Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.
The "bad faith set-up" narrative is the insurance industry's most successful reframing of excess judgment litigation. In its defense version, the story goes like this: a plaintiff's attorney deliberately crafts a time-limited demand that the carrier cannot possibly satisfy — through impossibly short deadlines, onerous release conditions, or deliberate withholding of supporting documentation — and then sues the insurer for a bad faith failure to settle when the demand expires unmet. The purpose, the carrier argues, is to manufacture a bad faith claim, not to resolve a genuine personal injury dispute.
This framing has achieved partial statutory codification in Florida through HB 837's § 624.155(5)(b), and it remains a standard defense theme in Alabama excess judgment litigation. The counter-playbook requires understanding the rhetorical structure of the set-up defense, the legal limitations on its use, and the documentary and strategic practices that neutralize it.
The Set-Up Defense: Its Legal Basis and Limits
The "set-up" argument has deep roots in Florida bad faith jurisprudence. In Berges v. Infinity Insurance Co., 896 So. 2d 665 (Fla. 2004), Justice Wells's dissent explicitly flagged the set-up concern, characterizing certain plaintiff tactics as strategies consisting of "setting artificial deadlines for claims payments and the withdrawal of settlement offers when the artificial deadline is not met." The majority in Berges did not accept this framing as a defense: it held that "the focus in a bad faith case is not on the actions of the claimant, but rather on those of the insurer in fulfilling its obligations to the insured." Berges, 896 So. 2d at 677.
Prior to HB 837, the set-up argument was a jury argument, not a legal defense — it could be presented as evidence bearing on whether the carrier's failure to tender caused the harm, but it could not, absent a specific finding of bad faith by the claimant, reduce or eliminate the carrier's liability. Berges explicitly held that even where a claimant's attorney may have been attempting to "manufacture" a bad faith claim, the insurer's conduct remained the focus.
HB 837 changed this by codifying the set-up argument in § 624.155(5)(b): the trier of fact may now consider whether the insured, claimant, and their representatives acted in good faith in furnishing information, making demands, setting deadlines, and attempting to settle; and if they did not act in good faith, the trier of fact "may reasonably reduce the amount of bad faith damages awarded against the insurer." The provision stops short of creating a complete defense — bad faith by the claimant's counsel reduces damages but does not bar the claim — but it gives defense counsel a statutory hook for a damages-reduction argument that previously existed only in dissenting judicial opinions.
The Georgia Context: Cotton States Mut. Ins. Co. v. Brightman
Georgia's Supreme Court addressed a related framing problem in Cotton States Mutual Insurance Co. v. Brightman, 276 Ga. 683, 580 S.E.2d 519 (Ga. 2003). The case involved a settlement demand from multiple claimants that conditioned settlement on all insurers tendering their limits simultaneously — a condition Cotton States could not satisfy unilaterally. The Georgia Supreme Court held that an insurer may create a safe harbor in multi-insurer situations by meeting the portion of the demand over which it has control, tendering its limits and leaving the plaintiff to negotiate with the remaining insurers. This case illustrates the multi-insurer variant of the set-up problem: a demand structured to prevent any single carrier from satisfying it creates the appearance of a set-up even in the absence of improper motive.
The Brightman principle — that an insurer may act in good faith by tendering what it controls — has been adopted as a practical matter in Florida through the HB 837 interpleader and arbitration safe harbors for multi-claimant situations. The common thread across jurisdictions is that a carrier that actively pursues resolution to the extent of its unilateral power has a strong defense against the bad faith charge.
Identifying the Set-Up Defense Structure
Defense counsel typically deploy the set-up argument through several recurring factual patterns:
Short-deadline demands. The most common set-up argument involves a demand with an unreasonably short deadline — 7, 10, or 14 days — in cases where the insurer requires time to investigate, get adjusters into the field, or consult with its insured before tendering. The defense argues that the deadline was designed to expire before a reasonable investigation could be conducted.
Demanding a global release. Demands that require the carrier to produce signatures from its insured along with the tender, or that condition release on cooperation from third parties the carrier cannot compel, create conditions the carrier may argue are beyond its control.
Withholding documentation. A demand sent without supporting medical records or liability documentation, followed by a claim that the carrier failed to investigate adequately, allows the defense to argue that the carrier was denied the information necessary to evaluate the claim.
Withdrawal before the deadline. A demand that is withdrawn before its own stated deadline expires — based on the argument that some act or omission by the carrier constituted a rejection — is the classic set-up structure.
The Counter-Playbook: Neutralizing the Set-Up Defense
The strongest antidote to the set-up defense is a demand that is facially reasonable, well-documented, and transparently aimed at genuine resolution.
Use a reasonable deadline. Post-HB 837, demands with deadlines shorter than 30 days in non-emergency circumstances invite the § 624.155(5)(b) reduction argument. The exception is genuine emergencies — an imminent trial date, a pending statute of limitations, or documented facts that make extended delay prejudicial. Where a short deadline is justified by circumstances, the demand letter should explain why.
Document the documentation. A demand loaded with complete medical records, billing, wage loss documentation, police reports, and liability support eliminates the argument that the carrier was denied information necessary to evaluate the claim. Delivery confirmation should be retained. In Florida, serving a demand that satisfies "sufficient evidence to support the amount of the claim" under § 624.155(4)(a) simultaneously starts the 90-day safe harbor clock and defeats the documentation-withholding variant of the set-up argument.
Keep the release conditions within the carrier's control. The demand should specify a release of the insured, the insurer, and other parties that the carrier can produce through its normal settlement mechanics. Conditioning release on actions that require the carrier to produce non-parties creates a defense.
Document carrier conduct during the demand period. Any communication from the carrier during the demand period — requests for extension, inquiries about documentation, coverage reservations — should be responded to promptly and in writing. If the carrier requests an extension to investigate and the request is reasonable, a written grant of extension demonstrates the claimant's good faith and defeats the artificial-deadline argument.
Maintain the demand and honor its terms. A demand that is withdrawn before expiration based on minor procedural disputes invites the set-up accusation. Unless the carrier has clearly breached the demand's terms in a material way, the demand should run to its stated deadline before any bad faith assertion is made.
Discovery into Carrier "Set-Up" Training Materials
One of the most effective counter-moves against the set-up narrative is discovery into the carrier's own internal materials on how to respond to time-limited demands. Insurance companies routinely train adjusters and coverage counsel on how to identify, document, and defeat "set-up" demands. These training materials, guidelines, and internal communications are relevant to whether the carrier's response to a time-limited demand was a genuine effort to resolve the claim or a scripted strategy to preserve a set-up defense.
Targeted discovery requests should include:
- All training materials, guidelines, manuals, or communications addressing how adjusters should respond to time-limited demands
- All communications between the adjuster, supervisor, and coverage counsel during the demand period that reference the time-limited demand or any strategy for responding to it
- Any internal communications characterizing the demand as a "set-up" or referencing plaintiff counsel's motivation
- The carrier's internal claims handling guidelines for evaluating and responding to demands accompanied by liability support and medical documentation
In Allstate Indemnity Co. v. Ruiz, 899 So. 2d 1121 (Fla. 2005), the Florida Supreme Court held that in bad faith actions, all claim file materials up through the resolution of the underlying dispute are discoverable. Ruiz discovery applied to the carrier's evaluation and response to pre-suit demands encompasses the adjuster's diary entries, supervisor communications, and coverage counsel communications about how to handle the specific demand.
The power of this discovery is that it often reveals the internal narrative. A claims diary that says "counsel believes this is a set-up demand" while simultaneously showing that the adjuster never requested the medical records, never contacted the insured, and never consulted an expert has destroyed the set-up defense by showing that the carrier did not try to resolve the claim before applying its litigation label.
The Cure-Period Interaction
In Florida, the CRN cure period creates a post-demand, post-litigation opportunity for the carrier to remediate its conduct. The cure period interaction with the set-up defense works in both directions. A carrier that argues the claimant set up the excess judgment but then fails to cure the bad faith violation during the 60-day CRN period has demonstrated that its set-up defense is pretextual — if it genuinely believed its conduct was defensible, it had every incentive to resolve the case during the cure period.
Conversely, a carrier that tenders the full amount owed within the CRN cure period destroys the bad faith action regardless of how objectionable the pre-suit demand may have been. From a plaintiffs' perspective, this means the CRN must be filed at the right time — after the excess judgment is final and the damages are quantifiable — to maximize leverage. If the CRN is filed before the excess judgment is liquidated, the carrier may tender something less than the full exposure and claim a cure.
Documenting Carrier Conduct Systematically
The evidentiary value of systematic documentation cannot be overstated. The set-up defense thrives where the record is ambiguous — where the carrier can argue, with some plausibility, that it was doing its best to respond to a confusing or obstructive demand. The counter is a documented record that shows, in temporal sequence: (1) a complete, unambiguous demand with a reasonable deadline; (2) actual delivery confirmation; (3) prompt written responses to any carrier inquiries; (4) no withdrawal of the demand before the deadline; and (5) a clear record of the carrier's failure to tender within the deadline.
In conjunction with the claims file obtained through Ruiz discovery, this external record frames the jury's inquiry around the carrier's conduct rather than the plaintiff's tactics — which is exactly where Berges directed it.
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.