Professional Negligence Law Reporter

The Eleventh Circuit Court of Appeals held that an insurer was not liable for bad faith where it had a legitimate reason to require an insured to litigate his claims against an underinsured motorist allegedly responsible for the insured’s motor vehicle collision.

Donna Smith, an underinsured motorist, allegedly hit Daniel Voss while he was riding his bicycle. Smith carried $25,000 in liability insurance; however, Voss was covered by several State Farm Insurance policies and had $100,000 of underinsured motorist coverage. Voss informed State Farm that Smith’s policy limits settlement offer would not cover his medical costs and requested an underinsured motorist payment. State Farm, which investigated Voss’s claim against Smith, rejected Smith’s policy limits settlement and sent Voss the $25,000 he would have received, leaving him to litigate his claims against Smith. A jury later found Smith liable and awarded Voss $1.9 million. State Farm then paid Voss the remaining $75,000 of his underinsured motorist coverage, and Smith’s insurer paid its $25,000 policy limit.

Voss sued State Farm, alleging it breached its insurance policy, acted in bad faith, and committed the tort of outrage. The trial court granted the defendant summary judgment.

Affirming, the Eleventh Circuit found that under Alabama law, an uninsured motorist carrier must conduct a good faith investigation. Voss may not prevail on his breach of contract claim by arguing that State Farm should have paid him sooner, the court found. It addded that under relevant case law, an insurer cannot be liable for a breach before an insured shows he or she is legally entitled to recover payment from the underinsured motorist. Here, the court found, Voss did not prove his entitlement to recover from Smith until after the trial.

The court also found that the tort of bad faith requires proof of a lack of legitimate reason for the denial of a claim. In this case, a jury could not find that State Farm had no legitimate reason for its decision to require Voss to litigate against Smith, even if a jury could find that the insurer’s investigation was sloppy. The accident report, photographs from the scene, and investigators’ findings support State Farm’s assertion that Voss may have been contributorily negligent, the court said, thus concluding that Voss may not succeed on his tortious bad faith claim.

Citation: Voss v. State Farm Mut. Auto. Ins. Co., 2022 WL 3449598 (11th Cir. Aug. 17, 2022).