The interplay between primary and excess insurance is often litigated, especially in the context of settlements. On April 26, 2017, the First Circuit in Salvati v. Am. Ins. Co., 16-1403, 2017 WL 1488238, at *1 (1st Cir. Apr. 26, 2017) considered whether the settlement agreement entered into between plaintiff and the insureds/primary insurer was sufficient to trigger excess insurance coverage under the insured’s policy with American Insurance Company.
On March 18, 2016, a Florida jury awarded Hulk Hogan (real name Terry Bollea) $115 million in damages in his lawsuit against Gawker.com. Mr. Bollea sued Gawker in Florida state court after it published portions of a video showing him having sex with the wife of a former friend, Todd Clem (a DJ better known as Bubba the Love Sponge). Mr. Bollea claimed he did not know he was being filmed and sought $100 million. He claimed, among other things, that his “goodwill, commercial value, and brand [were] substantially harmed” and that he suffered emotional distress by the posting. Following trial, the jury deliberated for six hours and awarded more than the amount sought: $55 million for economic harm and $60 million for emotional distress. On March 21, 2016, the jury awarded an additional $25 million in punitive damages.
On Thursday, Florida’s highest court held that prior to litigating a first-party bad faith action arising from an uninsured/underinsured motorist (“UM”) case, an insured is entitled to a jury determination of liability and the full extent of potentially recoverable damages, even if in excess of policy limits. Fridman v. Safeco Ins. Co. of Illinois, No. SC13-1607 (Fla. Feb. 25, 2016). And, such a determination is binding on the insurer in the subsequent bad faith action so long as the parties had an opportunity for appellate review of any trial errors.
The ruling is premised on Florida’s requirement that the insured’s liability and the full extent of potential damages be determined in order to state a claim for bad faith. Applying that rule, the Supreme Court rejected Safeco’s argument and reversed the Fifth District Court of Appeal, finding that liability and the extent of damages need not be deferred to the subsequent bad faith case. The Court also clarified that the UM trial court may reserve jurisdiction to allow an insured to formally amend his complaint to add a claim for bad faith at the conclusion of the UM proceedings.