Legal Memorandum: Third-party Beneficiary Theory in FL

Issue: Whether claimants have standing to bring a claim in Florida if there is no privity between claimants and the insurer, and whether there can be a tortious breach of duty to settle, because an insurer owes no duty of good faith towards a party injured by an insured. 

Area of Law: Insurance Law
Keywords: Breach of duty to settle; Third-party beneficiary; Duty of good faith
Jurisdiction: Florida
Cited Cases: None
Cited Statutes: Insurance Claims and Disputes § 9.12; Couch on Insurance § 104.2 n.22
Date: 01/01/2006

The insurer’s arguments properly state the law.  I have found no relevant case law that would support the existence of such a claim at this stage of the proceeding.  Although Florida at one time had created a common-law direct cause of action based on a theory that injured parties were third-party beneficiaries to the underlying insurance contract, the possibility of direct action was overruled by subsequent legislation:

When an insurance company breaches its duty to settle, it may be liable in excess of its policy limits.  Most courts, however, have held that, absent (a) a statutory cause of action, (b) an assignment from the insured to the injured party of the insured’s rights against the insurer, or (c) a policy provision authorizing such a suit, an injured party cannot recover such excess liability directly from the insurer.

There are two possible capacities in which an injured party, without being an assignee, could sue an insurer for an excess judgment caused by a breach of its duty to settle:  as a third-party beneficiary and as a judgment creditor.   Only Florida has adopted the third-party beneficiary theory.

Windt, Insurance Claims and Disputes § 9.12 (4th ed.).

The Florida third-party beneficiary theory has been overruled by subsequent legislation, at least to the extent that a direct action may be brought.  Furthermore, even if a tort theory could be supported, procedurally a direct action on any such claim is not permitted.  Our […]

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