Insurance Coverage and Bad Faith

The Fourth District Broadly Construes Florida’s Non-Joinder Statute

The Fourth District Broadly Construes Florida’s Non-Joinder Statute

The Fourth District Court of Appeal addressed the joinder of a liability insurer to a lawsuit when judgment has been entered against its insureds in GEICO General Ins. Co. v. Williams, 38 Fla. Law Weekly D817, 2013 WL 1442157 (Fla. 4th DCA April 10, 2013), broadly interpreting Florida’s Non-Joinder Statute, section 627.4136, Florida Statutes.

The lawsuit arose from a fatal car accident.  GEICO insured the defendant driver and car owner.  The GEICO policy carried liability limits of $25,000 per person and $50,000 per accident.  In November 2009, final judgment was entered against the insureds in the amount of $250,000. Nearly four months later, GEICO tendered its $25,000 in partial satisfaction of the judgment. Sometime after January 2011, plaintiff moved to amend the judgment to include GEICO in order to recover interest owed on the $25,000 paid.

Plaintiff also moved to recover attorney’s fees and costs against the insureds based on an unaccepted proposal for settlement pursuant to section 768.79, Florida Statutes.  In April 2010, the trial court determined that plaintiff was entitled to attorney’s fees and costs based on the proposal for settlement.  In January 2011, the trial court determined the recoverable amount of fees and costs.  Thereafter plaintiff moved for entry of a judgment for fees and costs and to include GEICO on the forthcoming judgment.  

At a May 2011 hearing, GEICO appeared and argued that the trial court did not have jurisdiction to join GEICO to the judgments.  Specifically, GEICO argued that plaintiff’s motions were untimely and that the belated joinder would violate the provisions of section 627.4136, Florida Statutes, which allows a liability insurer to be joined “at the time judgment is entered or a settlement is reached.” 

The trial court allowed joinder.  GEICO moved for rehearing, making two substantive arguments: (1) that its policy did not provide coverage for plaintiff’s attorney’s fees and (2) that it could not be considered a “party” for purposes of the proposal for settlement under section 768.79, Florida Statutes. 

Before the trial court ruled on GEICO’s motion for rehearing, GEICO noticed its appeal.  The Fourth District ruled that GEICO abandoned its substantive arguments when it noticed the appeal before the trial court ruled on the motion for rehearing.  As a result, the Fourth District did not address GEICO’s substantive arguments.  In a concurring opinion, Judge Gross briefly discussed the substantive arguments and indicated that he agreed with GEICO’s positions.  

As to the joinder issues, the Fourth District affirmed the trial court and held that plaintiff’s motions to join GEICO were timely.  Although GEICO was joined to the initial damages judgment and the later judgment for fees and costs, the opinion focuses on the fee/cost judgment. 

The Fourth District began its analysis by noting that “GEICO is considered a party for the purpose of recovering taxable costs or attorney’s fees which would be recovered by the insured.” (Emphasis added).  In fact, the statute had been amended to specifically recognize that a liability insurer has a cognizable interest in recovering the fees and costs which it expends on behalf of the insured.  see section 627.4136(2), Florida Statutes.  The Fourth District suggested that the “plaintiff’s motions sought to add GEICO as a party in order to recover such fees and costs.” (Emphasis added).  That is a mistaken reading of plaintiff’s motions: GEICO was joined for purposes of plaintiff’s fees and costs; GEICO was not joined with respect to fees and costs it had expended on behalf of the insured.  As a result, section 627.4136(2), Florida Statutes, was inapplicable and should have provided no basis to join GEICO.

The decision primarily analyzed section 627.4136(4), Florida Statutes, which provides: “At the time a judgment is entered or a settlement is reached during the pendency of litigation, a liability insurer may be joined as a party defendant for the purposes of entering final judgment or enforcing the settlement ….”

GEICO argued that joinder was untimely because plaintiff’s motions were not filed at the time the damages judgment was entered.  GEICO argued that the statute provides one opportunity to join the liability insurer – when the initial judgment is entered.  The Fourth District rejected this argument and read the statute to allow joinder at the time any judgment is entered.

The Fourth District discussed Third District precedent which had reversed joinder of an insurer when the motion to join was filed months after the judgment was entered against the insured.  C.A. Seguaros Catatumbo v. Herrera, 812 So. 2d 576, 577 (Fla. 3rd DCA 2002).  The Fourth District found that Herrera stands for the proposition that the liability insurer cannot be joined to a judgment which has already become final.  The Fourth District found this proposition inapplicable to the fee/cost judgment since it had not become final before GEICO was joined.  According to the Fourth District, since plaintiff did not seek to reopen the fee/cost judgment, joinder was timely.

The Fourth District did not address how the Herrera proposition applied to the initial damages judgment. Based on the facts outlined, that judgment had apparently become final before GEICO was joined.  The damages judgment was entered in November 2009 but plaintiff moved in 2011 to join GEICO for purposes of interest owed.  Those facts suggest an attempt to reopen the damages judgment to this limited extent, which should not have been permitted. 

The GEICO v. Williams decision is limited to the question of when a motion to join the liability insurer must be made under section 627.4136.  According to this decision, when a separate judgment is entered in the case, a new opportunity to join the liability insurer is created.

The GEICO v. Williams decision did not address other joinder issues under section 627.4136.  The statute does not allow joinder when the liability insurer has denied coverage or defended the insured under a reservation of rights.  See section 627.4136(4), Florida Statutes.  This limitation is intended to preserve the separation of insurance coverage issues from the other issues in the lawsuit against the insured.  As demonstrated by the substantive issues raised and abandoned, GEICO had coverage issues under its policy.  As noted by the concurring opinion, GEICO argued that attorney’s fees are not “damages” or “costs” within the meaning of the policy.  Thus, GEICO was denying coverage for the part of the fee/cost judgment.  Under these circumstances where coverage issues exist, joinder should not be allowed.  In future cases, liability insurers should deny coverage for the attorney’s fees and object that, as a result, joinder is not authorized.