condition placed in a settlement demand and the need to meet those conditions exactly as stated, i.e., provide a mirror-image response. Also, the decision seems to provide notice to insurers that if a claimant or plaintiff requires that a release not contain or hold harmless and indemnification language, the inclusion of waiver of subrogation language could be deemed a rejection of the demand.
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