ELEVENTH CIRCUIT’S NOTEWORTHY DISCUSSION ON BAD FAITH INSURANCE CLAIMS

Posted on October 2, 2021October 2, 2021 by Edward Garber

The Eleventh Circuit Court of Appeal’s opinion in Pelaez v. Government Employees Insurance Company, 2021 WL 4258821 (11^th Cir. 2021) is a non-construction case that discusses the standard for pursuing a bad faith claim against an insurer. This case dealt with an automobile accident. While the facts of the case are interesting and will be discussed, the takeaway is the Eleventh Circuit’s noteworthy discussion on the standard for bad faith claims and how they should be evaluated. This discussion is included below–with citations–because while the term “bad faith” is oftentimes thrown around when it comes to insurance carriers, there is indeed an evaluative standard that is applied to determine whether an insurance carrier acted in bad faith.

In Pelaez, a high school student driving a car crashed with a motorcycle. The motorcycle driver was seriously injured and airlifted to the hospital. The accident was reported to the automobile liability insurer of the driver of the car. The insurer through its investigation initially believed the motorcycle driver was contributory negligent. Eleven days after the crash, after learning additional information, the insurer tendered its bodily injury policy limits of $50,00 to the motorcycle driver even though it never received a settlement demand. The insurer sent a tender package to the motorcycle driver’s lawyer that included a $50,000 check for the bodily injury claim and a proposed release. The accompanying letter told the attorney to contact the insurer with any questions about the release and to edit the proposed release with suggested changes. The insurer also wanted to inspect the motorcycle in furtherance of adjusting the property damage claim which also had a policy limit of $50,000. A location of where the motorcycle could be inspected was never provided.

Shortly thereafter, counsel for the motorcycle driver rejected the policy limits tender offer claiming that the proposed release form included with the tender package was overbroad (and it was) since it did not specifically carve-out property damage claims. The insurer again told the lawyer to edit the release and asked for the location of the motorcycle because its intent was to treat the bodily injury and property damage claims separate. Instead of a response, the motorcycle driver sued the driver of the car. Clearly, the objective was not the $50,000 policy limits, but the potential bad faith exposure.

The property damage claim for the motorcycle ultimately settled but the bodily injury claim continued to trial. During trial, the parties consented to a judgment where a judgment was entered against the driver of the car for $14,900,000; the parties stipulated that the judgment shall not be recorded and cannot be collected against the car driver. Instead, the motorcycle driver agreed to collect solely against the car driver’s insurance policy. The car driver’s insurer was not a party to the judgment or stipulation.

Thereafter, both the car and motorcycle drivers sued the car driver’s automobile liability insurer for bad faith refusal to settle. The trial court entered summary judgment in favor of the car driver’s insurer finding no reasonable jury could find the insurer acted in bad faith under the totality of the circumstances. The Eleventh Circuit affirmed the trial court’s summary judgment in favor of the insurer based on the totality of circumstances including the insurer’s efforts to settle the bodily injury claim for policy limits. In doing so, the Eleventh Circuit includes the following noteworthy discussion on such bad faith insurance claims:

“It has long been the law of [Florida] that an insurer owes a duty of good faith to its insured.” Berges v. Infinity Ins. Co., 896 So. 2d 665, 672 (Fla. 2004). The duty has been well-defined for more than 40 years, since the Florida Supreme Court described it in Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980):

An insurer, in handling the defense of claims against its insured, has a duty to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business. For when the insured has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement, then the insurer must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured. This good faith duty obligates the insurer to advise the insured of settlement opportunities, to advise as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid same. The insurer must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.

Id. at 785; see also, e.g., Harvey v. GEICO Gen. Ins. Co., 259 So. 3d 1, 6–7 (Fla. 2018) (quoting Boston Old Colony to define the duty); Kropilak v. 21st Century Ins. Co., 806 F.3d 1062, 1067–68 (11th Cir. 2015) (same). “Breach of this duty may give rise to a cause of action for bad faith against the insurer.” Perera v. U.S. Fid. & Guar. Co., 35 So. 3d 893, 898 (Fla. 2010). Florida’s bad faith law is “designed to protect insureds who have paid their premiums and who have fulfilled their contractual obligations by cooperating fully with the insurer in the resolution of claims.” Berges, 896 So. 2d at 682.

Where “liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations.” Harvey, 259 So. 3d at 7 (quotation marks omitted). “In such a case, where the financial exposure to the insured is a ticking financial time bomb and suit can be filed at any time, any delay in making an offer … even where there was no assurance that the claim could be settled could be viewed by a fact finder as evidence of bad faith.” Id. (cleaned up).

“In Florida, the question of whether an insurer has acted in bad faith in handling claims against the insured is determined under the ‘totality of the circumstances’ standard.” Berges, 896 So. 2d at 680. Indeed “the critical inquiry” in a bad faith action is not whether an insurer met the obligations set out in Boston Old Colony but instead “whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment.” Harvey, 259 So. 3d at 7 (noting that the Boston Old Colony obligations “are not a mere checklist”).

The “focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured.” Berges, 896 So. 2d at 677. For that reason, a claimant’s “actions can[not] let the insurer off the hook when the evidence clearly establishes that the insurer acted in bad faith in handling the insured’s claim.” See Harvey, 259 So. 3d at 11 (emphasis added) (rejecting the “conclusion that where the [claimant]’s own actions[ ] even in part cause the judgment, the insurer cannot be found liable for bad faith”) (quotation marks omitted); id. (noting that “an insurer can[not] escape liability merely because the [claimant]’s actions could have contributed to the excess judgment”) (emphasis added and footnote omitted); id. at 12 (rejecting the idea that, “regardless of what evidence may be presented in support of the [claimant]’s bad faith claim,” the “insurer could be absolved of bad faith” if it “can put forth any evidence that the [claimant] acted imperfectly during the claims process,” which “would essentially create a contributory negligence defense for insurers” that is “inconsistent with [Florida’s] well-established bad faith jurisprudence”).

“[N]egligence is not the standard” for evaluating bad faith actions, Harvey, 259 So. 3d at 9, but “[b]ecause the duty of good faith involves diligence and care in the investigation and evaluation of the claim against the insured, negligence is relevant to the question of good faith,” Boston Old Colony, 386 So. 2d at 785. And “[a]lthough bad faith is ordinarily a question for the jury, both this Court and Florida courts have granted summary judgment where there is no sufficient evidence from which any reasonable jury could have concluded that there was bad faith on the part of the insurer.” Eres, 998 F.3d at 1278 (cleaned up); see also State Farm Fire & Cas. Co. v. Zebrowski, 706 So. 2d 275, 277 (Fla. 1997) (concluding, in a statutory third-party bad faith action, that summary judgment was appropriate). “While an overbroad release can create a jury question about bad faith, it doesn’t necessarily do so.” Eres, 998 F.3d at 1279.

Palaez, supra, at *4-6.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

DETERMINING OCCURRENCE FOR INJURY UNDER COMMERCIAL GENERAL LIABILITY POLICY WITHOUT APPLYING “TRIGGER THEORY”

Posted on June 26, 2021June 26, 2021 by Edward Garber

Oftentimes an occurrence in a commercial general liability policy is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” It is this occurrence that causes the bodily injury or property damage that may be covered by the policy.

An interesting non-construction case determined an occurrence under a commercial general liability policy occurred when the negligent act occurred irrespective of the date of discovery or the date the claim was discovered or asserted. See Certain Underwriters at Lloyd’s, London Subscribing to Policy No. J046137 v. Pierson, 46 Fla.L.Weekly D1288c (Fla. 4^thDCA 2021). This is interesting because the appellate court did NOT apply a “trigger theory” to first determine the occurrence’s policy period. The appellate court found it did not need to determine which “trigger theory” applied to determine the occurrence for the injury and relied on a cited case: “trigger theories are generally used in the context of deciding when damage occurred ‘in cases involving progressive damages, such as latent defects, toxic spills, and asbestosis’ because the time between the ‘injury-causing event (such as defective construction, a fuel leak, or exposure to asbestos), the injury itself, and the injury’s discovery or manifestation can be so far apart.” Pierson, supra, citing and quoting Spartan Petroleum Co. v. Federated Mut. Ins. Co., 162 F.3d 805, 808 (4^th Cir. 1998).

In Pierson, police officers were found civilly liable for civil rights violations that occurred twenty-years earlier when the officers physically and verbally forced a 15-year old boy to confess to a crime. Many years later, DNA evidence proved the boy did not commit the crime he was forced to confess and was incarcerated for. The officers sued the police department’s commercial general liability policy for failing to indemnify them in the civil lawsuit. The policy, however, was NOT in effect twenty years earlier when the officers verbally and physically forced the confession. “Since it is undisputed that the Officers’ misconduct occurred twenty years prior to the execution of the policies, there can be no duty to indemnify in this case…. [T]he fact that [the boy] suffered the consequences of the Officers’ wrongful conduct throughout his incarceration, including while the subject policies were in effect, is irrelevant for purposes of determining whether the Insurer has a duty to indemnify. Likewise, the fact that [the boy] was exonerated while the 2009 policy was in effect is of no consequence.” Pierson, supra.

What does this holding mean? It could likely mean outside of a latent defect scenario or a pollution liability issue–or property damage scenario–a “trigger theory” to determine when an occurrence occurred or is triggered is not applicable. An occurrence will be deemed to occur when the accident causing the injury occurred, as defined by the policy.

COURTS WILL NOT REWRITE YOUR POST-LOSS PROPERTY INSURANCE OBLIGATIONS

Posted on May 16, 2021May 16, 2021 by Edward Garber

In the preceding posting, I wrote about making sure you comply with your property insurance policy’s post-loss policy obligations. By failing to comply, you can render your policy ineffective meaning you are forfeiting otherwise valid insurance coverage, which was the situation discussed in the preceding posting. As an insured, you should never want this to occur!

In another case, discussed here, the property insurance policy had a preferred contractor endorsement. This means that instead of paying the insured insurance proceeds, the insurer could perform the repairs with its preferred contractor. Typically, the insured will pay a discount on their premium for this preferred contractor endorsement. The insurer elected to move forward with the repairs based on the preferred contractor endorsement but the insured performed the repairs on his own and then sold the house. By doing this, the appellate court held the insured rendered his policy ineffective by breaching his own policy (and failing to allow this post-loss obligation to take place). The explicit terms of the policy allowed the insurer to perform the repairs instead of paying the insured insurance proceeds. The court could NOT rewrite the post-loss obligations in the policy by requiring the insurer to pay insurance proceeds when the insurer, per the preferred contractor endorsement, elected to perform the repairs.

Your insurance policy is a contract and will be treated as a contract. Please make decisions with this in mind and consult counsel before taking positions that may be violative of your own contract and render your policy ineffective.

COMPLY WITH YOUR INSURANCE POLICY’S CONDITIONS PRECEDENT (POST-LOSS OBLIGATIONS)

Posted on May 15, 2021May 15, 2021 by Edward Garber

I am of the opinion that if your property insurer requests a sworn proof of loss, furnish one with the assistance of counsel (preferably). Ignoring the insurer’s request or refusing to comply with insurer’s request is NOT value-added; it is simply placing you at a disadvantage based on the insurer’s argument that you, as the insured, materially breached the policy. I generally find no value having to confront this expected argument. Instead, I find value making an effort to comply with post-loss obligations including the insurer’s request to submit a sworn proof of loss. Working with counsel can help you comply with post-loss obligations (conditions precedent) while not weakening the value or merits of your claim.

By way of example, in Edwards v. Safepoint Ins. Co., 46 Fla. L. Weekly D1086a (Fla. 4^th DCA 2021), the insured did not provide its property insurer with the requested sworn proof of loss. The insurer moved for summary judgment that the insured’s failure to submit the sworn proof of loss was a material breach of the policy that rendered the policy ineffective. The trial court agreed and granted summary judgment. The Fourth District Court of Appeal affirmed explaining “[a] total failure to comply with policy provisions made a prerequisite to suit under the policy may constitute a breach precluding recovery from the insurer as a matter of law. If, however, the insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented for resolution by a jury.” Edwards, supra, quoting Haiman v. Federal Ins. Co., 798 So.2d 811, 812 (Fla. 4^th DCA 2001).

In Edwards, however, it was undisputed the insured failed to submit the sworn proof of loss. Thus, there was a total failure to comply. More so, the Fourth District held that under Rodrigo v. State Farm Florida Ins. Co., 144 So.3d 690 (Fla. 4^th DCA 2014), “(1) an insurer need to show prejudice when the insured breaches a condition precedent to suit, (2) proof of loss is a condition precedent to the insured’s suit, and (3) the insurer did not waive the sworn proof of loss requirement by tendering payment because [i]nvestigating any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim does not constitute a waiver of a sworn proof of loss requirement.” Edwards, supra (internal quotations omitted).

Clearly, this is not the outcome that any insured wants. But this outcome was due to the insured not complying with its post-loss obligation, or condition precedent to suit, that was requested by the insurer. As you can see, not doing so was not value-added, it disadvantaged the insured to the point where its failure was deemed to render the policy ineffective to its detriment.

BLINDLY RELYING ON PUBLIC ADJUSTER OR LOSS CONSULTANT’S FALSE ESTIMATE CAN PLAY OUT BADLY

Posted on April 3, 2021April 3, 2021 by Edward Garber

Insurance policies, particularly property insurance policies, have a concealment or fraud provision that, in essence, gives the insurer an out if the insured submits a fraudulent claim, a false claim, or conceals material facts. Unlike a traditional fraud claim where a party needs to prove intent, the provision is broad enough that it does not require any intent behind making a false statement. See Mezadieu v. Safepoint Ins. Co., 46 Fla.L.Weekly D691c (Fla. 4^th DCA 2021). For this reason, and as exemplified below, do NOT blindly rely on a public adjuster or loss consultant’s estimate that contains false statements because those false statements, particularly if you know they are false, can play out badly for you! Review the estimate and ask questions about it to make sure you understand what is being included in the loss or damages estimate.

In Mezadieu, a homeowner submitted a claim to her property insurance carrier due to a second-floor water leak emanating from her bathroom. She submitted an estimate from her public adjuster that included damages for her kitchen cabinets directly below the second-floor bathroom, as well as other items on her first-floor. Her carrier denied coverage based on the exclusion that the policy excludes damage caused by “[c]onstant or repeated seepage of water or steam…which occurs over a period of time.”

The homeowner filed a lawsuit against her property insurance carrier. In interrogatory answers, she verified she was seeking the damages per the estimate prepared by her public adjuster. During her deposition, she reiterated this point. However, and this is a big however, she acknowledged that her public adjuster’s estimate contained false statements: “when asked if the reported leak caused damage to the kitchen cabinets, [she] disclosed that the cabinets had actually been damaged by a prior leak in the kitchen – a leak which [she] made a claim for with a different insurer – and the leak did not cause any damage to the kitchen cabinets.” Mezadieu, supra. Indeed, she conceded that her second-floor bathroom leak caused no damage to her kitchen and she did see any water damage on her first floor, although such damage was included in her public adjuster’s estimate.

The insurance carrier, after amending its affirmative defenses, moved for summary judgment based on the concealment or fraud provision which excluded coverage if an insured: “(1) Intentionally concealed or misrepresented any material fact or circumstance; (2) Engaged in fraudulent conduct; or (3) Made a false statement; relating to this insurance.” Mezadieu, supra.

The trial court granted summary judgment attributing the false statements to the homeowner “because she adopted the estimate as her own in both her sworn interrogatory answers and deposition testimony, and because [her adjuster] was acting as her agent.” Mezadieu, supra. The appellate court concurred because: (a) she adopted the estimate as her own statement; and (b) even if she did not intend to rely on false statements in her public adjuster’s estimate, the policy does not require that a false statement needs to be made with intent. As the appellate court explained, and reinforcing why reviewing and asking questions about any estimate is a must:

[An] insured cannot blindly rely on and adopt an estimate prepared by his or her loss consultant without consequence. This is not to say that an insured will always be bound by the representations made in an estimate prepared by his or her loss consultant. However, when an insured relied on or adopt an estimate containing material false statements to support his or her claim, the insured is bound by the estimate and cannot avoid application of the concealment or fraud simply because he or she did not prepare the estimate.

DO NOT FORFEIT COVERAGE UNDER YOUR PROPERTY INSURANCE POLICY

Posted on February 6, 2021February 6, 2021 by Edward Garber

If you have read prior articles (see here and here as an example), then you know that when it comes to first-party property insurance policies, an insured must comply with post-loss obligations in the policy. Failure to comply with a post-loss obligation gives the insurer the argument that the insured materially breached the policy and, therefore, forfeited rights to coverage. Naturally, this is avoidable by ensuring post-loss obligations are complied with, ideally under the guidance of counsel and qualified public adjusters to ensure your rights are being preserved and maximized.

[W]hen an insurer has alleged, as an affirmative defense to coverage, and thereafter has subsequently established, that an insured has failed to substantially comply with a contractually mandated post-loss obligation, prejudice to the insurer from the insured’s material breach is presumed, and the burden then shifts to the insured to show that any breach of post-loss obligations did not prejudice the insurer.

Universal Property & Casualty Ins. Co. v. Horne, 46 Fla.L.Weekly D201b (Fla. 3d DCA 2021) quoting American Integrity Ins. Co. v. Estrada, 276 So.3d 905, 916 (Fla. 3d DCA 2019).

This means when an insured fails to comply with a post-loss obligation (e.g., sworn statement in proof of loss, examination under oath), the property insurer will assert this failure as an affirmative defense. There is an “if-then” framework to determine whether there is “to be a total forfeiture of coverage under a homeowner’s insurance policy for failure to comply with post-loss obligations.” Horne, supra. First, the insurer has the burden to establish that its insured failed to substantially comply with a post-loss obligation in the policy. If the insurer establishes this, prejudice to the insurer is presumed. Then the burden shifts to the insured to demonstrate the breach (failure to comply with post-loss obligations) did NOT prejudice the insurer.

In Horne, the property insurer raised as an affirmative defense that its insured failed to timely comply with its post-loss obligation of submitting a sworn statement in proof of loss within 60 days. The insured argued, and the trial court agreed, that the insurer waived this argument by acknowledging coverage by tendering some payment to its insured for the loss. The appellate court held this was incorrect because “[i]nvestigatig any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim does not constitute a waiver of a ‘sworn proof of loss’ requirement.” Horne, supra (internal citations and quotation omitted). Without waiver applying, this means the insured’s failure to timely submit its sworn statement in proof of loss must fall within the “if-then” framework discussed above to determine prejudice to the insurer and, thus, total forfeiture under the policy.

QUITE NOTE: EXTRA-CONTRACTUAL, CONSEQUENTIAL DAMAGES AGAINST PROPERTY INSURER MUST BE PURSUED IN SEPARATE BAD FAITH CLAIM

Posted on January 24, 2021January 24, 2021 by Edward Garber

Unfortunately, the Fifth District Court of Appeals’ holding in this case did not last long. As discussed here, the Florida Supreme Court, quashing the Fifth District’s decision, ruled that an insured cannot recover extra-contractual, consequential damages against his/her/its property insurer absent a separate bad faith claim. This means that arguing extra-contractual damages against a property insurer claiming the damages flow from the insurer’s breach of the insurance contract are NOT going to fly in an action claiming the insurer breached the terms of the policy. An insured will need to pursue a separate bad faith insurance claim against his/her/its insurer to recover such damages. Make sure you consult with counsel when it comes to pursuing a property insurance claim including understanding damages covered by the policy and separate damages that may flow from a bad faith insurance claim.

ALLOCATING COVERED AND UNCOVERED DAMAGES IN JURY VERDICT

Posted on January 16, 2021January 16, 2021 by Edward Garber

When a liability insurer defends an insured from a third-party claim, they oftentimes do so under a reservation of rights. A reservation of rights letter is issued to the insured that identifies certain coverage exclusions or reservations relative to the insurance policy that may impact the insurer’s duty to indemnify the insured for damages. In other words, just because the insurer is defending its insured does not mean it will be indemnifying its insured for damages asserted in the third-party claim.

Under Florida law, the party claiming insurance coverage has the initial burden to show that a settlement or judgment represents damages that fall within the coverage provisions of the insurance policy. An insured’s inability to allocate the amount of a judgment between covered and uncovered damages is therefore generally fatal to its indemnification claim. However, the burden of apportioning or allocating between covered and uncovered damages in a general jury verdict may be shifted to the insurer if the insurer did not adequately make known to the insured the availability and advisability of a special verdict.

QBE Specialty Ins. Co. v. Scrap Inc., 806 Fed.Appx. 692, *695 (11^th Cir. 2020) (internal citations omitted).

This is an important concept because even when the insurer is defending its insured under a reservation of rights, it may put its insured on notice that because of coverage concerns, the insured needs to include special interrogatory questions in the verdict form for the trier of fact (jury) to answer to determine covered versus uncovered damages. If the insured fails to do so, it will give the insurer a very strong argument to avoid any indemnification obligation it has with respect to the judgement. This mean the insured is on the hook to deal with the judgment without insurance coverage.

For example, in QBE Specialty Ins. Co., an insured was sued for a nuisance stemming from its metal shredding operations. The insured’s liability insurer defended the insured under a reservation of rights. During the course of the case, the insurer notified the insured that it needed special interrogatory questions in the verdict form because of coverage concerns. The jury awarded $750,000 in nuisance damages against the insured. There was no allocation for covered versus uncovered damages. The insurer then filed a separate declaratory relief coverage action claiming it was not obligated to indemnify the insured for the $750,000 in damages. The Eleventh Circuit Court of Appeals, affirming the trial court, agreed because “in the absence of an allocated verdict form in the underlying trial, [the insured] never provided the district court with a plausible method for separating those damages awarded by the jury that are covered by [the insurer’s] policies from those that are not.” QBE Specialty Ins. Co., supra, at *696.

READ THE PROPERTY INSURANCE POLICY TO BE SURE YOU ARE COMPLYING WITH POST LOSS OBLIGATIONS

Posted on December 5, 2020December 5, 2020 by Edward Garber

I have discussed this before in prior postings, but it is worth repeating. It is imperative for an insured to comply with post loss obligations in a property insurance policy. Not doing so gives the insurer the argument that its insured forfeited coverage under the policy. Naturally, this is never what an insured wants as this is contrary to submitting an insurance claim to begin with. To avoid this situation, an insured should consult with counsel and read the policy including endorsements issued to the policy to be sure that post loss obligations are complied with and, if they are not, there is a basis supported by case law.

In a recent case, Goldberg v. Universal Property and Casualty Ins. Co., 45 Fla. L. Weekly D2118b (Fla. 4^th DCA 2020), the property insurance policy for hurricanes and windstorms contained the following through an endorsement issued to the policy:

You must give notice of a claim, a supplemental claim, or reopened claim for loss or damage caused by the peril of windstorm or hurricane, with us in accordance with the terms of this policy and within three years after the hurricane first made landfall or the windstorm caused the covered damage. For purposes of this Section, the term “supplemental claim” or “reopened claim” means any additional claim for recovery from us for losses from the same hurricane or windstorm which we have previously adjusted pursuant to the initial claim. . . .

The insured submitted a claim for hurricane damage. The insurer sent an adjuster that adjusted the loss at $12,960.80, and after depreciation, reflected an actual cash value of $9,158.43. The insurer paid the insured $8,158.43 after deducting the insured’s deductible. The insurer also notified the insured that the policy did include a replacement cost value and once the work was performed and costs verified it will evaluate for eligibility for payment of the depreciation.

Later, the insured notified the insurer he received an estimate for higher than the proceeds received. The insurer asked the insured to forward the estimate but the insured did not do so. The insured then filed a lawsuit against the insurer. However, prior to filing a lawsuit the insured did not submit a supplemental claim to the insurer. An issue was whether the insured failed to satisfy post loss obligations in the policy by not submitting a supplemental claim prior to filing suit.

The Fourth District Court of Appeal held that the insured did NOT comply with his post loss obligations because he did not submit a supplemental claim to the insurer for damages he sought in excess of what the insurer paid:

Here, the record shows that [the property insurer] “previously adjusted” [the insured’s] initial claim after he filed the Property Loss Notice in September 2017, and then promptly paid $8,158.43 on that claim. After [the property insurer] had “previously adjusted” the initial claim, any request by [the insured] for additional payment for losses from the same hurricane fell within the meaning of an “additional claim for recovery . . . for losses from the same hurricane” which [the property insurer] had “previously adjusted.” Thus, under the terms of the policy, [the insured] was required to notify [the property insurer] that he claimed further damages from Hurricane Irma.

Goldberg, supra.

The point is that had the insured simply provided a supplemental claim per his policy, even estimates he received for the remedial work, the end result would likely have been different because he would have satisfied a post loss obligation. This is important because his claim was clearly covered as the insurer would not have paid proceeds based off its adjustment if it did not believe the claim was a covered claim. But, by not complying with the terms of the policy, the insured was deprived of additional amounts relative to the loss.

FIRST-PARTY STATUTORY BAD FAITH – 60 DAYS TO CURE MEANS 60 DAYS TO CURE

Posted on September 5, 2020September 5, 2020 by Edward Garber

In a first party bad-faith lawsuit, such as a bad faith claim against an insured’s property insurer, there are three requirements that must be met before the bad faith lawsuit is filed: “‘(1) determination of the insurer’s liability for coverage; (2) determination of the extent of the insured’s damages; and (3) the required notice must be filed under section 624.155(3)(a).’” Fortune v. First Protective Ins. Co., 45 Fla. L. Weekly D2092a (Fla. 2d DCA 2020) (citation omitted).

The third requirement is for the insured to file a Civil Remedy Notice (known as a “CRN”) as a condition precedent to filing a statutory bad faith lawsuit giving the insurer 60 days’ notice of the bad faith violation and to cure the violation, i.e., pay the claim if the violation is payment.

A very common bad faith payment violation is the assertion that the insurer did NOT attempt “in good faith to settle claims when, under the circumstances, it could and should have done so, had it acted fairly and honestly towards its insured and with due regard for his or her interests.” Fla. Stat. s. 624.155(1)(b)(1).

Can a statutory bad faith action still be triggered if the insurer invokes the appraisal process per the insurance policy BEFORE the insured files its CRN? The answer is yes!

In Fortune, an insured suffered a loss stemming from a hurricane. The insurer adjusted the loss, after applying the deductible and depreciation, at approximately $3,000 and paid that money to the insured. The insured disputed this was a final amount for the loss and the insurer demanded appraisal per the policy. The insured then filed a CRN to start the statutory bad faith process. The insurer did NOT cure the violation—pay the claim—within the required 60-day period. The parties went through appraisal and the umpire determined the loss to be approximately $120,000. The insurer paid what it owed per the umpire’s award. The insured then filed his bad faith lawsuit. The trial court granted summary judgment in favor of the insurer finding there was no bad faith because the insurer instituted the appraisal process before the insured filed a CRN and then paid the award.

The Second District Court of Appeals reversed the summary judgment.

An insured is not precluded from filing a CRN prior to a determination of the insurer’s liability for coverage (requirement 1 above) or a determination of the extent of the insured’s damages (requirement 2 above). Thus, the insured was within his rights to file a CRN after the insurer instituted the appraisal process. See Fortune, supra (“Even if a policy requires the mediation or appraisal process to occur prior to suit being filed, an appraisal is not a condition precedent to the insurer fulfilling its obligation to fairly evaluate the claim and to either deny coverage or to offer an appropriate amount based on that fair evaluation.”).

Moreover, “an alleged payment violation [by the insurer] would require payment within the sixty-day cure period.” Fortune, supra. This means that the insurer invoking the appraisal process and then paying the umpire’s award AFTER the 60-day cure period expired does not cure a bad faith payment violation.

If you are dealing with a property insurance coverage claim or dispute, it is imperative that you work with counsel to ensure your rights are preserved. In this case, the insured’s bad faith rights were preserved against the insurer by the insured filing a CRN even after the insurer instituted the appraisal process.