958 F.

2d 340

Anna Rue CAMP and John E. Venn, as Trustee of the Estate of

Fariss D. Kimbell, Jr., M.D., Plaintiffs-Appellants,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Defendant-Appellee.
No. 91-3213.

United States Court of Appeals,

Eleventh Circuit.
April 16, 1992.

George W. Estess, Kerrigan, Estess, Rankin & McLeod, Pensacola, Fla.,

and Talbot D'Alemberte, and Adalber to Jordan, Steel, Hector & Davis,
Miami, Fla., for plaintiffs-appellants.
Elmo R. Hoffman, J. Scott Murphy, Orlando, Fla., William James Reedy,
G.H. Small, Jr., Small & White, Atlanta, Ga., and J. Dixon Bridgers, III,
Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Pensacola, Fla.,
for defendant-appellee.
Appeal from the United States District Court for the Northern District of
Florida; C. Roger Vinson, Judge.
Before KRAVITCH, ANDERSON and BIRCH, Circuit Judges.
BIRCH, Circuit Judge:

This diversity case involves the intersection of insurance bad faith law and
bankruptcy law. The defendant, St. Paul Fire and Marine Insurance Company
("St. Paul"), is the insurer of Dr. Fariss Kimbell, a neurosurgeon who became
bankrupt in late 1986. After the bankruptcy, Dr. Kimbell was found liable for
medical malpractice in his treatment of plaintiff Anna Rue Camp. The jury
returned a verdict of more than three million dollars, well in excess of Dr.
Kimbell's $250,000 policy limits. After the verdict, Camp joined the trustee of
Kimbell's bankruptcy estate, plaintiff John E. Venn, in suing St. Paul to recover
the excess amount of the verdict. The basis of their lawsuit was St. Paul's

alleged bad faith refusal to settle Camp's claim prior to the large judgment.
2

The United States District Court for the Northern District of Florida granted
summary judgment to St. Paul. The court reasoned that because Dr. Kimbell's
bankruptcy prior to the verdict prevented Dr. Kimbell's personal liability for
any excess judgment, St. Paul's alleged bad faith did not harm its named
insured. Therefore, the court concluded that St. Paul could not be sued for bad
faith under Florida law. See Camp v. St. Paul Fire and Marine Ins. Co., 127
B.R. 879, 882-86 (N.D.Fla.1991).

We agree with the district court that the plaintiffs' lawsuit raises issues of first
impression under Florida law. Id. at 884. We also believe that the resolution of
these important questions of law will be determinative of their cause.
Accordingly, we certify two questions to the Florida Supreme Court pursuant to
Article V of the Florida Constitution. See Fla. Const. art. V, 3(b)(6).

4
CERTIFICATION
FROM THE UNITED STATES COURT OF APPEALS FOR
THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF FLORIDA
PURSUANT TO ARTICLE V, SECTION 3(b)(6) OF THE FLORIDA
CONSTITUTION.
5 THE SUPREME COURT OF FLORIDA AND THE HONORABLE JUSTICES
TO
OF THAT COURT:
I. BACKGROUND
A. General Factual Background
6

The insurance policy issued by St. Paul's in favor of Dr. Kimbell covered the
doctor for medical malpractice up to a limit of $250,000 per person injured.
The policy also contained this language:

7
Once
liability has been determined by judgement or by written agreement, the party
making the claim may be able to recover under this policy, up to the limits of your
coverage. But that party can't sue us directly or join us in a suit against the protected
person until liability has been so determined. If the protected person or his or her
estate goes bankrupt or becomes insolvent, we'll still be obligated under this policy.
8

While this policy was in force, Dr. Kimbell performed the procedures which
resulted in Camp's injuries. Camp's lawyers threatened to sue Dr. Kimbell for
medical malpractice. In July 1984, Dr. Kimbell notified St. Paul about Camp's
claim.

St. Paul began the defense of Dr. Kimbell shortly thereafter. On December 10,
1984, Camp sued Dr. Kimbell for medical malpractice in Florida state court.
Between the time that Camp's malpractice suit was filed at the end of 1984 and
July of 1986, there were two important developments relevant to the present
case. First, Dr. Kimbell's financial condition began deteriorating. He had large
debts prior to Camp's lawsuit. In addition, the Camp lawsuit, as well as another
medical malpractice suit, started to affect the doctor's ability to earn money.
Specifically, an investigation of Dr. Kimbell, prompted by the two lawsuits,
eventually led to the suspension of Dr. Kimbell's privileges at one of the
hospitals where he practiced neurosurgery. That suspension led to fewer
referrals, less income, and the concomitant financial instability.

10

Second, Camp twice offered to settle with St. Paul for Dr. Kimbell's policy
limits of $250,000. The settlement requests were made on June 3 and
November 5 of 1985. St. Paul rejected both settlement offers. At the time the
second offer was rejected, St. Paul was at least aware of Dr. Kimbell's financial
difficulties.

11

In July of 1986, Dr. Kimbell filed a Chapter 7 bankruptcy case in the United
States Bankruptcy Court for the Northern District of Florida. Pursuant to the
automatic stay of 11 U.S.C. 362 (1988), Camp's state lawsuit was halted.
While Dr. Kimbell's bankruptcy case was proceeding, Camp offered to settle
with St. Paul for the policy limits for the third time. On September 19, 1986, St.
Paul again rejected settlement. One month later, on November 24, 1986, Dr.
Kimbell was granted a discharge order in bankruptcy court, shielding him from
any personal liability for claims pending against him as of the date of his
bankruptcy filing. During all of this time, St. Paul was researching the question
of whether or not Dr. Kimbell's bankruptcy would impact the company's
exposure to a potential bad faith suit by Mrs. Camp.

12

On April 13, 1987, the bankruptcy court modified the stay in Dr. Kimbell's
case so as to allow Camp to liquidate her claim against the doctor. However,
the bankruptcy court specifically ruled that any judgment obtained by Camp in
her state court lawsuit would not be enforceable against Dr. Kimbell personally.
In May 1987, St. Paul rejected a fourth offer by Camp to settle for the $250,000
policy limits. Although after this fourth rejection St. Paul offered to settle for
amounts lower than the policy limits, the parties could not agree and Camp's
case proceeded to trial. Mrs. Camp won a verdict of more than three million
dollars on June 25, 1987. This judgment was affirmed on appeal. Kimbell v.
Camp, 532 So.2d 1061 (Fla.Dist.Ct.App.1988) (table).

13

Subsequent to the verdict, the bankruptcy court in December of 1988 entered an

13

order allowing the excess of the judgment as a general, non-priority unsecured

claim against Dr. Kimbell's bankruptcy estate. Once again, the bankruptcy
court stated that Camp's judgment could not be enforced against Dr. Kimbell
personally. In the Florida state trial court, Dr. Kimbell moved for an order
canceling and discharging the three million dollar judgment pursuant to
Fla.Stat. ch. 55.145 (1991). On January 11, 1989, the lower state court
discharged the judgment against Dr. Kimbell in accordance with this provision
of Florida law.

B. Procedural Background of the Bad Faith Lawsuit

14
15

On February 3, 1989, the bad faith lawsuit filed by Camp and Venn at the end
of 1988--the lawsuit that is the subject of this appeal--was removed to the
United States District Court for the Northern District of Florida. After
discovery, the parties briefed and argued cross-motions for summary judgment.
St. Paul's motion for summary judgment relied heavily upon Fidelity and
Casualty Co. v. Cope, 462 So.2d 459 (Fla.1985), and Clement v. Prudential
Property & Casualty Ins. Co., 790 F.2d 1545 (11th Cir.1986) (interpreting
Florida law).

16

According to St. Paul, Cope and Clement make it clear that the essence of an
insurance bad faith claim in Florida is the named insured's liability for an
excess judgment following the insurance company's bad faith failure to settle.
The reason that some extant exposure to liability in the insured is the sine qua
non of a Florida bad faith claim, St. Paul contended, is that the insurer's duty
runs to the insured, not to any injured third party. In Cope and Clement, the
named insured was not responsible for an excess verdict, because either the
injured third party executed a release of his claims against the named insured
(Cope ) or agreed not to execute on the assets of the named insured (Clement ).
Both cases held that the injured party could not sue the insurance company for
bad faith under Florida law, because the named insured had not been harmed by
an enforceable excess judgment. See Cope, 462 So.2d at 459, 461; Clement,
790 F.2d at 1547-48. Evidently, an insurance company's bad faith liability is
extinguished once an insured is released from liability for a judgment in favor
of an injured third party.

17

St. Paul contended that Cope and Clement required dismissal of the plaintiffs'
bad faith claim in this case. Because Dr. Kimbell received his discharge in
bankruptcy well before Camp's state court lawsuit proceeded to trial, the doctor
was never liable for the adverse judgment in favor of Mrs. Camp. Moreover,
the judgment rendered against Dr. Kimbell was subsequently canceled and
discharged by the Florida circuit court, a discharge which had "the same effect

as a satisfaction of judgment." Fla.Stat. ch. 55.145 (1991). Accordingly, St.

Paul argued that under Cope and Clement, it could not be sued by Mrs. Camp
or Mr. Venn for bad faith because its named insured was never liable for an
excess verdict.
18

In their motion for summary judgment, the plaintiffs first relied upon the
language of Dr. Kimbell's insurance policy. In particular, the plaintiffs asserted
that the doctor's policy stated that St. Paul would "still be obligated under th[e]
policy" if Dr. Kimbell went bankrupt or became insolvent. Therefore, they
argued, even if Cope and Clement accurately stated that Florida law precluded
bad faith claims when the named insured was not responsible for an excess
judgment, the language of the St. Paul policy (which must be construed against
the company) overrode that common law and permitted the plaintiffs' bad faith
action against St. Paul. In short, the plaintiffs believed that St. Paul was "still ...
obligated" to settle Camp's claim in good faith notwithstanding the bankruptcy
of Dr. Kimbell.

19

The plaintiffs also argued that even if the language of the policy failed to
authorize their bad faith suit against St. Paul, Cope and Clement should not be
applied to bar their cause of action merely because of Dr. Kimbell's fortuitous
bankruptcy. In essence, the plaintiffs claimed that Cope and Clement are
distinguishable. First, neither case involved the bankruptcy of the named
insured. Instead, in both cases the named insured was voluntarily released from
liability for the excess judgment by the injured third party. Second, in neither
Cope nor Clement were there any other adverse consequences to the named
insured from the alleged bad faith of the insurance company. Here, in contrast,
there may be other adverse consequences to Dr. Kimbell, in so far as his
bankruptcy estate remains liable for the excess judgment. Finally, the plaintiffs
argued, importing Cope and Clement wholesale into the bankruptcy context
would be ill-advised. Under a regime in which a named insured's bankruptcy
insulated all bad faith exposure, insurance companies might have an incentive
to contribute to the named insured's bankruptcy, or might refuse to settle clearly
legitimate claims if the named insured's bankruptcy was imminent or even
possible.

20

Although the district court found that there were questions of fact regarding St.
Paul's alleged bad faith failure to settle, the court agreed with St. Paul's legal
analysis and accordingly awarded the insurer summary judgment. The court
wrote:

21 insurer's duty of good faith runs to the insured alone, as the Cope opinion
[T]he
makes very clear. As the Supreme Court of Florida indicated, the bankruptcy estate's

cause of action is entirely derivative of the insured's, and is extinguished once the
insured is released from obligations stemming from the underlying judgment. The
underlying judgment could not be more clear: Kimbell was never personally liable
for the excess judgment. Under the law of Florida, his discharge in bankruptcy had
the effect of "satisfying" that judgment with respect to him. Further, the discharge
was well before trial and long before judgment was entered. As the bankruptcy
judge's order makes perfectly plain ..., any judgment in the Camp litigation "shall
not be enforceable against the Debtor as a personal liability." Therefore, Kimbell
was, before trial, "released from liability for any damages he might have suffered as
a result of the insurer's bad faith." See Clement, supra, 790 F.2d at 1548. As a result,
Cope and Clement control, and St. Paul cannot be liable for any alleged bad faith in
defending Dr. Kimbell.
22

Camp, 127 B.R. at 883-84. As for the specific bankruptcy language of Dr.
Kimbell's policy, the court believed that the clause either "[did] not affect the
application of the law of Florida and the particular way the judgment was
entered in accordance with that law" or only referred to "St. Paul's duty to
defend Kimbell and to pay off its claim up to the policy limits...." Id. at 885.

23

The plaintiffs appealed from the district court's order granting St. Paul
summary judgment. On appeal, the parties have pressed the same arguments
considered by the district court.

II. REASONS FOR CERTIFICATION

24

This case obviously involves important questions of unresolved Florida law.

Cope appears to have relevance, but is not directly on point because it did not
involve the bankruptcy of the named insured. Moreover, there may be
indications that the lower Florida courts are retreating from the rationale of
Cope. See, e.g., Shook v. Allstate Ins. Co., 498 So.2d 498, 499-500
(Fla.Dist.Ct.App.1986) (distinguishing Cope and allowing the bad faith suit
even though the named insured had been released from liability by the injured
third party's agreement not to execute), review denied, 508 So.2d 13
(Fla.1987); Clauss v. Fortune Ins. Co., 523 So.2d 1177, 1178 & n.3
(Fla.Dist.Ct.App.1988) (allowing, without discussion, injured party's bad faith
claim despite the prior bankruptcy of the named insured).

25

As for the question of the language of Dr. Kimbell's insurance policy, Florida
has never addressed the issue. Although it is unclear whether the bankruptcy
clause in Dr. Kimbell's policy will overcome the principle clearly articulated in
Cope, we note that other jurisdictions have shown some willingness to allow
bad faith suits when the insurance policy contained similar language. See, e.g.,

Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554, 563-64 (Mo.Ct.App.1990)
(Missouri law) (permitting bad faith claim despite named insured's bankruptcy
because the "policy contained a provision that bankruptcy or insolvency of the
insured or his estate would not relieve [the company] of any obligation");
Torrez v. State Farm Mut. Auto. Ins. Co., 705 F.2d 1192, 1197-1201 (10th
Cir.1982) (New Mexico law) (permitting the bad faith claim despite
bankruptcy); Maguire v. Allstate Ins. Co., 341 F.Supp. 866, 869-71
(D.Del.1972) (Delaware law) (same). But see Harris v. Standard Accident and
Ins. Co., 297 F.2d 627, 636 (2d Cir.1961) (New York law) (barring bad faith
claim, without regard to insurance policy language, because the named insureds
"were insolvent before the excess judgment was rendered, have not paid any
part of it, and have been discharged from any future obligation to pay it"), cert.
denied, 369 U.S. 843, 82 S.Ct. 875, 7 L.Ed.2d 847 (1962).
26

Accordingly, because of the novelty and importance of the issues raised in this
appeal, we certify the following two questions to the Florida Supreme Court.

III. QUESTIONS TO BE CERTIFIED

27

(1) WHETHER, AS A MATTER OF LAW, A NAMED INSURED'S

BANKRUPTCY AND DISCHARGE FROM LIABILITY PRIOR TO
EXPOSURE TO AN EXCESS JUDGMENT, SUCH THAT THE NAMED
INSURED WAS NEVER PERSONALLY LIABLE FOR ANY AMOUNT OF
THE JUDGMENT, PRECLUDES AN INJURED PARTY'S OR
BANKRUPTCY TRUSTEE'S SUBSEQUENT BAD FAITH CAUSE OF
ACTION AGAINST AN INSURANCE COMPANY.

28

(2) WHETHER, AS A MATTER OF LAW, THE LANGUAGE OF A

BANKRUPTCY CLAUSE IN A PARTICULAR INSURANCE POLICY,
SUCH AS THE LANGUAGE AT ISSUE IN THIS CASE, CAN AUTHORIZE
AN INJURED PARTY'S OR BANKRUPTCY TRUSTEE'S BAD FAITH
ACTION AGAINST AN INSURANCE COMPANY, NOTWITHSTANDING
THE FACT THAT THE NAMED INSURED WAS NEVER PERSONALLY
LIABLE FOR ANY AMOUNT OF AN EXCESS JUDGMENT DUE TO THE
NAMED INSURED'S BANKRUPTCY.

29

We do not intend the particular phrasing of these questions to limit the Florida
Supreme Court in its consideration of the problems posed by this entire case. In
answering the certified questions, the Florida Supreme Court may wish to
consider whether or not different answers would be appropriate if the evidence
demonstrated that the conduct of the insurance company either caused or
contributed to the named insured's bankruptcy. In addition, the proper

resolution of the certified questions may require an interpretation of Fla.Stat.

ch. 624.155 (1991). The plaintiffs have contended that because this chapter
authorizes "[a]ny person" to bring a bad faith action against an insurance
company, id. ch. 624.155(1), Mrs. Camp's lawsuit is not derivative of Dr.
Kimbell's right of action and therefore not dependent upon his prior exposure to
liability. In order to assist consideration of the case, the entire record, along
with the briefs of the parties, shall be transmitted to the Supreme Court of
Florida together with this certification.
30

QUESTIONS CERTIFIED.