## Facts

- Kenneth and Teresa Cunningham were injured and suffered property damage in a vehicle collision allegedly caused by Joseph Grant James.
- The Cunninghams sued James for negligence; James was insured by Standard Guaranty Insurance Company with $10,000 bodily-injury and $10,000 property-damage limits.
- After months without settlement, the Cunninghams amended the suit to add Standard Guaranty, alleging bad-faith failure to settle.
- The Cunninghams and Standard Guaranty agreed to try the bad-faith claim before trying the underlying negligence claim.
- The parties stipulated that if no bad faith were found, the Cunninghams would accept a settlement for policy limits and James would not be exposed to an excess judgment.
- A jury found Standard Guaranty acted in bad faith in handling the claim, even though the negligence action had not yet reached a final judgment.
- Standard Guaranty later challenged the court’s authority to try bad faith first, asserting lack of subject-matter jurisdiction because no excess judgment existed.
- The trial court denied post-trial motions and entered a final judgment finding bad faith and that James’s negligence was the sole legal cause of the Cunninghams’ damages; the district court reversed on the ground the bad-faith claim had not accrued.

## Issues

1. Whether a trial court may adjudicate an insurer’s third-party bad-faith liability before final resolution of the underlying tort action when the parties stipulate to try bad faith first and to protect the insured from any excess judgment.

## Decision

- The Supreme Court of Florida approved the district court’s decision in result only.
- The court answered the certified question by holding that the trial court has jurisdiction to try the insurer’s bad-faith liability before final determination of the underlying negligence action when the parties stipulate to that procedure and the stipulation protects the insured from an excess judgment.
- The court treated the absence of an excess judgment as an accrual/timing rule for conventional bad-faith claims, not a bar to the court’s subject-matter jurisdiction where the parties’ agreement eliminated the insured’s excess exposure.

## Legal Principles

- A conventional third-party bad-faith failure-to-settle claim generally accrues only after entry of a final excess judgment against the insured in the underlying tort action.
- Parties may, by stipulation, permit the bad-faith issues to be tried before the negligence action is finally determined when the agreement ensures the insured will not face an excess judgment if bad faith is not found.
- Such an agreement permits an early adjudication of bad faith without depriving the circuit court of subject-matter jurisdiction over the dispute.

## Conclusion

Florida courts may enforce a stipulated procedure allowing trial of third-party bad faith before the underlying tort case ends when the agreement caps the insured’s exposure and ties resolution of the tort claim to the bad-faith verdict, notwithstanding the usual excess-judgment accrual rule.


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