In a recent string of opinions, the U.S. Court of Appeals for the Eleventh Circuit has corrected and clarified the requirements for a bad faith claim under Florida law, concluding in a decision in favor of policyholders that establishes that a consensual settlement and acceptance of a proposal for settlement qualify as "excess judgments," satisfying the causation requirement for bad faith claims. This is an important result for insureds who need to have sufficient and appropriate insurance coverage when they are faced with lawsuits brought by third parties. Starting with McNamara v. Government Employees Insurance, No. 20-13251 (11th Cir. 2021), the Eleventh Circuit revisited—and departed from—its prior, unpublished decision in Cawthorn v. Auto-Owners Insurance, 791 F. App'x 60 (11th Cir. 2019). In McNamara, the court held that a final judgment that exceeds all available liability policy limits, whether such judgment results from a jury verdict or a consensual settlement, constitutes an "excess judgment" that can be used to satisfy the causation requirement of an insurer bad faith claim in Florida.

Erika McNamara was driving Willard Warren's vehicle when she caused an accident with another driver. Warren was insured under a GEICO policy that provided $100,000 in bodily injury coverage. GEICO and the injured party could not reach a settlement and Warren and McNamara were sued. During the course of the suit, Warren and McNamara were presented with two proposals for settlement under Fla. Stat. Section 768.79. The proposals required Warren and McNamara to consent to final judgments in the amount of the proposal and GEICO had to confirm it would not assert that Warren and McNamara had breached the policy by accepting the proposals. GEICO agreed and the proposals were accepted.