Michael King v. Government Employees Insurance Company

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-14794
Non-Argument Calendar
________________________
D.C. Docket No. 8:10-cv-00977-JSM-AEP
MICHAEL KING,
Plaintiff-Appellant,
PHYLLIS KING,
Plaintiff,
versus
GOVERNMENT EMPLOYEES INSURANCE COMPANY,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(September 4, 2014)
Before JORDAN, ROSENBAUM, and FAY, Circuit Judges.
PER CURIAM:
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Michael King appeals the judgment in favor of the Government Employees
Insurance Company (“GEICO”) on King’s claim against GEICO for bad-faith
failure to settle a claim, brought pursuant to Fla. Stat. § 624.155. A federal jury
returned a verdict finding that GEICO had not acted in bad faith. Upon entry of
judgment on the verdict, this appeal followed. After a careful review of the record
and the briefs of the parties, we affirm the judgment of the district court.
I.
Michael King was injured in a three-car accident on August 11, 2004. King
was driving a vehicle owned by Donna Buttermore, a passenger in the vehicle at
the time of the accident who was insured by GEICO, when he was rear-ended by a
car driven by Holly Hahto, who was insured by Liberty Mutual. At some point,
Hahto was rear-ended by a car driven by Kristin Livingston, who was insured by
USAA. The precise causal chain of events was disputed, but it is immaterial to our
resolution of this appeal. Hahto and Livingston were both cited for careless
driving; King was not. Buttermore reported the accident to GEICO the same day.
Immediately after the accident, King sought treatment and was diagnosed
with lumbar strain, contusion to the right knee and left elbow, and wrist strains.
Between the time of the accident and April 2006, King continued to receive
medical treatment, described by the district court as follows:
Over the next eighteen months, King presented to multiple physicians.
Dr. Rog, King’s primary physician[,] referred him to Dr. Fiore, an
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orthopedic specialist, who recommended physical therapy and
chiropractic care after reviewing a whole body bone scan and MRI
which indicated degeneration in the lumbar spine. King then treated
with Dr. Valdes, a chiropractor, and Dr. Garner, a neurologist. Dr.
Garner identified a herniated nucleus polposus at L4-5 that made him
a surgical candidate, as well as ascribing him with a 25% permanent
impairment rating. She referred him to the Laser Spine Institute
where he was recommended for a nerve root decompression surgery.
King returned to Dr. Fiore who disagreed with immediate surgical
intervention, rather suggesting that conservative care first be
exhausted, although recognizing the probable necessity of surgery in
the future. Finally, Dr. Turner, another orthopedic surgeon,
recommended a lumbar percutaneous discectomy.
On April 13, 2006, King’s attorney, Joseph R. Bryant, submitted offers of
settlement to each of the three insurance carriers implicated in the accident. The
offers recounted the medical treatment that King had received, resulting in
$19,515.15 in medical bills, and that he was likely to require in the future, and
advised that King had exhausted his Personal Injury Protection benefits with
GEICO. 1 King demanded the $100,000 liability policy limits from Liberty Mutual,
$50,000 of the $100,000 liability policy limits from USAA, and the full $25,000
underinsured/uninsured motorist (“UM”) policy limits from GEICO. King then
settled with USAA.
Walter Dunn, a GEICO claims examiner, reviewed King’s UM policy limits
demand and evaluated his claim. Dunn determined that the value of King’s claim
was within one of the tortfeasor’s $100,000 policy limits. After consulting with his
1
King was covered under Buttermore’s GEICO policy as a Class II insured.
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claims manager, Dunn advised King in a letter dated May 8, 2006, that GEICO
would not make an offer under the UM policy because the value of King’s claim
was within the “within the available tort limits.”
Approximately one month later, in June 2006, King filed his initial
complaint in the underlying litigation in Florida state court against GEICO and
Hahto. 2 At the same time, he filed a Civil Remedy Notice (“CRN”) with the
Department of Insurance asserting that GEICO had not attempted to settle his
claim in good faith. In response to the CRN, GEICO again denied King’s demand
for UM benefits. Later, in 2007, GEICO attempted to tender the full $25,000 UM
policy limits to King after receiving his medical records, which showed that King
had undergone a more serious surgery, but King did not accept the tender on the
basis that it was untimely. At some point in 2008, Liberty Mutual settled King’s
claim against Hahto for payment of its $100,000 policy limits and also paid an
undisclosed sum to settle a potential bad-faith claim against Liberty Mutual.
In July 2009, the UM claim was tried before a jury, which returned a verdict
in favor of King. The jury found that King had sustained damages in the amount
of $1,638,171.00,3 and determined that Hahto was fully at fault. The state court
then entered a partial final judgment against GEICO on July 28, 2009, reducing the
2
Michael King’s wife was a plaintiff throughout most of the proceedings but was
dismissed in the subsequent bad-faith action in September 2013. King is the only appellant.
3
This amount includes recovery on Mrs. King’s claim for loss of consortium. The
amount in favor of Michael King alone was $1,588,171.00.
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judgment amount to GEICO’s $25,000 UM policy limits, and reserved jurisdiction
over bad-faith claims. GEICO appealed, and the Florida Second District Court of
Appeal issued a per curiam affirmance without a written opinion.
In April 2010, King amended his complaint to add a claim for statutory bad
faith against GEICO under Fla. Stat. § 624.155. Later that month, GEICO
removed King’s bad-faith claim from state court to federal district court in the
Middle District of Florida. The district court then denied King’s motion to remand
the claim. The case proceeded to trial before a federal jury, which found that
GEICO had not acted in bad faith. King timely brings this appeal.
King raises four main contentions on appeal, arguing that the district court
erred by (1) failing to remand the bad-faith claim to state court because GEICO’s
notice of removal was not timely filed within one year of the commencement of
the UM action under 28 U.S.C. § 1446(b) (2010) (amended 2011) 4; (2) failing to
give preclusive effect, for purposes of determining damages for the bad-faith
claim, to the state-court jury verdict in excess of the policy limits; (3) failing to
give certain requested jury instructions; and (4) admitting evidence of Liberty
Mutual’s evaluation of King’s claim but refusing to admit evidence of King’s
settlement with Liberty Mutual.
4
Section 1446 was amended in 2011. See Pub. L. No. 112-63, 125 Stat. 758, § 103
(2011). The one-year limit is now codified at 28 U.S.C. § 1446(c)(1). Because this action was
commenced before the effective date of the amendments, we apply the older version of
§ 1446(b). See id., § 105(b).
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II.
We review de novo the denial of a motion to remand to state court. Moore v.
N. Am. Sports, Inc., 623 F.3d 1325, 1328 (11th Cir. 2010). The question whether
to give preclusive effect to a state court’s judgment is a question of law reviewed
de novo. Aldana v. Del Monte Fresh Produce N.A., Inc., 578 F.3d 1283, 1288
(11th Cir. 2009). A district court’s refusal to give a requested jury instruction is
reviewed for an abuse of discretion. Burchfield v. CSX Transp., Inc., 636 F.3d
1330, 1333 (11th Cir. 2011). A court abuses its discretion if “(1) the requested
instruction correctly stated the law, (2) the instruction dealt with an issue properly
before the jury, and (3) the failure to give the instruction resulted in prejudicial
harm to the requesting party.” Id. at 1333-34 (quotation marks omitted). We
review the district court’s evidentiary rulings for an abuse of discretion. Id. at
1333.
III.
A. Timeliness of Removal
Federal courts are courts of limited jurisdiction. A defendant’s right to
remove an action against it from state to federal court is created and defined by
statute, and removal statutes are strictly construed. Global Satellite Commc’n Co.
v. Starmill U.K. Ltd., 378 F.3d 1269, 1271 (11th Cir. 2004); Univ. of S. Ala. v. Am.
Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999). Consequently, all doubts about
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the propriety of removal should be resolved in favor of remand. See Miedema v.
Maytag Corp., 450 F.3d 1322, 1328-29 (11th Cir. 2006).
Section 1446 contains two time restrictions on removing cases from state
court. See 28 U.S.C. § 1446(b) (2010) (amended 2011). First, the notice of
removal must be filed within thirty days of the initial pleading showing that the
action is removable. Second, a case may not be removed on the basis of diversity
jurisdiction more than one year after “commencement of the action.” Id.
Here, GEICO removed the bad-faith claim to federal court in April 2010,
well over three years after King filed the initial complaint in state court in June
2006. As a result, King asserts, GEICO’s notice of removal was untimely, the
judgment should be vacated, and this action should be remanded to state court.
GEICO responds that its notice of removal was timely because the bad-faith claim
is a “separate and independent” cause of action under Florida law that was
separately removable from the underlying action for purposes of § 1446(b).
The federal district courts of Florida are divided on this question. In line
with King’s position on appeal, some courts have concluded that the action is
“commenced” when the initial complaint is filed because, even if the bad-faith
claim is a separate and independent claim, amending the complaint to add such a
claim does not start the action anew. See, e.g., Barroso v. Allstate Prop. & Cas.
Ins. Co., 958 F. Supp. 2d 1344 (M.D. Fla. 2013); van Niekerk v. Allstate Ins. Co.,
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No. 12-62368, 2013 WL 253693 (S.D. Fla. Jan. 23, 2013). On the other hand,
other courts have concluded, as the district court did in this case, that the action is
“commenced” for purposes of § 1446(b) once the bad-faith claim accrues and has
been filed, because a bad-faith claim is a “separate and independent” cause of
action under Florida law. See, e.g., Love v. Prop. & Cas. Ins. Co. of Hartford, No.
8:10-649, 2010 WL 2836172 (M.D. Fla. July 16, 2010); Lahey v. State Farm Mut.
Auto. Ins. Co., No. 8:06-1949, 2007 WL 2029334 (M.D. Fla. July 11, 2007).
Ultimately, however, we do not resolve this dispute, for reasons we explain below.
This Court previously has held that the timeliness of removal is a procedural
defect, not a jurisdictional one. See Moore, 623 F.3d at 1329; Pretka v. Kolter City
Plaza II, Inc., 608 F.3d 744, 751-52 (11th Cir. 2010); In re Uniroyal Goodrich Tire
Co., 104 F.3d 322, 324 (11th Cir. 1997) (referring to the one-year limit as
procedural, not jurisdictional). The Supreme Court and the other circuits to have
addressed the issue are in accord that the one-year limit on removal of diversity
cases is non-jurisdictional. See, e.g., Caterpillar Inc. v. Lewis, 519 U.S. 61, 75
n.13, 117 S. Ct. 467 (1996) (referring to a contention regarding the one-year limit
in § 1446(b) as a “nonjurisdictional argument”); Music v. Arrowood Indem. Co.,
632 F.3d 284, 287-88 (6th Cir. 2011) (holding one-year limit non-jurisdictional);
Ariel Land Owners, Inc. v. Dring, 351 F.3d 611, 614-15 (3d Cir. 2003) (same);
Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 516 (5th Cir. 1992) (same).
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Accordingly, removal outside the one-year limit in § 1446(b) is a non-
jurisdictional defect.
Because it does not affect the district court’s subject-matter jurisdiction,
“[a]ny untimeliness in the filing of the notice of removal in this case would be an
insufficient basis to vacate the judgment and remand for a new trial in state court.”
Moore, 623 F.3d at 1329. Relying on Caterpillar, Moore indicated that the critical
question on appeal, even if the district court erred in failing to remand based on the
untimeliness of removal, is whether the “the requirements for diversity jurisdiction
were met by the time the district court entered judgment.” Id. If the district court
had subject-matter jurisdiction upon entry of judgment, the untimeliness of
removal is not “fatal to the ensuing litigation,” and we may review the merits of
the case on appeal. See id. at 1329-30.
In this case, there is no dispute that the district court had diversity
jurisdiction both at the time of removal and when the court entered judgment. 5 See
28 U.S.C. § 1332. Because the court had subject-matter jurisdiction and the bad-
faith claim was fully tried in federal court, “considerations of finality, efficiency,
and economy become overwhelming.” Caterpillar, 519 U.S. at 74, 117 S. Ct. 467.
Accordingly, we do not decide the question of whether the district court erred in
failing to remand the case, even though King timely objected to removal, because
5
GEICO’s notice of removal alleged that King was a citizen of Florida and GEICO was
a Maryland corporation with its principal place of business in Maryland.
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even if it did, any untimeliness is an insufficient basis to vacate the judgment and
remand for a new trial. Moore, 623 F.3d at 1329.
B. Effect of the State-Court Excess Jury Verdict
King next contends that the district court erred by failing to give preclusive
effect to the state-court jury verdict in his favor on the underlying UM claim. For
purposes of determining damages on his bad-faith claim, he asserts, the district
court was bound by the state-court jury verdict through collateral estoppel.
Therefore, the district court erred by requiring King to litigate the issue of the
“total amount of damages” during the bad-faith trial because, King argues, that
issue had already been “fully litigated and determined” in the underlying action.
Florida law recognizes a statutory cause of action for a “first-party” bad-
faith claim, independent of any contractual obligation, by an insured against the
insured’s own insurer for not attempting to settle claims in good faith. Fla. Stat.
§ 624.155; see State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55, 58-59
(Fla. 1995). To state a claim for bad faith, an insured must allege that there has
been a determination of the existence of liability on the part of the uninsured or
underinsured tortfeasor and of the extent of the plaintiff’s damages. See Imhof v.
Nationwide Mut. Ins. Co., 643 So. 2d 617, 618-19 (Fla. 1994); Blanchard v. State
Farm Mut. Auto. Ins. Co., 575 So. 2d 1289, 1291 (Fla. 1991).
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Under Fla. Stat. § 627.727(10), “damages in first-party bad faith actions are
to include the total amount of a claimant’s damages, including any amount in
excess of the claimant’s policy limits without regard to whether the damages were
caused by the insurance company.” Laforet, 658 So. 2d at 60. 6 As described by
the Florida Supreme Court in Laforet, the purpose of § 627.727(10), which was
enacted in 1992, was to make insurers found to have acted in bad faith liable not
only for “damages proximately caused by the bad faith,” but also for “a penalty
consisting of the entire amount of the excess judgment without regard to proximate
causation.” Id. at 60-61. Thus, an insured prevailing in a bad-faith action may
recover “any amount in excess of the claimant’s policy limits awarded by a judge
or jury in the underlying claim.” Id. at 57-58.
King contends that the legislative purpose in enacting § 627.727(10) was to
make the excess verdict in an underlying UM action binding as to damages in a
subsequent bad-faith action. GEICO disagrees, arguing that the excess verdict is
not a “judgment” that could be binding through collateral estoppel, because
judgment in a UM action cannot exceed the policy limits, which, in this case, was
$25,000. The district court found that giving preclusive effect to the underlying
6
Section 624.155 also has a damages provision: “The damages recoverable pursuant to
this section shall include those damages which are a reasonably foreseeable result of a specified
violation of this section by the authorized insurer and may include an award or judgment in an
amount that exceeds the policy limits.” Fla. Stat. § 624.155(8).
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excess verdict would deprive GEICO of due process because, under Florida law,
GEICO could not have appealed the excess verdict.
The parties have not identified any controlling authority providing an answer
to the question King poses, and our independent review of Florida law is similarly
inconclusive. Although an excess jury verdict in an underlying UM action appears
to be recoverable in a subsequent first-party bad-faith action, Florida courts have
not clarified how those damages are to be found or awarded. See Laforet, 658 So.
2d at 61; Fla. Stat. § 627.727(10).
Nevertheless, we need not resolve the ambiguity with respect to damages
because Florida law is clear that the insurance company must be “found to have
acted in bad faith” for damages to be awarded. See Laforet, 658 So. 2d at 61;
Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783, 785 (Fla. 1980) (to
recover damages, an insured “must first establish by legally sufficient evidence
that the insurance company acted in bad faith”). Here, the jury found that GEICO
did not act in bad faith in failing to settle King’s claim. Therefore, no damages
could have been awarded to King for GEICO’s alleged bad-faith failure to settle.
We are not persuaded by King’s speculative assertion that he was prejudiced
on the merits of the action because, by being required to litigate the issue of
damages, the federal jury might have based its verdict on facts inconsistent with
the state-court jury. The matter in issue in the district court—whether GEICO’s
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failure to settle was in bad faith—was not at issue in the state-court trial. Nor
could it have been under Florida law since a bad-faith claim is a separate cause of
action brought under § 624.155, which cannot be brought until after the conclusion
of the underlying UM action on liability, which, in turn, is based on the insurance
contract. Blanchard, 575 So. 2d at 1291. Florida law therefore specifically
contemplates separate and successive jury trials in contested cases such as this one.
See Gutierrez, 386 So. 2d at 785 (“The question of failure to act in good faith with
due regard for the interests of the insured is for the jury.”). In view of the related
and intertwined nature of the two causes of action required to be tried separately, it
is inescapable that some repetition of evidence must necessarily occur. But the
fact that the evidence offered at both trials substantially overlapped does not mean
that the relevant issues were the same or that the jury in the second trial was asked
to find facts established by the first jury.
Moreover, even if the district court erred in allowing evidence relating to the
amount of damages, any such error was harmless. The district court instructed the
jury that the first issue for its determination was “whether GEICO acted in bad
faith in handling the claim of Michael King for uninsured motorist benefits,” and,
if its verdict was for GEICO, the jury “will not consider the matter of damages.”7
7
The court also instructed the jury, with respect to damages, that “the August 11th,
2004, motor vehicle accident was the legal cause of loss, injury, or damage to Michael King,”
“Holly Hahto was 100 percent liability for the damage, loss, or injuries sustained by Michael
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See Laforet, 658 So. 2d at 63. “We presume a jury follows its instructions.”
Gowski v. Peake, 682 F.3d 1299, 1315 (11th Cir. 2012). The jury’s verdict
answered that first question, and only that first question, in the negative: King did
not prove by a preponderance of the evidence that GEICO acted in bad faith in
failing to settle King’s claim. Consequently, any error committed by the district
court in requiring King to litigate damages was harmless under the circumstances
because there is no indication that it had any effect on the outcome of the case.
The jury found that GEICO had not acted in bad faith, so no damages could have
been awarded. We therefore affirm on this issue.
C. Requested Jury Instructions
King next contends that the district court erred in failing to give two
requested jury instructions. The first requested instruction concerned recoverable
damages under § 627.727(10). As explained above, we find any error with respect
to this issue to be harmless because the jury did not reach the issue of damages.
The second requested instruction sought to instruct the jury on negligence as it
related to the insurer’s duty of care in these circumstances:
Because the duty of good faith involves diligence and care in the
investigation and evaluation of the claim against the insured,
negligence is relevant to the question of good faith.
King in the August 11th, 2004, motor vehicle accident,” and “Michael King sustained a
permanent injury within a reasonable degree of medical probability as a result of the August
11th, 2004, motor vehicle accident.”
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The instruction went on to define negligence. The district court gave the following
instruction on bad faith:
Bad faith on the part of an insurance company is failing to settle a
claim when, under all the circumstances, it could and should have
done so, had it acted fairly and honestly toward its insureds and with
due regard for their interests.
This is the standard instruction in Florida for a claim based on an insurer’s bad-
faith failure to settle. See Florida Standard Jury Instruction 404.4.
In support of his requested instruction, King cites to Gutierrez, 386 So. 2d at
785, and Berges v. Infinity Ins. Co., 896 So. 2d 665 (Fla. 2004). In relevant part,
Berges explained an insurer’s duty to its insured, with respect to third-party claims,
as follows:
An insurer, in handling the defense of claims against its insured, has a
duty to use the same degree of care and diligence as a person of
ordinary care and prudence should exercise in the management of his
own business. . . . The insurer must investigate the facts, give fair
consideration to a settlement offer that is not unreasonable under the
facts, and settle, if possible, where a reasonably prudent person, faced
with the prospect of paying the total recovery, would do so. Because
the duty of good faith involves diligence and care in the investigation
and evaluation of the claim against the insured, negligence is relevant
to the question of good faith.
Berges, 896 So. 2d at 668-69 (quoting Gutierrez, 386 So. 2d at 785 (citations
omitted)). Without the negligence instruction, King contends, “the jury was not
provided an integral piece of the matrix to analyze GEICO’s conduct.”
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The standard for determining insurer liability in this case is bad faith, rather
than negligence, but “consideration may be given to the negligence of the insurer
in determining whether it has breached its duty to negotiate in good faith.”
Thomas v. Lumbermens Mut. Cas. Co., 424 So. 2d 36, 38 (Fla. Dist. Ct. App.
1982); see also Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 483 F.3d
1265, 1276 (11th Cir. 2007). Therefore, at least the first part of King’s requested
instruction correctly stated the law regarding an issue properly before the jury.
Nevertheless, we cannot say, considering the totality of the circumstances,
that the failure to give the requested negligence instruction resulted in prejudicial
harm to King. See Burchfield, 636 F.3d at 1334. The jury was properly instructed
on the standard for bad faith, which King does not contest. While King’s
proposed instruction may have assisted the jury in deciding the question of bad
faith, it also may have had the opposite effect of confusing the jury by implying
that the jury could find GEICO liable even if it found GEICO only negligent in
failing to settle.
King’s reliance on Tran v. Toyota Motor Corp., 420 F.3d 1310 (11th Cir.
2005), and Palm Beach Atlantic College, Inc. v. First United Fund, Ltd., 928 F.2d
1538 (11th Cir. 1991), to suggest that reversal is required because the jury
instruction did not discuss negligence is likewise misplaced. Unlike in Tran and
Palm Beach Atlantic College, Inc., the district court here did not fail to give an
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instruction on an independent basis for liability. Nor did the court misstate the
applicable burden of proof. The court’s instruction on bad faith also did not
preclude King from making relevant arguments regarding GEICO’s duty to
investigate and evaluate King’s claim. Accordingly, the district court did not
abuse its discretion in refusing to give the negligence instruction.
D. Admission of Evidence
Finally, King argues that the court erred in selectively admitting evidence
about the handling of King’s claim by Liberty Mutual. During the trial, the district
court allowed GEICO’s counsel to elicit testimony from its employees that Liberty
Mutual’s evaluation and adjustment of King’s claim were consistent with
GEICO’s. But the court did not allow King’s counsel to elicit testimony that
Liberty Mutual settled King’s claim by paying its policy limits as well as bad-faith
damages. A district court’s evidentiary ruling will not be overturned “unless the
moving party establishes a substantial prejudicial effect.” Burchfield, 636 F.3d at
1333 (quotation marks omitted). We afford broad discretion to the district court’s
assessment of the probative value of the proffered evidence weighed against other
factors counseling against admissibility. Sprint/United Mgmt. Co. v. Mendelsohn,
552 U.S. 379, 384, 128 S. Ct. 1140 (2008).
The testimony regarding Liberty Mutual’s evaluation and adjustment of
King’s claim was probative of GEICO’s assessment of the claim and its stated
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reason for denying King’s initial settlement offer: that the value of King’s claim
was within the available policy limits of the tortfeasor’s insurance company. See
USAA Cas. Ins. Co. v. Shelton, 932 So. 2d 605, 608 (Fla. Dist. Ct. App. 2006)
(“The purpose of [UM coverage] is to provide a source of recovery when the
insured has been injured by a tortfeasor with insufficient or no insurance.”). By
contrast, testimony to the effect that Liberty Mutual settled King’s potential bad-
faith claims had little if any relevance to the question of whether GEICO acted in
bad faith, and it also had the potential to mislead the jury and unfairly prejudice
GEICO. King has not shown that either evidentiary ruling had a substantial
prejudicial effect, so we defer to the district court’s evidentiary rulings.
VI.
For the foregoing reasons, we affirm the judgment of the district court.
AFFIRMED.
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