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Cawthorn v. Auto-Owners Insurance Co.

United States District Court, M.D. Florida, Orlando Division

April 27, 2018



          JOHN ANTOON II United States District Judge.

         David Madison Cawthorn (Cawthorn) filed a personal injury lawsuit in Florida circuit court[1] against his friend Bradley Ledford (Ledford) arising from Ledford's negligent operation of his automobile. Cawthorn settled his claim with Ledford. As a part of that settlement, Ledford assigned to Cawthorn his right to sue his insurance carrier-Auto-Owners Insurance Company-for failing to initiate timely settlement negotiations with Cawthorn. Cawthorn now sues Auto-Owners seeking damages, claiming Auto-Owners' failure constituted bad faith. Auto-Owners moved for Summary Judgment (Doc. 74) and Cawthorn filed a Response (Doc. 89).[2] The existence of an excess judgment or the functional equivalent thereof is an element essential to a third-party bad faith claim. Cunningham v. Standard Guar. Ins. Co.. 630 So.2d 179, 181 (Fla. 1994) ("[T]he essence of a third-party bad faith cause of action is to remedy a situation in which an insured is exposed to an excess judgment . . . ."). Because Cawthorn fails to present a cognizable third-party bad faith claim under Florida law, Auto-Owners' Motion for Summary Judgment must be granted.

         I. Facts

         On April 3, 2014, Cawthorn and his friend were returning home to North Carolina from a spring break vacation in Florida. Ledford was driving on Interstate 4 near Daytona Beach, Florida, in a 2007 BMW X3 owned by his father's (Ledford Sr.) business, Bob Ledford's RV & Marine, Inc. ("Bob's RV"). In route, Ledford fell asleep and crashed the car into a concrete barrier. Ledford was not injured. But Cawthorn, who was asleep in the passenger seat with his feet on the dashboard, was not so fortunate. Emergency personnel airlifted Cawthorn from the scene of the accident to Halifax Hospital trauma center in Daytona Beach. (Ex. 6 to Pitman Dep., Doc. 56[3]). Cawthorn suffered serious injuries resulting in paralysis from the waist down. When the accident occurred, Cawthorn was 18 years old and Ledford was 17.

         At the time, Auto-Owners insured Bob's RVwith a $1 million Garage Liability Policy and a $2 million Commercial Umbrella Policy.[4] (Ex. 13 to Pitman Dep.). Ledford was a scheduled driver under the Garage Liability Policy. (Id.).

         a. Auto-Owners' Pre-Suit Contact with Ledford and Cawthorn

         Auto-Owners received notice of the accident on April 4 in the company's South Carolina office, and on April 7 that office transferred the claim to Pamela McLean, the company's adjuster in Ocala, Florida. (Exs. 59 & 60 to McLean Dep., Doc. 57). The next day, McLean placed a telephone call to Ledford Sr. but got no answer, and because the phone mailbox was full, McLean could not leave a message. (Ex. 2 to Pitman Dep.).

         On April 17, McLean sent a letter to Cawthorn requesting that he sign an enclosed form authorizing the release of his medical bills and records. (Doc. 81-24). The letter stated: "Please fill this form out and return it to our office in the enclosed envelope so we can retrieve any information we need to help process your claim We look forward to working with you toward an amicable conclusion." (Id. That same day, McLean received a police report describing the accident, causing her to conclude that Bob's RV and Ledford were at fault for Cawthorn's injuries. (McLean Dep. at 132:9-25; Exs. 2 & 5 to Pitman Dep. at 31-35, 63-65). On April 21, McLean increased the reserve to $250, 000. (McLean Dep. at 150:23-151:19).

         McLean spoke to Ledford Sr. and his girlfriend by telephone on April 28. During that conversation, Ledford Sr. described some injuries to McLean. Ledford Sr. reported that Cawthorn was "paralyzed with a spinal cord compromise at T-11, " had a fractured pelvis and two broken ankles, and had lost a kidney. (McLean Dep. at 156:13-157:12). Ledford Sr. told McLean there was a social media page called "Prayers for Madison 2014" that included updates on Cawthorn's condition. (Ledford Sr. Dep., Doc. 58, at 39:14-40:13; Doc. 62-12). That same day, McLean emailed Melinda Pitman at Auto-Owners' home office, reciting the details of her conversation with Ledford Sr. At that point, McLean opened a reserve of $3 million, the policy limits. (Pitman Dep. at 106:10-20, 120:7-10; Doc. 62- 12).

         Cawthorn's father (Cawthorn Sr.) claims that he received McLean's April 17 letter with the enclosed consent form to release medical information on April 29. (Cawthorn Sr. Dep., Doc. 55, at 68:24-70:4; Ex. 65 to McLean Dep.). Cawthorn Sr. signed Cawthorn's name and indicated his relationship to Cawthorn as "parent" and returned it to McLean. McLean telephoned Halifax Hospital to request Cawthorn's medical records on May 7, 2014, but the hospital refused to release the records until Cawthorn was discharged. (McLean Dep. at 189:7-190:4). The next day-May 8-Halifax Hospital transferred Cawthorn to Shepherd Center in Atlanta, Georgia. (Cawthorn Sr. Dep. At 79:11-16). McLean again contacted Halifax Hospital on May 14, this time faxing the medical release signed by Cawthorn Sr. with a cover letter. (Ex. 66 to McLean Dep.). The cover letter stated:

Please let me know when these records are ready so that I can pick them up. If we need to prepay, let me know so that we can bring a check with us. I appreciate your help. We are trying to get this young man some help and need the records as soon as possible to do so.

(Id.). McLean's plans to pick up the records were unsuccessful. On May 15, Halifax again told McLean it could not release Cawthorn's medical records, this time explaining that because Cawthorn was an adult, his father could not authorize consent on Cawthorn's behalf. (Ex. 66 to McLean Dep.; McLean Dep. at 194:14-195:3).

         By May 27, 2014, McLean, having reason to believe that damages might exceed the $3 million policy limits, renewed her effort to obtain the medical records by writing a letter to Cawthorn's parents, again requesting that Cawthorn execute an attached consent to release medical records. (Ex. 12 to Pitman Dep.). She explained that her earlier efforts to get the records had been frustrated, and she assured them that:

Mr. Ledford carries quite a bit of insurance coverage that would no doubt benefit your family in this very difficult time. As soon as I am able to obtain the records, we will be able [to] bring the insurance portion of this matter to a conclusion.


         Cawthorn Sr. telephoned McLean on June 11, 2014. During this conversation, McLean mentioned that on May 27 she had again sent a consent form for Cawthorn's signature. (Doc. 74 at 6; McLean Dep. at 211:2-19). She also told Cawthorn Sr. she would email him another consent form. (Id). Cawthorn Sr. recalled that during the telephone conversation McLean gave him "the runaround" and never answered his questions as to the amount of the check he would receive. (Cawthorn Sr. Dep. at 82:23-24). Cawthorn Sr. did not describe any further requests or demands he made to McLean during this conversation that led him to conclude he had received "the runaround." (Cawthorn Sr. Dep. at 83:3-10; 86:18-87:22). According to Cawthorn Sr., McLean also told him not to hire an attorney because "they'll take most of it, or part of it, or half of it." (]d, 83:8-10, 83:21-22). But McLean denied that she suggested that Cawthorn Sr. not hire a lawyer, stating that she would never make such a statement to a claimant and offering that her husband and father were lawyers. (McLean Dep. at 213:3-6). McLean also denied that Cawthorn Sr. ever asked for the amount of money that Auto-Owners would pay in exchange for a release of the Ledfords, stating "I don't believe he ever asked me that in a conversation." (McLean Dep. at 214:7-17).

         After the conversation ended, McLean emailed Cawthom Sr. the new consent form with copies of the May 27 correspondence and her cell phone number. McLean added:

It was a pleasure speaking with you this morning regarding your son's accident. Attached is the letter we discussed with the medical authorization included.
Upon receipt of the signed release, I will obtain the records from the hospital so that we can bring this matter to a conclusion.

(Ex. 67 to McLean Dep.). This message began a series of emails between Cawthorn Sr. and McLean the same day. Cawthorn Sr. wrote, asking questions and letting McLean know there would be more bills coming:

I see that this letter states "we will be able to bring the insurance portion of this matter to a conclusion." Not sure what is meant by that. My son will have bills from other places, doctors, surgeons, therapist and others from Florida and here in Georgia. Also for his long term care for years to come.
So I would think there will be a lot more bills to be paid.
Again, the conclusion part of what?

(Id.). McLean answered, explaining: "The payment that we make would be in a lump sum for a release of our insured. It would be for you to disperse. The payment would be made to your son for use at his discretion." (Id.) Cawthorn Sr. then asked, "How much would the check be for?" and McLean replied, "There is $3 million in coverage." (Id.).

         Cawthorn Sr. later testified in his deposition that based on this exchange with McLean, he believed that Auto-Owners intended to pay only the Halifax Health bills and nothing else. (Cawthorn Sr. Dep. at 82:1-87:22). He said, "It sounded like to me, she just wanted to pay the bills that were up to date, and then release her client, and Auto-Owners and the Ledfords would be free and clear." (Id. at 79:25-81:25). Cawthorn provides no details supporting this conclusion. Based on his interpretation of his father's conversation with McLean, Cawthorn decided that from that point on-June 11, 2014-he was not willing to settle for the policies' limits. (Cawthorn Dep., Doc. 63, at 94:10-98:9). And neither Cawthorn Sr. nor anyone else provided McLean or Auto-Owners with a properly executed authorization to release medical records.

         On June 12, a Cawthorn family friend contacted a lawyer, Joseph Kalbac, on Cawthom's behalf. Days later, Kalbac flew to Atlanta to meet Cawthorn, and Cawthorn hired Kalbac to represent him. Without submitting medical records, making a demand, or even providing notice to Auto-Owners that he had been retained, Kalbac sued Ledford and Bob's RV in Florida state court on June 26. (Kalbac Dep., Doc. 53, at 24:21-24; 26:120).

         Meanwhile, McLean continued her pursuit of an executed medical release from Cawthorn. On June 27, Optum, Inc.-a health services company retained by Cawthom's insurer to pursue recovery of medical benefits-provided Auto-Owners notice of a health care lien on any payment to Cawthorn but did not include the amount of the lien in the notice. (Doc. 81-27). On June 30, McLean sent Cawthorn Sr. an email reminding him that she still had not received a properly executed release from Cawthorn:

Just wanted to send you a quick note regarding the medical authorization that I sent to you. As soon as I receive that I will be able to get the medical records from Halifax Medical Center.

(Ex. 68 to McLean Dep.). She again received no response. On July 14, 2014, Auto-Owners learned for the first time that Cawthorn was represented by a lawyer who ...

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