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.

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.

YOUR BAD FAITH JURY INSTRUCTION AGAINST AN INSURER IS IMPORTANT

Posted on December 13, 2019December 13, 2019 by Edward Garber

A statutory bad faith claim against an insurer is derived from Florida Statute s. 624.155. A bad faith claim against a first party insurer, such as a property insurer, must be statutory. Check out the hyperlink of the statute, but a party must first file a Civil Remedy Notice identifying the statutory violations to preserve the statutory bad faith claim giving the insurer an opportunity to cure.

In a noteworthy case, Cooper v. Federated National Insurance Company, 44 Fla. L. Weekly D2961a (Fla. 5^th DCA 2019), the Fifth District Court of Appeal dealt with the jury instruction for an insured’s statutory bad faith claim against their property insurer. The insured filed a bad faith claim predicated on the property insurer violating the provisions of Florida Statute s. 626.9541(1)(i)3, which involves unfair claim settlement practices. The insured had a jury trial and submitted a proposed jury instruction regarding bad faith that tracked the very essence of their bad faith claim and was modeled after s. 626.9541(1)(i)(3). The trial court, however, denied this jury instruction, instead adopting a standard jury instruction for bad faith. The jury returned a verdict in favor of the property insurer and the insured appealed arguing it was reversible error for the trial court NOT to present to the jury their bad faith jury instruction. The Fifth District agreed and ordered a new trial finding that the trial court’s failure to present the jury instruction amounted to a miscarriage of justice.

Florida’s standard bad faith jury instruction is not the be-all-end-all of jury instructions for bad faith. Specifically for a statutory bad faith claim, the standard jury instruction would not fully model a party’s theory of bad faith which would be modeled after a statutory violation. The lack of a proper jury instruction is not compensated for by an attorney’s closing argument as to the insured’s theory of the case:

Leaving it to the parties’ attorneys to explain to the jury in closing argument what legal principles apply is an inadequate substitute for an accurate, relevant, and complementary instruction that contains legal principles not covered in a standard instruction. Contrary to [the property insurer’s] argument, we do not believe that the standard bad faith jury instruction sufficiently informed the jury of all the relevant law regarding bad faith. Nor do we believe that, under the facts of this case, the acts constituting a violation of section 626.9541(1)(i)3. were subsumed within the standard jury instruction.

Cooper, supra (internal quotations omitted).

A jury instruction is important and is nothing to sneeze at. Here, the Fifth District thought so as it reversed a jury’s verdict finding that the failure to include a bad faith jury instruction that modeled the theory of the case and specific statutory violations the insured was aiming to prove was reversible error.

60-DAY CLOCK FOR STATUTORY BAD FAITH “CURE PERIOD” STARTS WHEN CIVIL REMEDY NOTICE ELECTRONICALLY FILED

Posted on October 24, 2019April 24, 2020 by Edward Garber

The Second District Court of Appeal in Harper v. Geico General Insurance Company, 44 Fla.L.Weekly D618c (Fla. 2d DCA 2019) explained that the 60-day clock for a statutory bad faith cure period stars when the civil remedy notice is electronically filed with Florida’s Department of Financial Services:

Subsection 624.155(3)(d) plainly states that no action shall lie if the damages are paid or corrective action is taken within sixty days after the insured files the CRN [Civil Remedy Notice}. Under current procedures, an insured files a CRN with the Department electronically. See Fla. Admin. Code R. 69J-123.002(1). And while the Department also requires the insured to print a copy of the completed CRN from the Department’s website and send it to the insurer, the Department nevertheless considers the form to be “filed” when the insured clicks the “submit” button at the end of the electronic form. See Civil Remedy Notice of Insurer Violations FAQ, https://apps.fldfs.com/CivilRemedy/Help.aspx (follow “Continue” hyperlink; then follow “How do I file a Civil Remedy Notice?” hyperlink) (last visited Dec. 20, 2018). At that time, the CRN is assigned a “filing number” and any changes must be made by clicking on “edit filing.” Hence, the requirements of section 624.155(3)(d) are met when the insured electronically files the CRN with the Department, and that action starts the sixty-day cure period for the insurer.² Therefore, we hold that the sixty-day cure period under section 624.155 begins when the CRN is electronically filed with the Department, and to avoid a bad faith action, the insurer must pay the claim or take corrective action within sixty days from the date the CRN is electronically filed.
Harper, supra.

This is important because the insurer must fail to cure within this 60-day cure period to trigger the statutory requirements of a statutory bad faith claim. If the insurer fails to cure within this 60-day cure period, the insured has preserved an argument for a statutory bad faith claim. See Harper, supra (“Therefore, because GEICO did not pay Harper’s claim within sixty days of the date the CRN was electronically filed with the Department, it did not pay the claim within the sixty-day cure period, and Harper was entitled to pursue her action for GEICO’s alleged bad faith.”).

60-DAY CLOCK FOR STATUTORY BAD FAITH “CURE PERIOD” STARTS WHEN CIVIL REMEDY NOTICE ELECTRONICALLY FILED

Posted on March 26, 2019April 24, 2020 by Edward Garber

The Second District Court of Appeal in Harper v. Geico General Insurance Company, 44 Fla.L.Weekly D618c (Fla. 2d DCA 2019) explained that the 60-day clock for a statutory bad faith cure period STARTS when the civil remedy notice is electronically filed with Florida’s Department of Financial Services:

Subsection 624.155(3)(d) plainly states that no action shall lie if the damages are paid or corrective action is taken within sixty days after the insured files the CRN [Civil Remedy Notice]. Under current procedures, an insured files a CRN with the Department electronically. See Fla. Admin. Code R. 69J-123.002(1). And while the Department also requires the insured to print a copy of the completed CRN from the Department’s website and send it to the insurer, the Department nevertheless considers the form to be “filed” when the insured clicks the “submit” button at the end of the electronic form. See Civil Remedy Notice of Insurer Violations FAQ, https://apps.fldfs.com/CivilRemedy/Help.aspx (follow “Continue” hyperlink; then follow “How do I file a Civil Remedy Notice?” hyperlink) (last visited Dec. 20, 2018). At that time, the CRN is assigned a “filing number” and any changes must be made by clicking on “edit filing.” Hence, the requirements of section 624.155(3)(d) are met when the insured electronically files the CRN with the Department, and that action starts the sixty-day cure period for the insurer. Therefore, we hold that the sixty-day cure period under section 624.155 begins when the CRN is electronically filed with the Department, and to avoid a bad faith action, the insurer must pay the claim or take corrective action within sixty days from the date the CRN is electronically filed.

This is important because the insurer must fail to cure within this 60-day period to trigger the requirements of a statutory bad faith claim. If the insurer fails to cure within this 60-day cure period, the insured has preserved an argument for a statutory bad faith claim. See Harper, supra (“Therefore, because GEICO did not pay Harper’s claim within sixty days of the date the CRN was electronically filed with the Department, it did not pay the claim within the sixty-day cure period, and Harper was entitled to pursue her action for GEICO’s alleged bad faith.”).

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.

GENERAL UNDERSTANDING OF THIRD-PARTY AND FIRST-PARTY BAD FAITH INSURANCE ACTIONS

Posted on February 22, 2015November 8, 2024 by Edward Garber

Insurance is a large part of the construction industry. Whether you are a contractor, subcontractor, design professional, supplier, or owner, you (should) have insurance to cover risks inherent in the industry and the particulars of a project.

There are instances in a dispute involving insurance coverage that either an insured or third-party claimant will become frustrated with an insurer. The frustration may stem from the insurer not considering or initiating settlement opportunities to resolve the dispute. When this occurs, the insured and/or third-party claimant consider preserving rights to what is known as a bad faith action largely based on the insurer “[n]ot attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.” See Fla. Stat. s. 624.155(1)(b)(1).

There are two types of bad faith actions: (1) third-party bad faith actions and (2) first-party bad faith actions.

Third-Party Bad Faith Actions

A third-party bad faith action arises when a third-party asserts a claim against the insured and the insured is exposed to damage exceeding the coverage / policy limits of its insurance policy. Naturally, the insured would be responsible for any judgment that exceeds the policy limits of its insurance policy.

But, what if the insurer had the opportunity to settle the claim for the policy limits or under the policy limits but did not and exposed the insured to a monetary judgment exceeding the policy limits? It is this opportunity to settle a covered claim within coverage limits but refusing to do so that triggers the bad faith action. To this point, the Florida Supreme Court stated that “the essence of a third party bad faith cause of action is to remedy a situation in which an insured is exposed to an excess judgment because of the insurer’s failure to properly or promptly defend the claim.” Macola v. Government Employees Ins. Co., 953 So.2d 451, 458 (Fla. 2006) (internal citations omitted).

On the other hand, if the insurer effectuates a resolution with the third-party that includes a release of the insured, there is no third-party bad faith action considering the insured would not be exposed to a judgment in excess of the policy limits. See Fidelity and Cas. Co. of New York v. Cope, 462 So.2d 459 (Fla. 1985).

A third-party can bring a third-party bad faith action directly against the insured’s insurer only if it obtains a judgment against the insured in excess of the policy limits. State Farm Fire & Cas. Co. v. Zebrowski, 706 So.2d 275 (Fla. 1997).

A third-party bad faith action can be based on Florida Statute s. 624.155 or the common law. A difference is that a statutory bad faith action under s. 624.155 requires what is known as a civil remedy notice identifying the insurer’s violation to be submitted to the Florida Department of Financial Services as a condition precedent to initiating the bad faith action. See Fla.Stat. s. 624.155(3)(a). The insurer is given 60 days to cure the violation before the bad faith action can be initiated.

A common law third-party bad faith action does not require the civil remedy notice. See Macola 953 So.2d 451 (insurer tendering policy limits to insured in response to civil remedy notice and in accordance with Florida Statute s. 624.155 which did not eliminate underlying third-party action would not eliminate a common law third-party bad faith action.)

However, it is important to understand that a party (whether the insured or third party) initiating a third-party bad faith action will not be able to obtain a judgment for both the common law and statutory bad faith causes of action and will ultimately have to choose the cause of action it wants to pursue. Fla. Stat. s. 624.155(8). The statutory third-party bad faith action is probably more commonly pursued and parties should serve the civil remedy notice before initiating the bad faith action.

First-Party Bad Faith Actions

A first-party bad faith action is not based on a third-party action but based on the insured’s own claim against its insurer (such as with a first-party property insurance policy or for uninsured motorist coverage). This may occur when the insured submits a claim against its own insurance policy and the insurer denies the claim or otherwise refuses or delays in paying the full covered amount of the claim. Unlike the third-party bad faith action, a first-party bad faith action has nothing to do with an insurer exposing an insured to a judgment in a third-party claim in excess of the policy limits.

A first-party bad faith claim is a statutory action under s. 624.155 that requires the civil remedy notice as a condition precedent to initiating the bad faith action. However, unlike a third-party bad faith action, there is no common law first-party bad faith action. QBE Ins. Corp. v. Chalfonte Condominium Apartment Ass’n, Inc., 94 So.3d 541, 545 (Fla. 2012).

Before a bad faith action can be initiated in a first-party action, there needs to be a determination that there is coverage, i.e., that the insurer is liable to the insured under the insurance contract, and what the covered damages are. See Liberty Mut. Ins. Co. v. Farm, Inc., 754 So.2d 865 (Fla. 3d DCA 2000) (first-party bad faith action was premature prior to coverage dispute); see also State Farm Florida Ins. Co. v. Seville Place Condominium Ass’n, Inc., 74 So.3d 105 (Fla. 3d DCA 2011) (first-party bad faith action was premature until both coverage and extent of insured’s loss has been adjudicated).

(Notably, there is no statutory bad faith action against a surety issuing a payment or performance bond in Florida. Fla.Stat. s. 624.155(9).)

Bad faith actions are complicated actions and involve a host of issues (such as discovery-related issues, burdens of proof, and damages) that are not discussed in this article. The point of this article is for parties to understand the difference between third-party bad faith actions and first-party bad faith actions and to ensure their rights are protected if there is an insurance coverage dispute, whether it is a dispute involving an insured’s first-party insurance policy or a third-party claim that triggers an insured’s liability policy.