Issue: Under Florida law, must a primary insurer report to an excess insurer a plaintiff’s demand that exceeds the limits of the primary policy, even when the primary insurer values the claim at less than the primary policy’s limits?
|Area of Law:||Insurance Law|
|Keywords:||Primary insurer; Demand that exceeds the limits of the primary policy; An excess insurer|
|Cited Cases:||389 So. 2d 272; 913 F. Supp. 1525; 462 N.Y.S.2d 175; 238 N.W.2d 862; 600 So. 2d 1147; 475 N.Y.S.2d 267; 356 N.W.2d 648; 393 N.W.2d 479; 390 So. 2d 761; 886 F. Supp. 837; 678 So. 2d 1325|
I. THE PRIMARY INSURER SHOULD INFORM AN EXCESS INSURER ABOUT DEMANDS EXCEEDING THE LIMITS OF THE PRIMARY POLICY.
“Under Florida law the primary insurer must ‘investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible where a reasonably prudent person faced with the prospect of paying the total recovery would do so.'” Galen Health Care, Inc. v. American Cas. Co., 913 F. Supp. 1525, 1535 (M.D. Fla. 1996) (quoting Hollar v. International Bankers Ins Co., 572 So. 2d 937, 939 (Fla. Dist. Ct. App.—3d Dist. 1990)).
Because the primary insurer controls the insured’s defense, it has a duty to negotiate toward settlement in good faith. Id. at 1532. Another case describes the primary insurer’s duty:
When an insurance policy gives the primary carrier full control of the litigation, including the right to determine whether the case should be tried or settled, . . . the insurer is required to exercise this authority in good faith, regardless of the insured’s consent. The primary carrier has superior knowledge and should act reasonably under all circumstances and exercise due care in regard to settlements.