Could a Florida bar brawl case reshape insurer bad faith liability?

A Florida bar brawl that left a woman fatally shot has become a multimillion-dollar liability dispute with potential ripple effects nationwide on how carriers handle claims when catastrophic losses exceed policy limits.

At the center is Kinsale Insurance Co. vs. Pride of St. Lucie Lodge 1189, a case involving a deadly 2015 fight at a Fort Pierce fraternal lodge that escalated into the parking lot, where patron Tanya Oliver was shot in the head. She later died from her injuries. A jury found the lodge liable for negligent security and awarded more than $3.3 million, more than 60 times Kinsale’s $50,000 assault-and-battery sub-limit.

The legal battle now shifts to whether Kinsale acted in “bad faith” by not tendering its policy limits before the victim’s estate filed suit. The Eleventh Circuit Court of Appeals recently ruled that a jury should decide that question, reversing a lower court’s summary judgment in favor of Kinsale.

Florida’s Powell Doctrine at issue

At issue is Florida’s so-called Powell Doctrine, a 35-year-old precedent requiring insurers to start settlement negotiations when liability is clear and damages are likely to exceed policy limits. As Stephen F. Rosenthal, the lodge’s appellate attorney, explained in an interview, the insurer argued that “clear” should mean liability as plain as a drunk driver running a red light. The court disagreed, siding with a broader interpretation.

“Clear means obvious,” Rosenthal said. “And obvious means a thing is easily discovered, seen, or understood. The court rejected the industry’s attempt to limit it to inarguable, black-and-white cases.”

Exposure to bad-faith claims increases

That subtle shift could have significant consequences. If courts apply “obvious” instead of “inarguable” as the standard, it alters the risk allocation between the insurer and the insured. The more comprehensive “obvious” standard means that insurers are more likely to bear unforeseen losses in scenarios where liability and damages become clear after an incident, even if a claimant has not made a demand. This shift increases the exposure to bad-faith claims for insurers when serious injuries occur alongside low policy limits. This increased exposure to bad-faith claims raises industry alarm because it moves the financial burden of unexpected situations from policyholders to insurance providers, potentially increasing the number of situations where insurers might face large payouts.

Complicating matters further, Florida lawmakers in 2023 amended the state’s bad faith statute to create a 90-day “safe harbor” period. Insurers that tender limits within 90 days of receiving notice and supporting evidence of a claim are shielded from bad faith liability.

This legislative change introduces a practical timeline that insurers must closely adhere to. Day 1 marks the moment an insurer receives notice and the supporting evidence of a claim. By Day 90, the deadline arrives for insurers to tender their policy limits to protect against bad faith liability. This timeline conflict highlights the tension between the statutory”’safe harbor” and the broader interpretation of clear liability embraced by the appellate court.

“The case clarifies that the industry’s reliance on a narrow definition won’t fly anymore,” Rosenthal said. “Simultaneously, the legislature tightened the window to give insurers more breathing room. Those two forces are colliding.”

N.J., Oklahoma courts cite similar principles

Florida is not alone in recognizing a duty to settle absent a demand. New Jersey and Oklahoma courts have cited similar principles, and leading insurance treatises reference the same standard. That opens the door for the St. Lucie decision to influence courts in other jurisdictions wrestling with bad faith law.

Rosenthal suggested that carriers nationwide may need to reassess claims-handling protocols in cases where damages clearly exceed coverage.

“This ruling requires a careful assessment early on,” he said. “If there’s a likely possibility of an excess judgment, insurers had better take affirmative action to initiate settlement discussions.”

For insurers, the concern is that a “likely possibility” test injects uncertainty into what had been argued as a standard, or “bright line,” duty. Defense lawyers warn it will create more jury questions and fewer opportunities for early dismissal of bad-faith suits.

Industry experts note that negligent-security cases in Florida often result in significant jury verdicts, and failure to act quickly can be devastating. As one claims handler testified during the litigation, “very seldom will you get a defense verdict” in such cases.

Kinsale waited eight months after learning of Oliver’s shooting before tendering its $50,000 sub-limit, by which time the estate had already filed suit. The appellate court stated that a delay could lead a jury to conclude that the company acted in bad faith.

Financial exposure for carriers

The financial exposure for carriers is stark: the difference between a $50,000 tender and a $3.3 million judgment against their insureds. Florida courts have said such exposure is “a ticking financial time bomb” for insurers and policyholders.

The case now returns to the federal trial court for a jury to decide whether Kinsale’s handling amounted to bad faith. Meanwhile, insurers nationwide may be recalibrating. Some may adopt more proactive claims investigation; others may seek legislative fixes in their states to mirror Florida’s 90-day safe harbor.

The ruling underscores the value of bad faith protections for policyholders. For insurers, it is a cautionary tale of how quickly a failure to act can mushroom into catastrophic exposure.

“This is a new circumstance,” Rosenthal said. “The statute gives companies more protection. But the case law is now more liberal. Insurers will have to navigate both.”

The outcome of Kinsale v. St. Lucie will not just decide the fate of one fraternal lodge in Florida. It may reset the liability standards by which insurers nationwide are judged — and redefine what it means to act in good faith.

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