BUSH v. ALLSTATE INSURANCE COMPANY

AINSWORTH, Circuit Judge:

This Florida-based diversity action is predicated upon an insurance company's alleged bad faith in failing to settle a personal injury claim within the limits of an insured's automobile liability insurance policy. A judgment in excess of the policy limits was returned in a Florida state court against the insured, and the insured brought this action for the portion of the judgment not satisfied by the insurance company. We affirm the judgment denying relief to the insured.1

William Bush, the appellant here, was sued in the Circuit Court of Broward County, Florida by Lummie McCord Grant for the injuries she sustained as a result of an automobile accident involving a vehicle owned by Bush. Allstate Insurance Company had issued a liability policy on this vehicle to Bush. This policy was limited to $10,000 payable for personal injury to one person. The insurer handled Bush's defense to the Grant claim. Shortly before trial of this claim was to begin, Grant's lawyer delivered a letter to the Allstate lawyers representing Bush. This letter read in part:

No settlement was made on the basis of this letter, and the trial was conducted, resulting in a judgment in favor of Grant for $24,000, plus interest and costs. The skeletal record presented to this Court gives almost no account of the events that occurred before the trial of the Grant-Bush lawsuit. The opinion on the District Court, however, relates the following:2 Less than two months before the trial, Grant's lawyer, while stating that he felt Grant's claim had great potential and that Allstate's lawyers were "sitting on a powder keg," declined to give a settlement demand to the insurer's representatives. When pressed for a demand, he mentioned $20,000. Then, some two weeks before the trial was scheduled to begin, he offered to settle for in excess of $40,000. At the charge conference conducted by the state trial judge, he offered to settle for $18,500, but warned that he could not guarantee his client's acceptance of this amount. Grant apparently thought her claim was worth much more. When the jury's verdict of $24,000 was later announced, she screamed derisively at the jurors.

After Allstate paid Grant the policy limits in partial satisfaction of her judgment, Bush sued the insurer in the Broward County Circuit Court to recover the remainder of the judgment. The suit was removed to the Federal District Court by Allstate. There, after a trial to the court, a judgment in favor of Allstate was entered on February 24, 1969. On this appeal Bush contends that the District Court erred in denying him a jury trial and in refusing him recovery.

We first consider Bush's contention that he should have been afforded a jury trial in the court below. The facts material to this contention are as follows. Bush had not demanded a jury trial in the state court before this case was removed to federal court by Allstate in December 1966. During the next eighteen months, in which discovery was being conducted and Bush's present lawyer was substituted as counsel of record for his original counsel, no demand was made on Bush's behalf for a jury trial in the District Court. Then, on July 2, 1968, a pretrial conference was held. At this conference the lawyers for both sides and the District Judge labored under the assumption that this case was to be tried to a jury, notwithstanding that neither side had ever demanded a jury trial. Thereafter, on July 19, 1968, the clerk of the District Court set the case for a trial to the court to be held on September 16, 1968. In response to this action, plaintiff's lawyer filed a motion on July 25, 1968, for a trial by jury. This motion read in part:

The District Judge denied the motion. For reasons that follow, we conclude that Bush waived his right to a jury trial and that the District Judge did not abuse his discretion in denying Bush relief from this waiver.

When this case was removed to the District Court, the Federal Rules of Civil Procedure became applicable. Fed.R.Civ.P. 81(c). Since Bush had not made an express demand for a jury trial in the Florida state court in accordance with Fla.R.Civ.P. 1.430, 30 F.S.A.,3 he was required to make such a demand in the District Court within the period prescribed by Fed.R.Civ.P. 81(c).4 His failure to make a timely demand constituted a waiver of his right to a jury trial. Id.; cf. Fed.R.Civ.P. 38(d).5 Relief from that waiver was then to be found, if available at all, in an exercise of discretion by the District Court. Fed. R.Civ.P. 39(b).6 We have recognized that "when the discretion of the court is invoked under Rule 39(b), the court should grant a jury trial in the absence of strong and compelling reasons to the contrary." Swofford v. B & W, Incorporated, 5 Cir., 1964, 336 F.2d 406, 409. It is not an abuse of discretion by a District Judge to deny a Rule 39(b) motion, however, when the failure to make a timely demand for a jury trial results from mere inadvertence on the part of the moving party. See, e. g., Noonan v. Cunard Steamship Co., 2 Cir. 1967, 375 F.2d 69; 5 Moore, Federal Practice ¶ 39.09, at 719 (2d ed. 1969). In this case the excuse put forth by Bush was the inadvertence of both his lawyers. That the pretrial conference was conducted under the mistaken assumption that Bush had complied with the federal rules respecting demand for a jury trial does not strengthen this excuse under the circumstances here. Accordingly, the District Court was not required to order a trial by jury.

We next consider the merits of Bush's claim against Allstate. Finding that this claim is fatally incomplete, we conclude, as did the District Court, that Allstate may not be held liable under Florida law for the excess over policy limits of Grant's judgment against Bush.

In Florida an insurer is liable for the excess over policy limits of a judgment against its insured if it fails to exercise good faith in the defense, handling, or settlement of the claim upon which that judgment is based. Liberty Mutual Insurance Co. v. Davis, 5 Cir., 1969, 412 F.2d 475, 480; Burton v. State Farm Mutual Automobile Insurance Co., 5 Cir., 1964, 335 F.2d 317, 324 n. 14; Auto Mut. Indemnity Co. v. Shaw, 134 Fla. 815, 184 So. 852 (1938); American Fire & Casualty Company v. Davis, 146 So.2d 615 (Fla.Dist.Ct.App.1962). When an insured sues to recover such an excess on the ground that the insurer's conduct in failing to effect a settlement within policy limits amounts to bad faith, it must be shown that the insurer had an opportunity to settle the claim against the insured within policy limits. That is, in refusal-to-settle cases, Florida law does not subject the insurer to liability for bad faith or conduct tantamount to bad faith in the absence of an offer by the person claiming against the insured to settle within the limits of the insured's policy. American Fidelity Fire Insurance Co. v. Johnson, 177 So.2d 679, 683 (Fla.Dist.Ct.App.1965), cert. denied, 183 So.2d 835 (Fla.1966); accord, Seward v. State Farm Mutual Automobile Insurance Co., 5 Cir., 1968, 392 F.2d 723, 727-728. See also Comunale v. Traders & Gen. Ins. Co., 50 Cal.2d 654, 328 P.2d 198 (1958). In this case the District Court found that Allstate never had an opportunity to settle within the $10,000 limit of Bush's policy. On the record before us, we have no basis for saying that this finding was wrong. Bush, therefore, was not entitled to recover from Allstate.

Affirmed.