What is the effect of an injured plaintiff releasing an insured tortfeasor of liability or satisfaction of an excess judgment without prior assignment?

An injured plaintiff who releases an insured from all liability or executes a satisfaction of the underlying excess judgment without previously having obtained an assignment of the bad faith action will be barred from maintaining any such action. Fidelity & Casualty Co. of New York v. Cope, 462 So.2d 459 (Fla. 1985). Typically, to protect a future interest, an injured party’s attorney will have the insured tortfeasor execute an assignment agreement of the bad faith action against the insurer prior to releasing the tortfeasor of liability. A bad faith action accrues when the insurer has failed to satisfy their obligation to the insured, thus breaching their duty to the insured and resulting in a judgment against the insured exceeding the policy limits. This exposure is what constitutes the cause of action for either the insured or the injured party standing in the insured’s place. Kelly v. Williams, 411 So.2d 902 (Fla. 5th DCA 1982). In a leading case on bad-faith, Cope, the court determined that because the plaintiff had settled an action against the primary insurer, in exchange for a release and satisfaction of the judgment in favor of the tortfeasor, the primary insurer, and the owner of the car driven by the tortfeasor, the injured plaintiff could not bring a bad faith action against the excess insurer. The court reasoned that since the judgment was satisfied against the tortfeasor, he no longer maintained a cause of action and thus the injured party also had no cause of action because the injured party either assumes the rights by assignment or the insured keeps those rights. Neither had occurred prior to the satisfaction so the injured plaintiff could no longer bring a bad faith action. When you have been involved in an accident, prior to any agreement with anyone, contact a knowledgeable Palm Beach County accident attorney. In Florida, the injured party’s bad faith claim is not treated as a separate cause of action from the tortfeasor’s so releasing the insured from all personal liability will also discharge the insurer from liability if the injured accepted the policy limits in full satisfaction of any claims against the insured. In very few situations, Florida courts have allowed the injured plaintiff to maintain a bad faith action against the insurer even when there was no assignment prior to the release because the court determined that the agreement merely provided a covenant not to execute. Rosen v. Florida Insurance Guaranty Ass’n, 802 So.2d 291 (Fla. 2001). In another case, the court said that the intent of either party was not to release the insurer from liability and this was established by the language in the settlement agreement. Lageman v. Frank H. Furman, Inc., 697 So.2d 981 (Fla. 4th DCA 1997).