Feeling the Heat in Florida: Could Canadian Insurers Be Exposed to Florida’s Unfriendly Bad Faith Laws?

February 10, 2014

Authors: Sean M. McDonough, Brian Del Gatto, John W. Bussey III

Could a Canadian insurer that only insures Canadian residents still be sued for bad faith in Florida for failing to performing certain duties that must be performed in Florida? A recent Florida intermediate appeals court decision – Betzoldt v. Auto Club Group Insurance Company, (38 Fla. L. Weekly D2244 Fla. 2nd DCA October 25, 2013) – suggests that the answer could be “yes.” In Betzoldt, the court held that a Michigan insurer who only insured Michigan residents could still be sued for bad faith in Florida for failing to procure affidavits from the insured regarding the availability of other insurance, an act that could only be performed in Florida by delivering the affidavits to the plaintiff’s attorney who demanded them. The discussion in Betzoldt focused on personal jurisdiction and Florida’s long-arm statute.

The case arises from an accident involving a Michigan insured who injured another out-of-state woman in a car accident in Tampa. The injured woman made a claim against the Michigan resident, who was insured by a Michigan insurer. The Michigan insurer attempted to accept an offer to settle for policy limits. However, according to the complaint, it never procured or delivered to the injured party’s attorney affidavits from the Michigan insured confirming that no other insurance was available, nor did it advise the Michigan insured of the settlement offer. As a result of not receiving an affidavit of the insured, the injured party did not accept the offer to settle for policy limits, sued the Michigan insured and obtained a judgment of $459,381. Thereafter, the insured died and her personal representative sued the Michigan insurer for bad faith arising out of the excess judgement. The trial court granted the Michigan insurer’s motion to dismiss for lack of personal jurisdiction, and the insured’s representative appealed.

On appeal, the Second District Court of Appeals found that the failure of the Michigan insurance company to advise its insured of the plaintiff’s settlement offer was not an act that had to occur in Florida. As a result, Florida did not have personal jurisdiction over the Michigan insurance company due to that failure to act. However, there is a section of Florida’s long-arm statute allowing the exercise of jurisdiction over a defendant who breaches a contract in Florida by failing to perform acts that the contract required to be performed in Florida. On the facts, the Betzoldt court reasoned that because the act of delivering an affidavit of the insured necessarily had to be performed in Florida, that section of Florida’s long-arm statute applied.

The jurisdictional analysis did not end there, however. The court also had to find that the Michigan insurer had the requisite minimum contacts with the State of Florida to be subject to its jurisdiction. In contesting jurisdiction, the insurer argued that neither of the drivers was from Florida and that it never issued policies there. The insurer also argued that the settlement demands could have come from an attorney in any state and did not have to be sent by a Florida attorney. The Betzoldt court, however, rejected this argument, ruling that the determinative factor was not where the demand letter originated but rather where the Michigan insurer had to perform.

In so ruling, the Betzoldt court relied on a 2004 intermediate Florida appeals court decision, Virginia Farm Bureau Mutual Insurance Company v. Dunford. Dunford, which held that when an insurer agrees to exercise good faith in defending claims against its insureds anywhere in the United States, it should expect to be hailed into a Florida Court if it breached a duty of good faith in Florida, resulting in a Florida judgment against its insured.

Practice Pointer
The same analysis may apply to a Canadian insurance company, especially when the policy suggests that it would cover its Canadian insured when they traveled to Florida, whether for a brief vacation or an extended period, such as during the winter.

Admittedly, Betzoldt concerned Florida’s assertion of personal jurisidiction over persons residing in and businesses located in another state; thus it did not consider the extent to which Florida could exercise personal jurisdiction over companies located in another country, such as a Canadian insurer. Nevertheless, under the Betzoldt rationale, one could certainly envision scenarios where Florida’s long-arm statute is used to argue that a Canadian insurer could envision being “hailed” into a Florida court because of duties it has to Canadian insureds who frequently travel to Florida. The argument would be that (1) the Canadian insurer should foresee having to defend claims in Florida and (2) failure to perform acts under the Canadian insurance contract that Florida law required to be performed in Florida would constitute bad faith. This is particularly true when the Canadian policy suggests that it would cover its Canadian insured when they traveled to Florida – whatever the duration of their stay.

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