Hans E. Kivi and Carol A. Kivi, Individually and as Husband and Wife v. Nationwide Mutual Insurance Company, a Foreign Corporation, Defendant

Citations: 695 F.2d 1285; 35 Fed. R. Serv. 2d 1363; 1983 U.S. App. LEXIS 31351Docket: 81-5687

Court: Court of Appeals for the Eleventh Circuit; January 17, 1983; Federal Appellate Court

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In a non-jury trial, the United States Court of Appeals for the Eleventh Circuit affirmed a judgment against Nationwide Mutual Insurance Company, finding it acted in bad faith by not settling the Kivis' claim for $15,000, which was within its policy limits. The Kivis suffered severe injuries in an automobile accident involving a vehicle insured by Nationwide. Despite both insurance adjusters believing the claim should be settled, internal delays and a lack of communication prevented a timely resolution. On July 28, 1977, the Kivis' attorney sent a 'bad faith' letter demanding the policy limit, which Nationwide received on July 29. After a lack of response, the Kivis filed a lawsuit on October 3, 1977. Nationwide eventually expressed willingness to settle, but no agreement was reached before the case went to trial. The state court awarded Hans Kivi $350,000 and Carol Kivi $25,000, which led to an amended judgment reducing the amounts by their respective policy limits. The district court ruled in favor of the Kivis, awarding damages exceeding the policy limits, $3,000 in costs, and $70,000 in attorney's fees. The appellate court upheld the damages and attorney's fees but reversed the award of $1,000 for expert witness fees.

Nationwide does not contest the district court's factual findings but argues that the court failed to address Hartford's delays. The court determined Hartford's role as an excess carrier did not impact Nationwide's potential bad faith. Nationwide contends that if Hartford's actions had been considered, it would show that Nationwide was denied a timely opportunity to participate in a reasonable policy limits settlement. However, Nationwide’s argument incorrectly assumes that it could not settle without Hartford's involvement, despite being the primary insurer responsible for good faith negotiations. The primary insurer is obligated to negotiate settlements effectively, independent of the excess carrier's actions.

Nationwide also claims that the Kivis' settlement offer was invalid because it did not release certain parties or address outstanding medical liens exceeding both insurers' policy limits. Yet, the court rejects this narrow interpretation, stating that the presence of an excess insurer and the insured's non-judgment proof status means that a lack of a settlement offer within policy limits does not determine the primary insurer's bad faith. Additionally, Nationwide's assertion that the offer's deficiencies prevent it from being valid is undermined by the fact that Nationwide did not raise these issues with the Kivis or indicate that they were insurmountable obstacles to a settlement. Had Nationwide opted to settle for policy limits, it could have arranged for the resolution of Rua's liability and the subrogation claims, thereby mitigating further liability.

The district court's findings and conclusions are upheld as they are substantiated by evidence, reflecting the true nature of the case. Nationwide failed to fulfill its good faith duty to inform the insured about settlement opportunities, potential outcomes, and risks of excess judgment, as established in precedent cases. The court’s consideration of Nationwide's negligence in settlement negotiations was appropriate.

Regarding the $70,000 attorney's fee award, Nationwide argues it is excessive, claiming that only fees incurred after an assignment executed just before trial should be compensable. The court disagrees, stating that accepting Nationwide’s argument would undermine the statute's purpose of encouraging prompt payment of valid claims. The law allows attorney's fees for third parties claiming coverage via assignment, and the court found no basis to limit the fee award to a short trial period, as substantial preparatory work was documented.

The court also rejected Nationwide's challenge against the taxation of expert witness fees, reaffirming that such fees cannot exceed statutory limits under 28 U.S.C. Sec. 1821.

In Henkel v. Chicago, St. Paul, Minneapolis, Omaha Railway, the Supreme Court established that expert witness fees beyond statutory provisions cannot be taxed as costs in federal courts, as specified in 28 U.S.C.A. Sec. 1821. This principle was reiterated in Green v. American Tobacco Company and United States v. Kolesar, affirming that only statutory attendance fees, mileage, and subsistence allowances are recoverable. The court distinguished Henning v. Lake Charles Harbor and Tunnel District, where Louisiana law allowed for the taxation of expert fees, asserting that such provisions are not applicable under Florida law, which does not grant a substantive right to recover expert witness fees. The district court's decision to tax costs for expert fees exceeding the statutory limits was deemed erroneous. The judgment awarding damages and attorney's fees was affirmed, while the taxation of excess expert witness fees was reversed and remanded for re-taxation. Additionally, a demand letter from the Kivis to Nationwide Insurance Company indicated a request for full policy limits, emphasizing the substantial medical expenses and potential for excess damages due to bad faith if settlement was not reached. Florida Statute Sec. 627.428(1) allows for attorney's fees to be awarded to an insured who prevails, which applies to the Kivis as assignees.