"Whether a surety has settled a claim in good faith or not, of course, depends on the particular facts of the case." Download Auto-Owners Insurance Co. v. Southeast Floating Docks, Inc. (11th Cir. Opinion Filed June 16, 2009).
In the Auto-Owners case, the Eleventh Circuit Court of Appeals held that a jury could find on the record evidence that, under Florida law, the surety settled a bond claim in bad faith. The record evidence, according to the Eleventh Circuit, included bases for jury findings that among other things investigation and assessments as to the merits and strengths of the bond claim were ignored, that settlement for the full amount of the bond claim did not match the strength of that claim, and the "secretive nature of the negotiations" indulged in by the surety to settle the bond claim. The Eleventh Circuit Court of Appeals held that although evidence of "an unreasonable and inadequate investigation and handling of a claim, standing alone, may be insufficient to support a finding of bad faith, the jury in the case also heard evidence to support an inference Auto-Owners had an improper and self-interested motive to settle a claim." Download Auto-Owners Insurance Co. v. Southeast Floating Docks, Inc. (11th Cir. Opinion Filed June 16, 2009).
The implications of this holding on the law of Insurer Bad Faith are pretty clear: Whenever a settlement is even remotely suspicious, and is used as the basis for a claim of Bad Faith against an Insurance Company which is why the underlying claim was settled as it was, that settlement is potentially subject to the legal standards imposed under the holding in this new Eleventh Circuit decision.
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