No Breach of Contract for Excess Carrier’s Failure to Settle Despite $45M Verdict
The United States District Court for the Southern District of Florida, applying Florida law, held that neither the cooperation clause nor the duty to defend includes a duty to settle. Therefore, the district court granted the insurer’s motion for summary judgment with regard to the breach of contract claims against it for failure to settle the underlying action.
The coverage dispute stems from a lawsuit filed by a personal representative of the Estate of Jonathan R. Astaphan against Ranger Construction Industries, Inc. (“Ranger”) following a fatal traffic accident. A jury awarded the estate $20 million in compensatory damages and $25 million in punitive damages. Ranger sued its excess insurer, Allied World National Assurance Company (“Allied”), for breach of contract and declaratory relief based on its failure to cooperate in the settlement of the Astaphan suit. Ranger alleged Allied failed to initiate settlement discussions and/or refused to accept reasonable settlement offers to resolve the Astaphan suit before trial.
Allied moved for summary judgement on the breach contract claim, arguing that the duty to defend does not include a duty to settle and there is no duty to settle under its policy. Allied also argued the breach of contract claim was included within Ranger’s bad faith claim.
Ranger’s breach of contract claim relied on the policy’s cooperation clause, which states in part that “the insured, the underlying insurer and the company shall cooperate in the investigation, settlement or defense of such claim, suit or proceeding.” The opinion was not clear as to whether and why Allied was defending, and it did not provide facts regarding the details of the settlement demands and offers. Ranger proposed that the term “cooperate” meant Allied must make and accept settlement offers within its policy’s $25 million per occurrence policy limits. The district court disagreed and granted Allied’s motion for summary judgment with respect to the breach of contract claim.
The district court noted that typically the purpose of the cooperation clause is to protect the insurer and to require the insured to assist the insurer in investigating and defending a claim. “Specifically, the cooperation clause imposes a mutual duty among, [Allied], Ranger and the underlying insurers in the investigation, settlement or defense of the claim, suit or proceeding.” There is no requirement that Allied initiate settlement negotiations or accept settlement offers.
The district court also rejected the assertion that the duty to defend includes a duty to settle claims. Under Florida law, “an insurance company’s duty to defend an insured is determined solely from the allegations in the complaint against the insured, not by the facts of the cause of action against the insured, the insured’s version of the facts or the insured’s defenses.” To satisfy its obligation, an insurer must provide an “adequate defense” and appoint “competent and qualified” counsel. “Clearly, by taking the case to trial, [Allied] satisfied its duty to defend [Ranger].”
According to the district court, if anything, the failure to settle by Allied would constitute a bad faith claim because Ranger’s claim regarding the failure to settle requires an inquiry into the totality of the circumstances including, among other things, any settlement discussions and the actions of the primary and other excess insurers carriers. “Given that the breach of contract claim is essentially a bad faith claim, summary judgment on the breach of contract claim is appropriate.” In making its ruling, the district court also reserved summary judgment with respect to arguments pertaining to punitive damages. Ranger Construction Indus., Inc., v. Allied World Nat’l Assurance Co. Case No. 17-81226-CIV-Marra/Matthewman (S.D. Fla. June 11, 2019).