LET’S TALK ABOUT A STATUTORY FIRST-PARTY BAD FAITH CLAIM AGAINST AN INSURER

Posted on January 27, 2024January 27, 2024 by David Adelstein

Let’s talk about a statutory first-party bad faith claim against an insurer under Florida law. A recent opinion, discussed below, does a nice job providing a synopsis of a first-party statutory bad faith claim against an insurer:

The Florida Legislature created the first-party bad faith cause of action by enacting section 624.155, Florida Statutes, which imposes a duty on insurers to settle their policyholders’ claims in good faith. The statutory obligation on the insurer is to timely evaluate and pay benefits owed under the insurance policy. The damages recoverable by the insured in a bad faith action are those amounts that are the reasonably foreseeable consequences of the insurer’s bad faith in resolving a claim, which include consequential damages.

“[A] statutory bad faith claim under section 624.155 is ripe for litigation when there has been (1) a determination of the insurer’s liability for coverage; (2) a determination of the extent of the insured’s damages; and (3) the required [civil remedy] notice is filed pursuant to section 624.155(3)(a).”

“An insured may obtain a determination of the insurer’s liability and the extent of their damages by litigation, arbitration, settlement, stipulation, or the payment of full policy limits.” Additionally, payment of an appraisal award by the insurer constitutes a determination of the insurer’s liability and the extent of the insured’s damages.

Cingari v. First Protective Ins. Co., 49 Fla.L.Weekly D89a (Fla. 4^th DCA 2023) (internal citations omitted).

The fact pattern in this case is somewhat nutty. This case dealt with a homeowner’s property insurance policy. The homeowners discovered cracks in their walls and submitted an insurance claim. The insurer issued two partial payments. However, the homeowner felt its insurer was not properly adjusting the claim and filed a Civil Remedy Notice as the perquisite for a statutory bad faith claim. The homeowner subsequently invoked the appraisal process in the policy. The insurer agreed and the claim proceeded through the appraisal process (after a lawsuit was initiated for the court to appoint the umpire to preside over the appraisal process). The umpire found damages more than the partial payments paid by the insurer resulting in the insurer paying the policy limits under the policy. The homeowner then filed a bad faith action against its insurer for failing to timely and properly adjust the loss. The insurer moved for summary judgment arguing that AFTER it paid the policy limits it discovered that the loss (that it paid for) was, in fact, excluded under the policy by an earth settlement exclusion. The trial court agreed with the insurer that because there was no coverage, there could be no bad faith claim against the insurer.

The appellate court concluded differently under the facts of the case: “we conclude the trial court erred in accepting the insurer’s argument that because no coverage existed, the homeowner was not entitled to litigate whether the insurer acted in bad faith.” Cingari, supra. Why did the appellate court conclude differently? Two main reasons:

(1) The insurer never raised that “no coverage exists” to the umpire during the appraisal process.

(2) “[T]he focus of a first-party bad faith claim is whether the insurer in good faith timely and property investigated and resolved claims filed by the insured.” Cingari, supra. In other words, the focus centers on the insurer’s investigation of the cause of the loss. Remember, the insurer argued it did not discover the basis of the exclusion until AFTER it paid the policy limits per the appraisal process.

[T]he insurer’s statements that it ‘proceeded under an erroneous policy interpretation’ in the umpire appointment suit [for the appraisal] and ‘gratuitously’ paid the policy limits and appraisal award certainly raise an inference that the insurer did not properly investigate the claim. The homeowner argued…that the failure to properly investigate caused the insurer to improperly extend settlement of the claim through the appraisal process. In doing so, the insurer arguably violated the requirements in section 624.155(1)(b)1. and 2., Florida Statutes (2020), to ‘attempt[] in good faith to settle claims’ and ‘promptly settle claims[.]

Cingari, supra.

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.

TWO WORTHY INSURANCE TOPICS: (1) BAD FAITH, AND (2) SETTLING WITHOUT INSURER’S CONSENT

Posted on February 5, 2023February 6, 2023 by David Adelstein

The recent Eleventh Circuit Court of Appeals’ decision, American Builders Insurance Company v. Southern-Owners Insurance Company, 56 F.4^th 938 (11^th Cir. 2023), is an insurer versus insurer case that touches on two important insurance topics: (1) common law bad faith against an insurance company, and (2) an insurer’s affirmative defense that an insured settled a claim without its consent. The Eleventh Circuit provides invaluable legal discussion on these topics that any insured (and an insured’s counsel) need to know and appreciate. While this article won’t go into the granular facts as referenced in the opinion, it will go into the law because it is the law the facts of a case MUST cater to and address.

In this case, a person performing subcontracting work fell from a roof without fall protection and became paralyzed from the waist down. The general contractor had a primary liability policy and an excess policy. The general contractor’s primary liability insurer investigated the accident and assessed the claim. The subcontractor’s liability insurer, which was the primary insurance policy (the general contractor was an additional insured for work the subcontractor performed for the general contractor), did little to investigate and assess the claim and then refused to pay any amount to settle the underlying claim or honor its defense and indemnity obligation to the general contractor.

Both the general contractor’s primary insurer and excess insurer each tendered policy limits to settle the claim and avoid a bad faith claim by exposing the general contractor to more than policy limits, which was the determination had the matter proceeded to a trial.

The general contractor’s primary liability insurer then sued the subcontractor’s liability insurer for common law bad faith (based on equitable subrogation). The subcontractor’s liability insurer, among other things, argued it should be absolved because its policy was breached when payment was made to the claimant without its consent. The case proceeded to trial and a jury found in favor of the general contractor’s primary liability insurer. The subcontractor’s liability insurer appealed…and lost.

Common Law Bad Faith

[T]he critical inquiry in a bad faith [action] is 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. Additionally, any damages claimed by an insured in a bad faith case must be caused by the insurer’s bad faith. That is, the bad faith conduct must directly and in natural and continuous sequence produce[] or contribute[] substantially to producing such [damage], so that it can reasonably be said that, but for the bad faith conduct, the [damage] would not have occurred.

The bad faith inquiry is determined under the ‘totality of circumstances’ standard, and we focus not on the actions of the claimant but rather on the insurer in fulfilling its obligations to the insured. That said, a claimant’s actions –such as a decision not to offer a settlement-remain relevant in assessing bad faith. Insurers have obligations to advise the insured of settlement opportunities, to advise 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 [the] same,” as well as to 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. These obligations … are not a mere checklist, however, and, as the Florida Supreme Court has explained, [a]n insurer is not absolved of liability simply because it advises its insured of settlement opportunities, the probable outcome of the litigation, and the possibility of an excess judgment.

Moreover, insurance companies occasionally have an affirmative duty to offer settlements. Bad faith may be inferred from a delay in settlement negotiations which is willful and without reasonable cause. Thus, [w]here liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, the insurer must initiate settlement negotiations. In such a case, where [t]he financial exposure to [the insured] [i]s a ticking time bomb and [s]uit c[an] be filed at any time, any delay in making an offer under the circumstances of this case even where there was no assurance that the claim could be settled could be viewed by a fact finder as evidence of bad faith.

American Builders Insurance Company, supra, at 944-45 (internal quotation and citation omitted).

Here, the jury reasonably found that the subcontractor’s liability insurer “acted in bad faith because it delayed acting on its duty to investigate and settle [the claimant’s] claim.” American Builders Insurance Company, supra at 945. The facts “could lead a reasonable jury to conclude that the [subcontractor’s liability insurer] delayed its investigation instead of attempting ‘to resolve the coverage dispute promptly’ or using ‘diligence and thoroughness.’” Id. at 946 (internal quotation and citation omitted).

Here, a reasonable jury could also find that the subcontractor’s liability insurer caused the general contractor’s liability insurer damages. The subcontractor’s liability insurer wanted to focus on the claimant and his attorney’s action. This was shot down. “Of course, there’s a difference between focusing on a claimant’s actions, which would be improper, and factoring a claimant’s actions into the totality of circumstances analysis, which is not improper. In this case, though, [the subcontractor’s liability insurer] flipped Florida law on its head and exclusively focused on [the claimant and his attorney’s] actions.” American Builders Insurance Company, supra, at 947 (internal quotation and citation omitted).

Insurer “Consent” Affirmative Defense

The subcontractor’s liability insurer argued that the general contractor’s primary liability insurer breached the subcontractor’s liability insurance contract “by failing to receive its consent before settling with [the claimant].” American Builders Insurance Company, supra, at 944. This was also shot down.

Subcontractor’s liability insurance contract provided:

[N]o insured will, except at the insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent. [T]his language required the insured to obtain the insurer’s consent before settling. That is, while an insured is free to enter into a reasonable settlement when its insurer has wrongfully refused to provide it with a defense to a suit, … the insured is not similarly free to independently engage in such settlements where, as here, the insurer had not declined a defense to suit.

The Florida Supreme Court requires an insurer to establish three things in order to succeed on this affirmative defense: (1) a lack of consent; (2) substantial prejudice to the insurer; and (3) diligence and good faith by the insurer in attempting to receive consent. The first element has a few exceptions. The insured may settle without obtaining consent if the insurer wrongfully refused to provide [the insured] with a defense to a suit, or offers a conditional defense that the parties cannot agree upon. Moreover, even if the insured was obliged to obtain consent, the failure to do so is not an affirmative defense unless the insurer also establishes substantial prejudice and evinces good faith in bringing about the cooperation of the insured.

American Builders insurance Company, supra, at *947-48.

Here, the issue of whether the general contractor’s primary liability insurer needed consent was not at-issue. It did. But the subcontractor’s liability insurer still needed to establish substantial prejudice and good faith, and the jury could find it proved neither, which it did. American Builders Insurance Company, supra, at *948.

STATUTORY BAD FAITH CLAIM NOT TOLLED MERELY BECAUSE PROPERTY INSURER INVOKES APPRAISAL PER THE POLICY

Posted on February 28, 2021February 28, 2021 by Edward Garber

A statutory bad faith claim is NOT tolled merely because the property insurer invoked the appraisal process in the property insurance policy. Zaleski v. State Farm Florida Ins. Co., 46 Fla.L.Weekly D416b (Fla. 4^th DCA 2021). A statutory bad faith claim requires the insured to comply with Florida Statute s. 624.155 and submit a civil remedy notice with Florida’s Department of Financial Services identifying the bad faith violations. The insurer is given sixty days to cure the asserted bad faith violations (typically involving non-payment or the payment of a lowball amount due to failure to settle a claim in good faith).

A statutory bad faith claim under s. 624.155 “is ripe for litigation when there has been (1) a determination of the insurer’s liability for coverage; (2) a determination of the extent of the insured’s damages; and (3) the required [civil remedy] notice is filed pursuant to section 624.155(3)(a).” Zaleski, supra (citation omitted).

In Zaleski, the property insurer argued that the sixty-date statutory cure period under section 624.155 should be tolled when it invokes the appraisal process within this sixty-day window; and because the insurer timely paid the award rendered by the appraiser, there can be no statutory bad faith. This argument was rejected:

The appraisal award is not a condition precedent to [the property insurer’s] obligation to pay Homeowners a fair amount due under the policy. To allow the sixty-day cure period to toll at the invocation of the appraisal process would allow insurers to cause delay or otherwise act in bad faith while escaping liability as long as it makes payment within the sixty-day time period of the appraisal award. This would negate and frustrate the purpose of the statute.

Zaleski, supra.

Of importance, when an insurer receives a statutory bad faith claim (i.e., the civil remedy notice), it

[M]ust evaluate a claim based upon proof of loss required by the policy and its expertise in advance of a determination by a court or arbitration. In other words, when an insurer receives a claim, it has an independent duty to evaluate the claim in advance of a determination of damages and take timely, independent action. Thus, the focus in a bad faith case is not whether the insurer ultimately paid the amounts due under the policy, but whether it acted reasonably in evaluating a claim prior to the determination of damages.

For example, “[a] fair evaluation would be evidence that an insurer did not action in bad faith. But a lowball offer made in bad faith is not cured by an insurer ultimately paying what it is later found to owe via appraisal process.” The determination of good faith or bad faith, however, “is usually a question for the finder of fact.”

Zaleski, supra, (internal citations omitted).

As I have mentioned in prior articles, it is key to work with qualified counsel when pursuing a property insurance claim and, of course, a bad faith insurance claim. Counsel can ensure all rights are preserved when it comes to preserving a bad faith claim and preparing and submitting the required civil remedy notice that starts the clock for the sixty-day cure period. Notably, in Zaleski, the insurer recognized coverage and paid what the insured believed, and what turned out to be, a lowball amount. The insured filed its civil remedy notice to start the cure period. The insurer then invoked the appraisal process hoping it would cure the sixty-day cure period; it did not. The appraiser determined the insured was entitled to almost the amount the insured’s adjuster valued the claim, which the insurer paid. However, as discussed, the invocation of the appraisal process and the timely payment of the appraiser’s award had NO bearing on whether the insurer committed bad faith based on its initial lowball payment.

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.

FLORIDA SUPREME COURT’S APPLICATION OF INSURANCE BAD FAITH IN THIRD-PARTY CONTEXT

Posted on September 21, 2018April 24, 2020 by Edward Garber

What happens when an insured receives a judgment in excess of his/her insurance policy limits when the matter could have been resolved within the insured’s policy limits? Think of a personal injury scenario where the insured received a claim by an injured party and tenders the claim to his/her insurer. What if that matter could get resolved within policy limits but it does not and exposes the insured to a judgment in excess of the policy limits? This could be where insurance bad faith comes into play in the third-party liability insurance context based on the totality of circumstances—the insurer acted in bad faith in failing to settle this third-party claim and exposed the insured to a judgment in excess of the insured’s policy limits.

The Florida Supreme Court in Harvey v. Geico General Insurance Company, 43 Fla.L.Weekly S375a (Fla. 2018) just entered a fairly significant ruling in the insurance bad faith context with respect to third-party claims when it reversed the Fourth District Court of Appeal with direction to reinstate a substantial bad faith jury verdict against an insurer. This case dealt with a car accident that resulted in death. The driver that caused the accident had policy limits of $100,000 per occurrence. The decedent’s estate was not going to accept that amount unless it had verification in a recorded statement as to other insurance and assets the driver had, which was never timely facilitated by the driver’s insurer. As a result, the driver was sued and received an approximate $8 Million Dollar jury verdict against him. This prompted the bad faith lawsuit (i.e., the driver was exposed to a judgment well in excess of his policy limits) where the jury found the insurer acted in bad faith (because, among other facts, had the insurer timely facilitated a recorded statement of the driver regarding other insurance and assets, the estate likely would have accepted the policy limits since the decedent did not have other insurance or significant assets). The Fourth District, however, reversed the jury verdict and the issue on appeal became the application of bad faith law in the third-party liability context.

It is this insurance bad faith application that is important and will be quoted below:

We have explained that “[b]ad faith law was 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. Thus, “[b]ad faith jurisprudence merely holds insurers accountable for failing to fulfill their obligations, and our decision does not change this basic premise.” Id. at 683.

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Almost four decades ago, we explained the law of bad faith and the good faith duty insurers owe to their insureds in handling their claims, which still holds true today. See Boston Old Colony, 386 So. 2d at 785. We explained that “in handling the defense of claims against its insured,” the insurer “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.” Id. This duty arises from the nature of the insurer’s role in handling the claim on the insured’s behalf — because 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.” Id. We explained in great detail what this duty requires of insurers:

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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. Because 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.

Id. (citations omitted).

–

We reaffirmed this duty insurers owe to their insureds in Berges, stating that the insurer “owe[s] a fiduciary duty to act in [the insured’s] best interests.” 896 So. 2d at 677. Indeed, “this is what the insured expects when paying premiums.” Id. at 683.

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The obligations set forth in Boston Old Colony are not a mere checklist. An insurer is not absolved of liability simply because it advises its insured of settlement opportunities, the probable outcome of the litigation, and the possibility of an excess judgment. Rather, the critical inquiry in a bad faith is 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. “[T]he 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.” Id. at 680. Further, it is for the jury to decide whether the insurer failed to “act in good faith with due regard for the interests of the insured.” Boston Old Colony, 386 So. 2d at 785. This Court will not reverse a jury’s finding of bad faith where it is supported by competent, substantial evidence, as “it is not the function of [the appellate court] to substitute its judgment for the trier of fact.” Berges, 896 So. 2d at 680.

–

In a case “[w]here 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.” Powell v. Prudential Prop. & Cas. Ins. Co., 584 So. 2d 12, 14 (Fla. 3d DCA 1991). In such a case, where “[t]he financial exposure to [the insured] [i]s a ticking financial time bomb” and “[s]uit c[an] be filed at any time,” any “delay in making an offer under the circumstances of this case even where there was no assurance that the claim could be settled could be viewed by a fact finder as evidence of bad faith.” Goheagan v. Am. Vehicle Ins. Co., 107 So. 3d 433, 439 (Fla. 4th DCA 2012) (citing Boston Old Colony, 386 So. 2d at 785).

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The damages claimed by an insured in a bad faith case “must be caused by the insurer’s bad faith.” Perera v. U.S. Fidelity & Guar. Co., 35 So. 3d 893, 902 (Fla. 2010). However, “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.*

***

In the decision below, the Fourth District stated that “where the insured’s own actions or inactions result, at least in part, in an excess judgment, the insurer cannot be liable for bad faith.” Harvey, 208 So. 3d at 816. We conclude that this statement misapplies our precedent in Berges, where we stated that “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.

***

While this Court has stated that “there must be a causal connection between the damages claimed and the insurer’s bad faith,” Perera, 35 So. 3d at 902, this Court has never held or even suggested that an insured’s actions can let the insurer off the hook when the evidence clearly establishes that the insurer acted in bad faith in handling the insured’s claim. In fact, the standard jury instructions on legal cause in a bad faith case belies the Fourth District’s conclusion that where the insured’s own actions, even “in part” cause the judgment, the insurer cannot be found liable for bad faith. Indeed, the standard legal cause instruction states:

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Bad faith conduct is a legal cause of [loss] [damage] [or] [harm] if it directly and in natural and continuous sequence produces or contributes substantially to producing such [loss] [damage] [or] [harm], so that it can reasonably be said that, but for the bad faith conduct, the [loss] [damage] [or] [harm]would not have occurred.

–

Fla. Std. Jury Instr. (Civ.) 404.6(a). Nowhere in this instruction does it state that an insurer can escape liability merely because the insured’s actions could have contributed to the excess judgment.

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To take the Fourth District’s reasoning to its logical conclusion, an insurer could argue that regardless of what evidence may be presented in support of the insured’s bad faith claim against the insurer, so long as the insurer can put forth any evidence that the insured acted imperfectly during the claims process, the insurer could be absolved of bad faith. As Harvey argues, this would essentially create a contributory negligence defense for insurers in bad faith cases where concurring and intervening causes are not at issue. We decline to create such a defense that is so inconsistent with our well-established bad faith jurisprudence which places the focus on the actions on the insurer — not the insured. Berges, 896 So. 2d at 677.

STATUTORY BAD FAITH AND AN INSURED’S 60-DAY NOTICE TO CURE

Posted on March 30, 2018March 30, 2018 by Edward Garber

A recent case came out in favor of an insured and against a first-party property insurer in the triggering of a statutory bad faith action. Florida’s Fifth District Court of Appeal in Demase v. State Farm Florida Insurance Company, 43 Fla. L. Weekly D679a (Fla. 5th DCA 2018) held that if an insurer pays a claim after the 60-day notice to cure period provided by Florida Statute s. 624.155(3), this “constitutes a determination of an insurer’s liability for coverage and extent of damages under section 624.155(1)(b) even when there is no underlying action.”

Before a statutory bad faith claim is brought, an insured must file a Civil Remedy Notice giving the insurer written notice of the violation and 60 days to cure the claimed violation.

There are three requirements to sue for a statutory bad faith claim: “1) a determination of the insurer’s liability for coverage; (2) a determination of the extent of the insured’s damages; and (3) the required notice is filed pursuant to section 624.155(3).” The third requirement is the filing of the Civil Remedy Notice pursuant to s. 624.155 giving the insurer a safe harbor to cure the claimed violation.

The first and second requirement are oftentimes determined in litigation, arbitration, or settlement in a coverage lawsuit against an insurer. However, as this court demonstrates, that does not always have to be the case. If the insurer pays a claim outside of the 60-day cure period, this establishes (1) a determination of the insurer’s liability for coverage and (2) a determination of the extent of the insured’s damages. In other words, if an insurer is going to pay a claim, they really need to think carefully about doing so within the 60-day statutory bad faith cure period. Paying afterwards supports the first two requirements of a statutory bad faith claim.

QUICK NOTE: SUBMITTING CIVIL REMEDY NOTICE

Posted on May 5, 2017May 5, 2017 by Edward Garber

There are steps an insured or claimant need to take in order to assert a statutory bad faith claim. The first step is the obligatory Civil Remedy Notice. This obligation is set forth in Florida Statute s. 624.155. The Civil Remedy Notice is, in essence, written notice of the specific violation(s) that are being claimed against the insurer that give rise to potential bad faith and an opportunity for the insurer to cure the violation(s). Florida Statute s. 624.155 would not be confused as a model of clarity, so it is important that a insured or claimant work with an attorney regarding any bad faith claim including filling out the Civil Remedy Notice.

In Fox v. Starr Indemnity & Liability Co., 2017 WL 1541294 (M.D.Fla. 2017), an insured sued his property insurer for bad faith. Prior to suing, the insured submitted the required Civil Remedy Notice. However, the insurer moved to dismiss the lawsuit under the argument that the insured did not strictly comply with the statutory requirements based on how the insured filled out the Notice. The insurer argued this because if the Civil Remedy Notice was deficient than the statutory bad faith claim would not be triggered. The Middle District, reviewing this issue, maintained, that substantial compliance with the statutory requirements would suffice. The Middle District was not going to toss out a bad faith claim based on technicalities with how the Civil Remedy Notice was filled out when the insured substantially complied with the intent of the requirements.

Pursuing a bad faith claim against an insurer is not as easy as it may appear. There are steps and requirements that must occur before the bad faith claim can even be pursued. The first step is submitting the Civil Remedy Notice pursuant to Florida Statute s. 624.155. But, this is not the only step. Check out this article for more information on bad faith.

BAD FAITH IN THE FIRST-PARTY INSURANCE CONTEXT

Posted on December 10, 2016December 10, 2016 by Edward Garber

In a previous article I discussed bad faith when it comes to an insurance claim. Recently, in Barton v. Capitol Preferred Insurance Co., Inc., 41 Fla. L. Weekly D2736b (Fla. 5^th DCA 2016), the court discussed bad faith in the first-party insurance context (i.e., a property / homeowners insurance policy).

In this case, homeowners, as the insured, sued their homeowners insurance carrier for sinkhole coverage. The homeowner filed a Civil Remedy Notice of Insurer Violation (also known as a Civil Remedy Notice) against their insurer with the Florida Department of Insurance in accordance with Florida Statute s. 624.155. This Civil Remedy Notice is a prerequisite to initiating such a bad faith claim; the notice specifies the statutory violations committed by the insurer and gives the insurer 60 days to cure the violation.

The insurer denied the assertions in the Civil Remedy Notice. Thereafter, the homeowners served a proposal for settlement / offer of judgment trying to settle the claim for $65,000. The insurer paid $65,000 and the lawsuit was dismissed. But, the proposal for settlement did not require the homeowners to release the insurer. In other words, there was no release of any bad faith insurance claim. So, naturally, the homeowners refiled a lawsuit against their homeowners insurance carrier for bad faith.

“[A] bad-faith action is premature until there is a determination of liability [coverage] and extent of damages owed on the first-party insurance contract.” Barton, supra. citing Vest v. Travelers Ins. Co., 753 So.2d 1270, 1276 (Fla. 2000). An insured can obtain a determination of liability through an agreed settlement, arbitration, or stipulation—the determination of liability / coverage does not have to be made through trial. Id. quoting Fridman v. Safeco Ins. Co. of Ill., 185 So.3d 1214, 1224 (Fla. 2016).

Here, the court held that there was a determination of liability because the insurer paying the insured-homeowners $65,000 was a favorable resolution to the homeowners. It did not matter that the $65,000 was less than the insured’s original demand or less than the policy limits for sinkhole coverage. Why? Because the settlement operated as a determination of liability and extent of the homeowners’ damages, thereby satisfying the condition precedent to filing a bad faith claim.

This was a clever move by the homeowners not to give the insurer a release in consideration of the $65,000 (and not to condition the proposal for settlement on giving the insurer a release). From an insurer’s standpoint, after it receives a Civil Remedy Notice and, then, a proposal for settlement, it should try to obtain such a release. Perhaps the insurer tried hard to get that release but the homeowners were unwilling to give such a release. This may have forced the insurer to pay the $65,000 pursuant to the proposal for settlement to minimize its exposure in the underlying insurance coverage dispute. The fact that accepting a proposal for settlement can satisfy the determination of liability and extent of damages requirement (even if the proposal for settlement amount is less than any original demand) before initiating a bad faith claim may motivate insurers to negotiate and pay for a release that protects them from such bad faith claims.

QUICK NOTE: COVERAGE MUST FIRST BE ESTABLISHED TO HAVE A BAD FAITH INSURANCE CLAIM

Posted on April 20, 2016April 20, 2016 by Edward Garber

In order to have a bad faith insurance claim you must first establish that there was coverage under the insurance policy. Otherwise, the bad faith claim is prematurely filed and will be dismissed or abated.