The U.S. Court of Appeals for the 11th Circuit has ruled that the lower court erred when it dismissed a complaint made by the insured against its insurer for alleged bad faith for failure to settle a personal injury action. The district court determined that the four-year statute of limitation that governed intentional torts applied in the case. The case is Baranowski v. Geico Gen. Ins. Co., No. 17-12122, 2018 U.S. App. LEXIS 525 (11th Cir. Jan 9, 2018).
Years ago, Waldemar Baranowski was involved in a car accident that caused Jiri Renotierova to be ejected from the passenger seat of Baranowski's car. Renotierova and his wife sued Baranowski for the serious injuries that Renotierova suffered due to the ejection. Baranowski had a liability insurance policy with Geico at the time of the accident, and subsequently informed Geico of the incident. Geico failed to settle the dispute and the jury decided for Renotierova on claims of negligence and loss of consortium. Subsequently, Baranowski filed a complaint against Geico for acting in bad faith by failing "to accept a reasonable offer and opportunity to settle within the policy window when it could have, and should have, done so", failing "to exercise reasonable care and good faith in the investigation, negotiation, and attempted settlement of the claim" as well as failure to advise of settlement opportunities and failure to warn Baranowski of the possibility of an excess judgment.
Geico moved to dismiss the complaint under the four-year statute of limitations that was applicable in cases of negligence in Florida. Baranowski argued that the statute of limitations that should be applicable in this case was five years because the complaint of bad faith refusal to represent arose in the insurance contract.
The 11th Circuit Court of Appeals determined that Baranowski's complaint of bad faith arose out of a contract, that between Baranowski and his insurance company, instead of an action in a tort. The court noted that "most states treat [an action for bad faith" as a tort claim or as a combination of a tort and a contract], but in Florida, bad faith is treated as a matter of contract. As the statute of limitations for "a legal or equitable action on a contract" is five-years, and Florida views cases of bad faith as a matter of contract, the application of the four-year statute of limitations in this case was an error, and Baranowski filed his law suit against Geico within the necessary time period.
Editor's Note: Insurance companies owe their insureds a duty of good faith and fair dealing. If an insurance company violates the covenant of good faith and fair dealing, the insured may sue the insurer for the tort as well as for a standard breach of contract. In this case, the court applied the longer statute of limitations term, in favor of the insured.