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Progressive committed an error, not bad faith – 11th Circuit

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Progressive American Insurance Co is not liable for a $10 million verdict a bereaved mother in Florida obtained after Progressive failed to follow her attorney’s instructions for drafting a $20,000 settlement agreement, a federal appeals court held Tuesday.

The 11th U.S. Circuit Court of Appeals affirmed Progressive’s win in a third-party bad faith lawsuit by Heather Eres, whose 8-year-old son was killed in a 2007 train collision caused by Progressive’s insured.

Progressive admittedly botched the settlement with its wording of the releases; however, under a totality of the circumstances approach, its handling of Eres’ claim was “diligent,” “expeditious,” and “quite the opposite” of bad faith, Circuit Judge Kevin Newsom wrote for the court. He was joined by Circuit Judges Jill Pryor and Stanley Marcus.

One of Eres’ appellate attorneys, Michal Meiler of Ver Ploeg & Marino, “respectfully” disagreed with the 11th Circuit.

“We believe that Progressive did not act with the requisite care and diligence in the handling of this claim,” Meiler said in an email.

Progressive and its attorneys at Young Bill Boles Palmer Duke & Thompson and Boyd & Jenerette did not immediately respond to requests for comment.

According to the 11th Circuit, Eli Villareal Alvarez (Villareal) was intoxicated when his truck “slammed into Heather Eres’ vehicle, propelling it into an oncoming train.”

Within a week, Progressive tendered policy limits of $20,000 to Eres and the child’s estate. However, her attorney said Eres and her estranged husband were still deciding who would represent the child’s estate. Eres also preferred to await the outcome of Villareal’s criminal trial, the lawyer said.

Progressive followed up for two years, until Villareal entered a guilty plea in 2009. Another attorney, Peter Macaluso, then said Eres and the estate would settle for $20,650, provided an agreement could be reached by Good Friday – 16 days later.

Macaluso insisted that the releases include only Villareal, and not include any “hold harmless” provisions.

With two days to spare, Progressive delivered the draft checks, releases and a cover letter stating that it thought it had followed Macaluso’s instructions, but he should notify it of any problems.

The releases did not include any hold-harmless provisions but did include a waiver of subrogation claims against Villareal. Macaluso called that a hold-harmless provision; Progressive disagreed, but told him to “feel free” to strike the offending language.

Instead, the settlement fell through. Eres sued Villareal in state court, obtaining the $10.2 million verdict in 2011. An appeals court affirmed in 2013 – based, in part, on a 2012 appellate ruling that found a subrogation waiver was “in the nature of” a hold-harmless clause.

Seeking to collect on the verdict, Eres sued Progressive in 2017. The U.S. District Court in Tampa ruled for the insurer last year.

Affirming, the 11th Circuit said Progressive had complied with the letter of Macaluso’s instructions, and the question of whether hold-harmless clauses included subrogation waivers was unsettled at the time.

While the state appeals court ultimately resolved that question in Eres’ favor, “Progressive lacked the benefit of that decision when it responded to Eres’ offer in the spring of 2009, so it can’t form the basis of her bad-faith claim now,” the court held.

The case is Eres v. Progressive American Insurance Co, 11th U.S. Circuit Court of Appeals, No. 20-11006.

For Eres: Stephen Marino Jr and Michal Meiler of Ver Ploeg & Marino; Stephen Rosenthal of Podhurst Orseck

For Progressive: Billy Richard Young, Jordan Thompson, and Megan Alexander of Young Bill Boles Palmer Duke & Thompson; Joshua Hartley of Boyd & Jenerette

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