Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.
Disclaimer — Not Legal Advice. This article is published for general informational and educational purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied upon as a substitute for advice from a licensed attorney in your jurisdiction. Statutes, rules, and case law change frequently; portions of this article may be out of date by the time you read it. Reading this article, contacting the author, or commenting on it does not, by itself, retain counsel. If you believe you have a legal claim or defense, consult an attorney admitted in the relevant jurisdiction promptly because deadlines (statutes of limitations, claim-presentment, and notice requirements) can extinguish rights without warning. Prior results do not guarantee a similar outcome.
When an insurer controls settlement negotiations and allows a plaintiff to take judgment in excess of policy limits, the insured can assign the bad faith claim — and the consequences can dwarf the underlying policy.
Doctrinal Framing
Florida's bad faith failure-to-settle doctrine sits at the intersection of contract, tort, and fiduciary obligation. Its premise is straightforward: when an insurer accepts the duty to defend and assumes control over settlement negotiations, it steps into a position of trust vis-à-vis its insured. If the insurer uses that position to protect its own financial interests — by refusing a reasonable settlement offer and allowing the case to proceed to a verdict in excess of policy limits — it has violated the obligation that comes with the authority it assumed. The excess judgment becomes the insurer's liability.
The governing standard in Florida is the totality of the circumstances, as articulated by the Florida Supreme Court in Berges v. Infinity Insurance Co., 896 So. 2d 665 (Fla. 2004). Berges did not create the doctrine — Boston Old Colony Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980), had established the foundational duty and its elements a quarter-century earlier — but it applied that standard in a way that closed the door on several insurer defenses and clarified that the insured's own conduct does not relieve the insurer of its obligation.
This post examines the Berges/Boston Old Colony framework, the elements of a failure-to-settle bad faith claim, the mechanics of assignment and the Cunningham agreement, post-reform modifications, and litigation strategy for plaintiff's counsel.
The Foundation: Boston Old Colony (1980)
Boston Old Colony Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980), established the insurer's duties in the settlement context with clarity. The Florida Supreme Court held that when an insurer assumes control of a claim in which the potential liability may exceed policy limits, the insurer owes the insured the following obligations:
- To advise the insured of any settlement offers and to make sure the insured understands that a verdict could exceed policy limits.
- To thoroughly investigate the facts underlying the claim.
- To evaluate the claim fairly and objectively.
- To give fair consideration to any settlement offer not unreasonable under the facts.
- To warn the insured of the risk of an excess judgment and to advise the insured to retain independent counsel if necessary.
The Boston Old Colony court also established that the question of whether the insurer acted in good faith in the settlement context "is for the jury." This jury-question holding has remained the cornerstone of Florida bad faith litigation: if there is evidence that the insurer failed any of the duties listed above, the case goes to the jury, and the insurer cannot defeat the claim on summary judgment by arguing it had a colorable reason to reject the settlement offer.
Berges v. Infinity Insurance Co. (2004): The Totality Standard
Berges arose from a wrongful death claim against an Infinity policyholder. The claimant made a time-limited demand for policy limits; Infinity did not tender within the demand period; the case proceeded to a verdict substantially in excess of the policy. Infinity argued that (1) the insured's own conduct contributed to the inability to settle and (2) its adjuster had not acted with bad faith intent.
The Florida Supreme Court held for the plaintiff on both grounds. On the first: the insured's conduct may be one factor in the totality of the circumstances analysis, but it does not relieve the insurer of its independent obligation to act in good faith. An insurer cannot point to the insured's behavior as a complete defense if the insurer itself failed to properly evaluate and respond to the settlement opportunity.
On the second: Berges confirmed that Florida's failure-to-settle standard is whether the insurer used "that degree of care and diligence which a person of ordinary care and prudence should exercise in the management of his own business" — an objective standard. Subjective intent to act in bad faith is not required. The question is what the insurer did, measured against what a reasonably prudent insurer in its position should have done.
The totality-of-circumstances test requires courts and juries to evaluate:
- The probability that the plaintiff would prevail at trial;
- The adequacy of the insurer's investigation;
- The severity of the potential injuries and likely damages;
- The insured's financial exposure above policy limits;
- The reasonableness of the settlement demand in light of the facts known to the insurer;
- The insurer's response time and internal deliberations;
- Whether the insurer conveyed all material information to the insured.
No single factor is dispositive. A perfect investigation paired with an inadequate response to a settlement offer may still constitute bad faith. An imperfect investigation that leads to prompt settlement avoids the problem.
Assignment, Excess Judgments, and the Cunningham Agreement
Assignment of the Bad Faith Claim
Florida permits the insured to assign the bad faith cause of action to the plaintiff who obtained the excess judgment. This assignment creates the third-party bad faith litigation architecture: (1) plaintiff wins excess verdict against insured; (2) insured assigns bad faith claim to plaintiff; (3) plaintiff brings bad faith action against insurer for the full amount of the excess judgment. The bad faith damages are the excess judgment amount — which may far exceed policy limits.
Cunningham Agreements
Cunningham v. Standard Guaranty Insurance Co., 630 So. 2d 179 (Fla. 1994), addressed what happens when the parties want to resolve the underlying claim and preserve the bad faith action without the insured bearing the risk of an actual excess judgment. The Cunningham agreement is a stipulation between the claimant and the insured that: (1) the insurer's liability under the policy is established; (2) the damages are established at an agreed amount; and (3) the claimant agrees not to execute against the insured personally in exchange for the assignment of the bad faith claim. The Florida Supreme Court approved this structure as the functional equivalent of an excess judgment for bad faith ripeness purposes.
Cunningham agreements allow the bad faith case to proceed without the insured being exposed to actual collection of the excess judgment. They are the standard vehicle in cases where the insurer has rejected a limits demand and the parties want to resolve the underlying claim while preserving the bad faith action.
The § 624.155 CRN and Third-Party Claims
Florida's statutory bad faith framework under § 624.155 applies to certain third-party bad faith failure-to-settle claims, but the common-law failure-to-settle cause of action recognized in Boston Old Colony and Berges also exists independently. The interplay between the statutory CRN requirement and the common-law third-party claim is case-specific; confirm which theory (or both) applies and what prerequisites must be satisfied.
Post-Reform Modifications: The 90-Day Safe Harbor
The 2023 HB 837 reforms added § 624.155(4)(a), which creates a 90-day safe harbor for liability insurers: an insurer that tenders its policy limits within 90 days of receiving a CRN alleging failure to settle is immune from bad faith liability under § 624.155 for that failure-to-settle claim. This safe harbor is designed to incentivize prompt policy-limits tenders when a demand is received.
From the plaintiff's perspective, the safe harbor creates a strategic opportunity: a well-drafted CRN puts the insurer on notice that limits must be tendered within 90 days or the safe harbor is forfeited. Tender within the window closes the bad faith action under § 624.155, but the common-law Berges claim may survive — depending on the facts and whether the tender cures the prior conduct.
Key Elements for Litigation
Timing of the Settlement Demand
Time-limited settlement demands are ubiquitous in Florida practice. The insurer's response to a time-limited demand within policy limits is the central fact in most failure-to-settle cases. Document:
- When the demand was made;
- What the demand contained (offer to release, deadline, conditions);
- What the insurer knew about liability and damages at the time of the demand;
- What the insurer did during the demand period;
- Whether the insurer communicated with the insured about the demand;
- Whether the insurer rejected, ignored, or allowed the demand to lapse.
A demand that the insurer allowed to lapse without response, followed by a verdict in excess of limits, is the paradigm case. The insurer will argue the demand was unreasonable, the damages were uncertain, or the liability was contested. Preemptively document why the demand was reasonable at the time.
The Insurer's Internal Deliberations
Discovery of the insurer's claim file, adjuster notes, supervisor communications, and reserve history is essential. Reserve increases during the litigation period are evidence that the insurer recognized its exposure; failure to settle despite increasing reserves indicates the insurer valued its own interests over the insured's.
Expert Testimony on Claims Handling
An insurance industry expert who can opine on what a reasonably prudent insurer should have done, given what this insurer knew, at the time the demand was pending, is valuable in most failure-to-settle cases. The Berges objective standard invites comparison to industry norms; the expert bridges the gap between the insurer's conduct and those norms.
Practice Notes
Document everything before the demand lapses. The bad faith case is made or broken on the record as of the demand deadline. Photographs of the scene, medical records establishing severity, liability analysis, and communications establishing the insured's exposure should be assembled before the demand issues and organized so that the insurer's file will show what it received and when.
Draft the demand carefully. Florida courts evaluate the reasonableness of the demand as part of the totality analysis. A demand with unreasonable conditions, an unreasonably short deadline, or prerequisites that could not realistically be met weakens the bad faith case. Time-limited demands should be reasonable in their terms and should offer a genuine opportunity for the insurer to settle.
*Coordinate the Cunningham structure early. If the insurer has rejected the demand and a verdict is looming, begin negotiating the Cunningham* agreement before verdict. An agreement in place before judgment protects the insured, preserves the assignment, and ensures the bad faith action can proceed on the stipulated record.
Account for the 90-day safe harbor. If you are filing a CRN for a failure-to-settle claim, calendar the 90-day safe harbor deadline. If the insurer tenders within 90 days, the § 624.155 claim is barred — but evaluate whether the common-law Berges cause of action survives.
Open Questions
- The safe harbor and prior bad faith. Whether the § 624.155(4)(a) safe harbor immunizes an insurer for conduct that occurred before the CRN was filed — including earlier failures to respond to the original demand — is unresolved.
- Proportionality of bad faith damages. When the excess judgment is very large relative to policy limits, courts have begun to examine whether the damages are proportionate to the insurer's culpability. This constitutional proportionality question has not been fully resolved in the failure-to-settle context.
- *Post-Berges treatment of insured fault. Berges* held that the insured's conduct is one factor in the totality, not a complete defense. How much weight courts and juries give to insured conduct in the totality analysis varies.
Conclusion
Florida's failure-to-settle bad faith doctrine gives plaintiffs a powerful tool when an insurer treats its own financial interests as superior to its insured's welfare in the settlement context. Boston Old Colony's enumerated duties and Berges's totality standard together create a framework where the insurer's entire claims-handling conduct is placed before the jury. The doctrine's strength lies in its breadth: it captures not just the single decision to reject a settlement offer but all of the investigative, evaluative, and communication failures that led to that decision. Counsel who document the demand record carefully, pursue the assignment or Cunningham structure strategically, and account for the 2023 safe harbor are positioned to recover damages that reflect the true cost of the insurer's failure.
Talk to Yates Anderson
If you are litigating a matter in this area — or weighing whether to — the working analysis above only goes so far. Request a case evaluation and a Yates Anderson attorney will respond within one business day.
Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.