               Case: 18-12067        Date Filed: 10/25/2019      Page: 1 of 12


                                                                       [DO NOT PUBLISH]


                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                             __________________________

                                    No. 18-12067
                             __________________________

                        D.C. Docket No. 6:16-cv-02240-JA-GJK

DAVID MADISON CAWTHORN,

                                                                          Plaintiff-Appellant,

                                            versus

AUTO-OWNERS INSURANCE COMPANY,
                                                                        Defendant-Appellee.

                             __________________________

                      Appeal from the United States District Court
                          for the Middle District of Florida
                           __________________________

                                     (October 25, 2019)


Before TJOFLAT, MARTIN, and PARKER, * Circuit Judges.

TJOFLAT, Circuit Judge:




       *
          Honorable Barrington Daniels Parker Jr., United States Circuit Judge for the Second
Circuit, sitting by designation.
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      David Madison Cawthorn appeals the District Court’s grant of summary

judgment in favor of Auto-Owners Insurance Company on his assigned third-party

bad faith insurance claim. After reviewing the record, and with the benefit of oral

argument, we affirm the District Court because Cawthorn cannot show that the

insured in this case was exposed to an excess judgment—an essential element of

the claim.

                                          I.

      David Madison Cawthorn and Bradley Ledford were traveling together from

Florida to North Carolina on April 3, 2014. Ledford was driving a vehicle owned

by his father’s business, Bob Ledford’s RV & Marine, Inc. (“Bob’s RV”). While

his friend drove, Cawthorn slept in the passenger seat. Ledford fell asleep at the

wheel and crashed into a concrete barrier. He sustained no injuries, but Cawthorn,

whose feet were on the dashboard, sustained serious injuries resulting in paralysis

from the waist down.

      Serious injuries bring serious medical bills, so the parties had to think about

liability and insurance coverage. At the time of the accident, Bob’s RV was

insured through Auto-Owners Insurance Company (“Auto-Owners”). Bob’s RV

was covered by two Auto-Owners policies: a $1 million Garage Liability Policy

and a $2 million Commercial Umbrella Policy, for $3 million of total coverage.

Ledford was a scheduled driver under the Garage Liability Policy.

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      First, we describe the communications that transpired between Auto-

Owners, the Ledfords, and the Cawthorns preceding this litigation. The District

Court’s order sets forth an extensive description of the pre-litigation

communications. There is no need to repeat the information here beyond a brief

summary.

      Auto-Owners learned about the car accident on April 4, 2014. A Florida

adjuster, Pamela McLean, was assigned to handle the claim. McLean gathered

information about the accident throughout April, such as the details of the accident

and Cawthorn’s injuries, and determined that the insured, Ledford, was at fault. At

the end of the month, McLean opened a reserve for $3 million, the policies’

combined limits.

      Between April and June, McLean sought Cawthorn’s medical records, which

she needed to process his claim. She requested an authorization release form from

Cawthorn. Cawthorn’s father (“Cawthorn Sr.”) signed and submitted the form on

behalf of his son. But because Cawthorn was an adult, Halifax Hospital, where

Cawthorn had been treated, would not accept a form signed by a parent. McLean

reached out again to the Cawthorns but they did not produce the signed form.

      On June 11, Cawthorn Sr. called McLean. The parties offer different

accounts of the conversation. According to McLean, she merely reminded

Cawthorn Sr. that she still needed the medical authorization form. Contrarily,

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Cawthorn Sr. says McLean refused to tell him how much money he would receive

and advised him not to hire a lawyer.

      Soon after the June 11 call, McLean emailed Cawthorn Sr. a blank medical

authorization form. Cawthorn Sr. responded, asking how much money his son

would receive. McLean explained the $3 million policy limits.

      According to Cawthorn, he would have accepted $3 million before June 11.

But because of the June 11 phone call, the Cawthorns distrusted Auto-Owners and

decided they would no longer be willing to settle. So Cawthorn hired a lawyer,

Joseph Kalbac.

      That brings us to the present litigation. Cawthorn sued Ledford and Bob’s

RV for negligence in Florida state court. On July 14, 2014, Auto-Owners learned

of the lawsuit. It hired attorneys to represent Ledford and Bob’s RV.

      On August 7, McLean tendered two checks to Kalbac, totaling $3 million.

Auto-Owners still had not received Cawthorn’s medical records but had received a

notice of a lien from Cawthorn’s health insurance company, which constituted

enough to process the claim. Kalbac returned the checks, rejecting the tender.

      In 2016, after an unsuccessful attempt at mediation, Kalbac sent out a

proposed settlement agreement to Ledford and Bob’s RV. The agreement required

tender by Auto-Owners of the $3 million policy limits to settle claims against

Bob’s RV, a $33 million consent judgment against Ledford, and Cawthorn’s

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covenant not to execute the judgment against Ledford. There were signature lines

for Ledford, Bob’s RV, Cawthorn, and Auto-Owners.

      McLean (on behalf of Auto-Owners) responded to the proposal: “[W]e

continue to be willing to pay Mr. Cawthorn the full $3 million . . . while continuing

to provide a defense to Mr. Ledford . . . . As for a future consent judgement [sic]

against [Ledford], that will be solely up to [Cawthorn], you and [Ledford’s

counsel].”

      So Cawthorn and Ledford continued the settlement discussions without

Auto-Owners. On October 20, 2016, they executed the final agreement. There

was no signature line for Auto-Owners on the final agreement, and there is no

evidence that Auto-Owners saw the agreement. Under the terms of the agreement,

Auto-Owners would tender $3 million to Cawthorn for a full release of Bob’s RV.

Ledford also agreed to a $30 million consent judgment against him, and Ledford

assigned to Cawthorn his rights to sue Auto-Owners for its conduct during the

insurance claim. Finally, Cawthorn agreed not to record the consent judgment

against Ledford and to deliver to Ledford a full and complete satisfaction of the

consent judgment, regardless of the outcome of the future bad faith claim.

      Auto-Owners tendered $3 million to Cawthorn and Cawthorn accepted.

Cawthorn then filed this bad faith suit in December 2016, under assignment of

Ledford’s rights, seeking $30 million. The theory of Cawthorn’s case is that Auto-

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Owners acted in bad faith when handling Cawthorn’s insurance claim, and but for

the bad faith, Cawthorn would have settled for the $3 million policy limits. Auto-

Owners moved for summary judgment.

      Two issues were before the District Court: (1) whether Cawthorn could

prosecute the bad faith claim against Auto-Owners without first obtaining an

excess judgment or its functional equivalent, and (2) whether Auto-Owners acted

in bad faith as a matter of law. The District Court answered the first question in

the negative, did not reach the second question, and granted summary judgment in

favor of Auto-Owners. The instant appeal followed.

                                         II.

      We review a district court’s grant of summary judgment de novo, viewing all

evidence in the light most favorable to the non-moving party. Owen v. I.C. Sys.,

Inc., 629 F.3d 1263, 1270 (11th Cir. 2011). Summary judgment is appropriate “if

the movant shows that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In a

diversity action such as this, we apply state substantive law and federal procedural

law. Horowitch v. Diamond Aircraft Indus., Inc., 645 F.3d 1254, 1257 (11th Cir.

2011). We apply the substantive law of the forum state, so here we look to Florida

law. Id.




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                                         III.

      Bad faith claims arise when a party incurs liability that is covered by his

insurance policy, but due to the alleged bad faith of his insurance company, the

liability is higher than the policy limits. These claims are rooted in the same logic

as negligence claims, although some states (like Florida) impose a heightened duty

of care. In a bad faith claim, a plaintiff must show that (1) the insurer owed the

insured a duty, (2) the insurer breached its duty, (3) and the breach caused the

insured to suffer (4) an injury. See Bos. Old Colony Ins. Co. v. Gutierrez, 386 So.

2d 783, 785 (Fla. 1980) (per curiam).

      Duty is straightforward. Florida law imposes a duty of good faith. Fla.

Farm Bureau Mut. Ins. Co., v. Rice, 393 So. 2d 552, 555 (Fla. 1st Dist. Ct. App.

2010). Insurance companies must “settle, if possible, where a reasonably prudent

person, faced with the prospect of paying the total recovery, would do so.” Bos.

Old Colony Ins. Co., 386 So. 2d at 785. The insurer must also “defend its

insured.” Coblentz v. Am. Sur. Co. of N.Y., 416 F.2d 1059, 1062 (5th Cir. 1969).

      An insurance company breaches its duty when it acts in bad faith—mere

negligence is not enough. Campbell v. Gov’t Emps. Ins. Co., 306 So. 2d 525, 530

(Fla. 1974) (“[W]e align[] Florida with those states whose standards for

determining liability in an excess judgment case is bad faith rather than

negligence.”).

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      Causation is proved with an excess judgment, which is a judgment above the

insurance policy limits. Causation is a prerequisite for the claim: for an insured to

bring a bad faith claim, the injured party must first win an excess judgment.

Cunningham v. Standard Guar. Ins. Co., 630 So. 2d 179, 181–82 (Fla. 1994).

We’ll call this rule the “excess judgment rule.”

      The excess judgment rule prevents courts from deciding cases without

jurisdiction. There is not a case or controversy before there is an excess judgment.

Until the insured is subjected to an excess judgment, any contention that he will be

liable beyond policy limits “rests upon contingent future events that may not occur

as anticipated, or indeed may not occur at all.” Atlanta Gas & Light Co. v. Fed.

Energy Regulation Comm’n, 140 F.3d 1392, 1404 (11th Cir. 1998); see Dixie Ins.

Co. v. Gaffney, 582 So. 2d 64, 65 (Fla. 1st Dist. Ct. App. 1991); State Farm Mut.

Automobile Ins. Co. v. Marshall, 618 So. 2d 1377, 1379–80 (Fla. 5th Dist. Ct. App.

1993).

      As with all rules, this one has some exceptions. There are three exceptions,

which are deemed “functional equivalents” of an excess judgment under Florida

law. Perera v. U.S. Fid. & Guar. Co., 35 So. 3d 893, 899 (Fla. 2010). When an

exception applies, an insured can show causation based on a stipulation of damages

rather than an excess judgment. Id.




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      The first exception is called a Cunningham agreement, wherein the

insurance company and the injured third party agree to try the bad faith claim first,

and, if the jury finds no bad faith, the parties agree to settle for policy limits.

Cunningham, 630 So. 2d at 182. The second exception is called a Coblentz

agreement. Coblentz agreements arise when the insurance company fails to defend

the insured and, in response, the insured and the injured third party agree to settle

the suit and allow the injured third party to sue the insurance company on a theory

of bad faith. Coblentz, 416 F.2d at 1063; Steil v. Fla. Physicians’ Ins. Reciprocal,

448 So. 2d 589, 591 (Fla. 2d Dist. Ct. App. 1984). The third exception occurs

when an excess carrier incurs damages because the primary carrier acted in bad

faith. In such cases, an excess carrier may bring a bad faith claim against a

primary insurer “by virtue of equitable subrogation.” Perera, 35 So. 3d at 900.

      If a plaintiff can show breach and causation, he can show injury. The

amount of liability that exceeds the policy limits is the injury. United Servs. Auto

Ass’n v. Jennings, 731 So. 2d 1258, 1259 n.2 (Fla. 1999).

                                           IV.

                                            A.

      This case turns on causation, which means it turns on whether the Cawthorn-

Ledford consent judgment constitutes an excess judgment or a functional

equivalent.

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       We will start with the exceptions to the excess judgment rule because we can

make quick work of them. None of the exceptions apply here. Cawthorn’s claim

is not a Cunningham agreement because, unlike in Cunningham, the insurer, Auto-

Owners, was not a party to the consent judgment. Cawthorn’s claim is not a

Coblentz agreement because Auto-Owners did not neglect its duty to defend.

Finally, this claim clearly does not fall into the third exception: this is not a case of

an excess carrier suing a primary carrier.

       Instead of pointing to an exception, Cawthorn argues that the consent

judgment is an excess judgment. The District Court did not see it that way, and

our interpretation of Florida law aligns with the District Court’s.

       The question turns on our interpretation of the word “judgment” in this

context. A judgment is a final decision—a verdict—reached by a factfinder. 1 A

judgment is an excess judgment when the amount of the verdict recovered by the

injured party is greater than all the available insurance coverage. Jennings, 731



       1
          Florida courts have used “judgment” and “verdict” interchangeably when discussing
excess judgments. E.g., Jennings, 731 So. 2d at 1259 n.2 (“An excess judgment is . . . the
difference between all available insurance coverage and the amount of the verdict . . . .”
(emphasis added)). A verdict is “[a] jury’s finding or decision on the factual issues of a case.”
Verdict, Black’s Law Dictionary (11th ed. 2019).
        Furthermore, if a consent judgment did constitute a judgment here, then Florida courts
would not have been so precise when carving out the narrow exceptions in Cunningham and
Coblentz. Plaintiffs would not need to get insurance companies to agree to try a bad faith case
pre–excess judgment, as in Cunningham, nor would it matter whether the insurer failed to defend
the insured, as in Coblentz. That Florida courts carved out such specific functional equivalents,
rather than merely deeming all consent judgments sufficient, demonstrates that Florida courts
construe “judgment” as narrowly as we do in this context.
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So. 2d at 1259 n.2. A consent judgment, on the other hand, is akin to a private

contract, one that it is simply acknowledged and recorded by a court.

      If we were to adopt Cawthorn’s argument that a consent judgment is a

judgment, we would be carving out a fourth exception to the excess judgment rule.

Cawthorn disagrees. Cawthorn points to Florida case law to support the

proposition that courts have treated final verdicts and consent judgments as

indistinguishable in third-party bad faith claims. But the authority he cites is not

convincing. For example, he points to Barnard v. Geico Gen. Ins. Co., 448 F.

App’x 940 (11th Cir. 2011) (per curiam) (unpublished opinion); Padilla v.

Travelers Home & Marine Ins. Co., No. 6:14-cv-1700 (M.D. Fla. May 29, 2015);

and Gutierrez v. Yochim, 23 So. 3d 1221 (Fla. 2nd Dist. Ct. App. 2009). Although

these cases involve consent judgments, only Gutierrez mentions whether the

defendant–insurance company was a party to the consent judgment. And the

defendant–insurance company in that case was a party to the consent judgment,

making the case inapposite. Gutierrez, 23 So. 3d at 1224. Furthermore, none of

the cases mention whether the insurance companies were bound by the consent

judgments.

      Had those cases been analogous to this one, the courts would have paid

closer attention to the facts surrounding the consent judgments, as well as the

consequences of deciding that a consent judgment constitutes an excess judgment

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for the purposes of a third-party bad faith claim. Florida law protects insurance

companies with the excess judgment rule. If consent judgments were enough to

show causation, that protection would be eliminated. Insurers would not know

whether an insured party and an injured party entered into a consent judgment as

adversaries, at arm’s length and in good faith, or as friends, making a strategic

decision to undermine the insurance company’s policy. Surely no court would

eviscerate the well-established safeguards without paying any attention to the

gravity of the decision.

                                              B.

       Auto-Owners argues on appeal that this Court should decide whether, as a

matter of law, Auto-Owners acted in bad faith. The District Court did not reach

this issue because there was no excess judgment or functional equivalent, meaning

no case or controversy. The District Court was correct to not reach the issue.

Cunningham, 630 So. 2d at 181 (“[A] third party must obtain a judgment against

the insured in excess of the policy limits before prosecuting a bad-faith claim

against the insured’s liability carrier.”).

       AFFIRMED.




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