In Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Company, 100 So.3d 1155 (Fla. 4th DCA 2012), the Fourth District Court of Appeal was tasked on deciding whether an appraisal award constituted a “favorable resolution” of an underlying dispute for purposes of filing a bad faith claim. The appellate court concluded that an appraisal award in the insured’s favor constituted a favorable resolution of the underlying breach of contract dispute for purposes of an insured’s bad faith claim.
As with so many insurance related decisions being decided these days, this case has its origins with Hurricane Wilma. This case has its origins with Hurricane Wilma. A shopping center damaged by Hurricane Wilma led to problems for the property owner after the center was denied full payment for its losses by Zurich American Insurance Company. Discrepancies between the purported costs resulted in the hiring of appraisers and finally an umpire to determine the actual damage cost. An amount was determined, and the check was issued. Prior to this resolution the center had filed a breach of contract suit for Zurich’s failure to pay the amount due, but once the appraisal award was dispersed the court granted Zurich’s motion for summary judgment and the suit was over.
However, because the insurance company failed to timely investigate the center’s claim the owner was determined to bring a Bad Faith claim against the company. Bad Faith claims crop up when the insurer fails to act in the best interests of the insured in settling a claim. Zurich argued that the center had not met all the prerequisites under Florida law to bring a bad faith claim.
To bring a bad faith claim a party must show that: (1) that the insurance company has offered no defenses that could defeat the insured’s coverage; and (2) that the extent of loss has been determined and any underlying action resulted in a favorable resolution to the insured.
The court decided the center had met all of those requirements. Zurich had written an appraisal award check to the center, by doing so they waived any and all defenses they might have had against providing coverage for the damages. Because there was an appraisal award, the amount of loss had been determined. The only sticking point, however, was whether the appraisal award constituted a favorable resolution for the insured.
Zurich argued that the granting of the motion for summary judgment constituted a favorable resolution for them not the center. The Court disagreed. They concluded that an arbitration award was a favorable resolution for the insured, and the court saw no reason to distinguish between an arbitration award and an appraisal award. Indeed, the court concluded that all the conditions precedent to bringing a statutory bad faith claim had been satisfied.