Bad Faith Judgements & Settlements are Punishment not Damages
Barry Zalma
Nov 8, 2023
Read the full article at https://lnkd.in/g5_pZzvP and see the full video at https://lnkd.in/gTvWeDRX and at https://lnkd.in/g7Ps4sUD, and at https://zalma.com/blog plus more than 4650 posts.
The Florida Supreme Court was asked to resolve a certified question from a lower court about whether a personal injury damages award must be reduced by a payment the plaintiff received to settle a bad faith claim against his uninsured motorist insurance carrier.
In Alberta S. Ellison v. Randy Willoughby, No. SC2021-1580, Supreme Court of Florida (November 2, 2023) the Supreme Court answered the questions posed.
FACTS
Respondent/plaintiff Randy Willoughby was badly injured in a car crash. After the accident, he sued Petitioner/defendant Alberta Ellison, bringing a vicarious liability claim based on Ellison’s co-ownership of the other car in the crash. Willoughby also sued his own uninsured motorist insurance carrier to recover policy benefits and for statutory bad faith damages. Willoughby and his insurer settled before trial for $4 million. The subsequent trial against Ellison resulted in a $30 million jury verdict for Willoughby. Ellison then asked the trial court to set off the $4 million insurance settlement against the damages award, but the court denied the motion.
The Second District Court of Appeal affirmed the denial of the set off request. It also certified this two-part question as one of great public importance.
1. Is a settlement payment made by an uninsured motorist insurer to settle a first-party bad faith claim subject to set off under section 768.041(2) or
2. a collateral source within the meaning of section 768.76?
The court answered no to both parts of the question, holding that neither statute authorized a set off in this case. The Second District explained that, writing on a blank slate, it would have found Ellison entitled to a set off under section 768.041(2), but it decided that the Supreme Court’s case law precluded that result.
Based on the parties’ arguments and the Supreme Court’s review of the record, the Supreme Court determined that Ellison did not ask the trial court for a set off under section 768.041(2) and refused to consider the issue.
The Supreme Court rephrased the question posed to it to read: “Is a settlement payment made by an uninsured motorist insurer to settle a first-party bad faith claim a collateral source within the meaning of section 768.76(2)(a)2.?”
Although Willoughby sued his uninsured motorist insurance carrier both for the $10,000 limit allowed under his policy and for bad faith damages, his $4 million insurance settlement was undifferentiated (as to claims and categories of damages). Subject to certain exceptions, section 768.76(1) mandates damage award reductions for sums that the plaintiff has received from “collateral sources.”
The Supreme Court noted that bad faith damages are not “benefits” for purposes of the collateral source definition in section 768.76(2)(a)2.
First-party bad faith claims like Willoughby’s are a creature of statute, not of the underlying insurance contract between the parties. In particular, the damages recoverable in an uninsured motorist insurance bad faith claim are set out in a statute to be “the total amount of the claimant’s damages, including the amount in excess of the policy limits, any interest on unpaid benefits, reasonable attorney’s fees and costs, and any damages caused by a violation of a law of this state.”
The Florida Supreme Court characterized statutory bad faith damages as a penalty. By “extracontractual,” the Supreme Court meant that first-party bad faith damages are over and above the amount owed pursuant to the express terms and conditions of the policy after all of the conditions precedent of the insurance policy in respect to payment are fulfilled.
The Supreme Court answered its rephrased question with a “no” and concluded that a settlement payment made by an uninsured motorist insurer to settle a first-party bad faith claim is not a collateral source and the judgment could not be offset.
ZALMA OPINION
The $30 Million verdict was not offset by the $4 Million bad faith settlement. Randy Willoughby was entitled to collect, if possible, the full $34 million in damages and punishment damages. The Supreme Court wisely concluded that punishment damages were not damages for bodily injury and could not be used to reduce the trial court’s verdict in the bodily injury suit.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808
Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01
Follow me on LinkedIn: http://www.linkedin.com/comm/mynetwork/discovery-see-all...
Daily articles are published at https://zalma.substack.com.
Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to substack at https://lnkd.in/gcZKhG6g;
Go to Barry Zalma videos at Rumble.com at https://lnkd.in/g7-xSs2; Go to the Insurance Claims Library – https://lnkd.in/gwEYkxD.
Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
Post 5184
See the full video at https://lnkd.in/gyxQfnUz and at https://lnkd.in/gAd3wqWP, and at https://zalma.com/blog plus more than 5150 posts.
Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gRthzSnT; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; Go to the Insurance Claims Library – https://lnkd.in/gwEYk.
Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
The Plaintiff-in-Interpleader...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
Post 5180
See the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
Evidence Required to Prove Breach of Contract
Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...
