Divided appeals court reverses insurer’s bad faith win

A divided 11th U.S. Circuit Court of Appeals on Friday vacated an insurer’s summary judgment award in a bad faith dispute over its refusal to initiate settlement negotiations to resolve a lawsuit stemming from a fatal March 2015 shooting in the parking lot of a nightclub.

Circuit Judges Adalberto Jordan and Stanley Marcus disagreed with a federal judge in Fort Pierce, Florida, that the insurer was not obligated to initiate settlement talks because no reasonable jury would find that the nightclub was “clearly liable” for the incident. The case is Kinsale Insurance Co. v. Pride of St. Lucie Lodge 1189 Inc. et al.

On March 1, 2015, two groups of female patrons were involved in a fight inside the club while it was hosting a weekend social event. Two club volunteers who worked security removed the groups through separate exits. The brawl resumed in the parking lot, and approximately 15 minutes later, one of the women involved was shot in the forehead. She died from her injuries the following year, court records show.

Kinsale provided a $1 million surplus policy to the lodge that limited coverage to $50,000 for any claims arising from assault and battery. Mount Vernon Fire Insurance Co. provided a liquor liability policy to the lodge that had an absolute firearms exclusion that barred coverage for any claim arising directly or indirectly from the use of firearms.

The estate of the shooting victim sued the lodge for negligent security and was awarded $3.3 million. The lodge and estate sued the Richmond, Virginia-based surplus insurer for bad faith.

The trial judge awarded summary judgment to Kinsale, and the lodge appealed.

Fred Alan Cunningham, a Palm Beach Gardens, Florida-based attorney with Rafferty Domnick Cunningham & Yaffa that represented the lodge, said the court issued a “well-reasoned opinion” that “correctly applied existing law to reach the right result” and that the decision is “very important” for Florida policyholders.

Representatives for Kinsale did not respond to requests for comment.