In Betzdolt v. Auto Club Group Insurance Company, a Michigan resident was allowed to proceed with a bad faith claim against her insurer in Florida, even though the insurer did not sell policies in Florida, did not deliver policies in Florida, and was not authorized to write insurance policies in Florida. Betzdolt arises in the context of a third-party liability case (car accident) in which the Michigan resident was being defended by the Michigan insurer in Florida.
The Underlying Case
Hazel Dawdy (insured), a Michigan resident, purchased auto insurance from Auto Club Group Insurance Company (insurer), an insurer issuing policies exclusively to Michigan residents. While in Florida, the insured was involved in an auto collision with Helen Wesley (underlying claimant), a Pennsylvania resident. Underlying claimant hired Florida counsel, who made a policy limits settlement demand. As part of this demand and as a condition to settlement, underlying claimant’s counsel demanded that the insured execute an affidavit affirming she had no other insurance that would respond to underlying claimant’s claim. Insurer attempted to settle with underlying claimant by agreeing to tender insured’s policy limits of $100,000, but included with the tender an affidavit from an insurer’s claims manager stating the insurer was “aware of no other coverage that would apply to the claim.” Thus, even though the insurer agreed to tender the $100,000 policy limit, the absence of an affidavit from the insured caused underlying claimant’s counsel to reject the allegedly imperfect settlement acceptance and file suit. The claim proceeded to trial, which resulted in a judgment against the insured for $459,000.
The Trial Court Dismisses the Claim Against Insurer on Jurisdictional Grounds
As a result of the verdict in excess of her limits, insured sued insurer in Florida, and included a claim for bad faith. In response, insurer filed a motion to dismiss insured’s bad faith claim on jurisdictional grounds. Specifically, insurer argued that it had no minimum contacts with Florida sufficient to allow jurisdiction by the Florida courts. Insurer pointed out that it was not a Florida corporation, that it did not sell policies to Florida citizens, and that insured was not a Florida citizen. Insured countered that jurisdiction was proper as insurer failed to defend her properly in a Florida action. The trial court agreed with insurer and dismissed the case.
The Appellate Court Reverses the Trial Court and Reinstates the Bad Faith Claim
The Florida Second District Court of Appeals reversed and reinstated the case. In doing so, the appellate court first looked to the Florida long-arm statute, Section 48.193 Florida Statutes (2012), which provided two potential bases for jurisdiction. The appellate court held that the first basis, subsection (1)(d), did not provide jurisdictional authority, as that subsection applied only to insurers that agreed to insure “any person, property or risk located within [Florida] at the time of contracting.” Because insured was a Michigan resident, the appellate court concluded that insurer did not agree to insure a person or risk in Florida at the time of contracting.
The appellate court, however, held that the second basis, subsection (1)(g), provided jurisdictional authority. This subsection provides jurisdiction over defendants who “breached a contract by failing to perform acts required by the contract to be performed in [Florida],” e.g., complaints against an insurance carrier arising out of the carrier’s conduct in Florida. The court reasoned that insurer was required to defend insured in Florida and to deliver to opposing counsel the affidavit of no further insurance in Florida with its policy limits settlement acceptance.
The appellate court also determined that the exercise of jurisdiction did not offend the traditional minimum contacts analysis. The appellate court conducted a specific jurisdiction analysis, holding that insurer’s liability in Florida arose from its failure to include the affidavit with the settlement acceptance. Insurer argued that it never anticipated being subject to suit in Florida, as it insured only Michigan residents. Insurer further argued that the need to deliver an affidavit in Florida was merely coincidental, as underlying claimant’s lawyer could have been located anywhere in the country. The appellate court rejected this argument, pointing to insurer’s policy that covered accidents in all 50 states and for which insurer presumably charged a premium. The appellate court concluded that if insurer wished to avoid being sued in Florida, then it could have excluded any duty to act in Florida.
Distinguishing Betzoldt from Other Cases
In reaching its conclusion, the appellate court distinguished another Florida case, Meyer v. Auto Club, which held that Auto Club was not subject to Florida’s jurisdiction in the context of a first-party claim. Meyer involved a foreign resident who brought a PIP claim that did not arise out of Auto Club’s conduct in Florida; additionally, payment of the PIP claim did not have to occur in Florida. The first-party/third-party distinction was important, as the appellate court believed insurer should reasonably foresee having to defend lawsuits in Florida, and therefore foresee potential bad faith liability arising from the alleged mishandling of the defense of those lawsuits.
Implications of Betzoldt
Betzoldt suggests that any carrier obligated to defend claims in Florida should foresee being subject to liability in Florida arising from the provision of that defense, even when neither the insurer nor the insured has any particular connection with Florida. Non-Florida insurers providing a “fifty states policy,” even when the policyholders are located principally or exclusively outside Florida, must anticipate liability in Florida arising from third-party matters, including allegations that the insurer breached its policy obligations by failing to provide a proper defense.