Case Name: Ward W. KELLY, Appellant, v. Grace B. WILLIAMS, as Personal Representative of the Estate of Larry Arthur Williams, Deceased, Grace B. Williams, individually and Allstate Insurance Company, Appellees
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 1982-03-03
Citations: 411 So. 2d 902
Docket Number: No. 79-162
Parties: Ward W. KELLY, Appellant, v. Grace B. WILLIAMS, as Personal Representative of the Estate of Larry Arthur Williams, Deceased, Grace B. Williams, individually and Allstate Insurance Company, Appellees.
Judges: ORFINGER, J., concurs.
Reporter: Southern Reporter, Second Series
Volume: 411
Pages: 902–910

Head Matter:
Ward W. KELLY, Appellant, v. Grace B. WILLIAMS, as Personal Representative of the Estate of Larry Arthur Williams, Deceased, Grace B. Williams, individually and Allstate Insurance Company, Appellees.
No. 79-162.
District Court of Appeal of Florida, Fifth District.
March 3, 1982.
Rehearing Denied April 1, 1982.
Richard A. Krause, Ormond Beach, for appellant.
Christopher W. Wickersham, Daytona Beach, for appellee, Grace B. Williams.
Robert K. Rouse, Jr., Daytona Beach, for appellee, Allstate Ins. Co.

Opinion:
SHARP, Judge.
Kelly appeals an order entered after a pre-trial conference, which dismissed his cause with prejudice. The issues in the suit were comparative negligence and Kelly's damages stemming from an automobile collision caused in part by the negligence of Williams' deceased husband. We affirm the order because Kelly voluntarily agreed to accept a specific sum in settlement, and no justiciable issues remained for trial.
Before trial the parties entered into a stipulation , filed with the court, in which Allstate agreed to pay Kelly Fifty Thousand Dollars ($50,000), the liability limit of Williams' policy. The Stipulation provided in pertinent part:
2. The Defendant ALLSTATE agrees to pay Plaintiff, WARD W. KELLY the sum of Fifty Thousand Dollars ($50,000) within five (5) days of the execution of this Stipulation/Agreement by counsel for all Defendants and counsel for Plaintiff.
3. In consideration of the said payment, and the other agreements contained herein, Plaintiff agrees and promises to execute a Satisfaction of Judgment with regard to any and all judgments which are entered against GRACE B. WILLIAMS, and to deliver said executed Satisfaction of Judgment to [Williams' attorney] within sixty (60) days of the conclusion of the above-captioned cause (both in the Florida State Trial Courts and the Florida State Appellate Courts), unless a bad-faith action is commenced against ALLSTATE within that time. In the event that a bad-faith action is filed against ALLSTATE within that time, Plaintiff agrees and promises to execute a Satisfaction of Judgment with regard to any and all judgments which are entered against GRACE B. WILLIAMS, and to deliver said executed Satisfaction of Judgment to Christopher Wickersham, Esq. within ten (10) days of the conclusion of any bad-faith action against ALLSTATE arising out of or derived from the above-captioned law suit (both in the Florida State Trial Courts and the Florida State Appellate Courts). Said Satisfaction or Satisfactions of Judgment shall satisfy any and all judgments entered against GRACE B. WILLIAMS because of the above-styled litigation, and said Satisfaction shall be executed and delivered within the appropriate stated period of time, regardless of the outcome of any bad-faith action against ALLSTATE.
4. Additionally, and in further consideration of the said payment and other agreements contained herein, Plaintiff agrees and promises not to execute or to seek to execute or to cause execution upon any judgment entered in connection with or because of the above-styled action against the property or assets of GRACE B. WILLIAMS until at least twenty (20) days have elapsed after the conclusion of any bad-faith action commenced against ALLSTATE.
5. It is agreed and stipulated that in the above-styled cause, the liability of the Defendant, ALLSTATE, is limited to Fifty Thousand Dollars ($50,000), as to any judgment which may be entered at the conclusion of or as a result of the above-captioned cause and action, and that no judgment can or should be entered against ALLSTATE in excess of Fifty Thousand Dollars ($50,000) as a result of the above-styled action. In addition, it is agreed that the said Fifty Thousand Dollars ($50,000) paid to Plaintiff as agreed herein, should be set off from any judgment rendered as a result of the above-captioned cause against ALLSTATE, and before any such judgment be entered in connection with the above-syled [sic] cause. However, it is also stipulated and agreed that the payment of the Fifty Thousand Dollars ($50,000) to Plaintiff as agreed herein, and the agreement to satisfy judgment contained herein and the agreement not to execute as contained herein, will not operate to prevent or hinder GRACE B. WILLIAMS and/or Plaintiff from filing a legal action against ALLSTATE for alleged bad-faith. (Emphasis supplied.)
Within five days after execution of the stipulation, the Fifty Thousand Dollars ($50,000) was paid to Kelly. The lower court ordered a supplemental pre-trial conference to determine the legal effect and consequences of the stipulation, and appel-lees moved to dismiss the cause with prejudice. The trial judge ruled that execution of the stipulation precluded "any actual or potential exposure to liability" on the part of Williams and therefore foreclosed any bad faith action against Allstate. The motion to dismiss was granted on the basis that no justiciable issues remained before the court.
Appellant contends that the stipulation clearly contemplated his future third-party action against the insurer for bad faith negotiations, an action which may be asserted after entry of final judgment in the original liability case. See, e.g., Cotton States Mutual Insurance Company v. Trevethan, 390 So.2d 724 (Fla. 5th DCA 1980). However, a cause of action for bad faith arises when the insured is legally obligated to pay a judgment that is in excess of his policy limits. Farmers Insurance Exchange v. Henderson, 82 Ariz. 335, 313 P.2d 404 (1957); 7C J. Appleman, Insurance Law and Practice, § 4712 (Berdal ed. 1979). Where the parties have stipulated, as they have in this case, that Williams' and Allstate's liability is limited to the fifty thousand dollars ($50,000) policy amount, then no cause of action for bad faith can exist. See Stubblefield v. St. Paul Fire & Marine Ins. Co., 267 Or. 397, 517 P.2d 262 (1973).
The essence of a "bad faith" insurance suit (whether it is brought by the insured or by the injured party standing in his place), is that the insurer breached its duty to its insured by failing to properly or promptly defend the claim (which may encompass its failure to make a good faith offer of settlement within the policy limits) —all of which results in the insured being exposed to an excess judgment. Under the arrangement stipulated to by the parties in this case, the insured could not be exposed to an excess judgment under any circumstances. If one was obtained, the insured was entitled to a complete satisfaction of it, as soon as the judgment became final or enforceable. The stipulation completely safeguarded the insured, and therefore it completely discharged the insurer's duty to its insured.
We do not think Critz v. Farmers' Ins. Group, 230 Cal.App.2d 788, 41 Cal.Rptr. 401, 12 A.L.R.3d 1142 (3d Dist.Ct.App.1964), cited by the dissent, is applicable to this case. There the injured party was allowed to sue the insurer for the insured's bad faith claim (having obtained that right by written assignment, which we realize is not necessary in Florida). To obtain the assignment, the injured party covenanted with the insured that he would not execute on the excess judgment, if he obtained one. The court ruled that this promise did not "blot out" the personal judgment against the insured. It would clearly be of record, and at least in Florida, it would affect the insured's credit and title to real estate. Further, the arrangement in Critz was worked out between the insured and the injured party when the insurer refused to defend or participate. In this case, the insurance company participated in the stipulation, and was a party to the lawsuit. Kelly's attempted reservation of his rights against the insurer were not effective, since in the body of the stipulation, the baby was thrown out with the bath water. See Stephen Bodzo Realty, Inc. v. Willit International Corp., 405 So.2d 269 (Fla. 4th DCA 1981).
It is apparent that a mistake was made, at least by Kelly, as to the legal effect of the stipulation. However, he did not make any showing at the trial court level sufficient to establish grounds to release him from the stipulation; nor did he file any motion before the trial court seeking to be relieved from it. Absent a basis to invalidate the stipulation, it is binding and enforceable, and we cannot relieve him from its legal consequences.
AFFIRMED.
ORFINGER, J., concurs.
COWART, J., dissents with opinion.
. The stipulation encompassed the liability of Grace B. Williams individually, and as the personal representative of Larry Arthur Williams (her deceased husband) and his estate.
. See American Fire & Cas. Co. v. Davis, 146 So.2d 615 (Fla. 1st DCA 1962).
. Thompson v. Commercial Union Ins. Co. of N. Y., 250 So.2d 259 (Fla.1971).
. Florida East Coast Railway Co. v. Thompson, 93 Fla. 30, 111 So. 525 (1927).
. Dorson v. Dorson, 393 So.2d 632 (Fla. 4th DCA 1981).