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Good News for Florida Policy Holders – An Insured Can Bring a Bad Faith Claim against its Insurance Company after the Issuance of an Appraisal Award

Insurance PolicyThe Second District Court of Appeal concluded that an insured can bring a bad faith claim against an insurance company after the issuance of an appraisal award.  This is a significant ruling for insureds as insurance companies often argue that bad faith claims are not ripe until a judgment has been entered in the insured’s favor.  This case, however, dismisses that argument.

The facts in Hunt v. State Farm are rather straight forward.  Mr. Hunt sustained sinkhole damage in July of 2006.  Mr. Hunt then filed a claim with his insurance company, State Farm, to recover for those damages.  After disagreeing with State Farm’s estimate for damages, Mr. Hunt filed a civil remedy notice of insurer violation (“CRN”).  The civil remedy notice triggered the start of a 60 day period in which State Farm could cure its alleged wrongful conduct.  Mr. Hunt then sued State Farm for a bad faith claim.

In response, State Farm moved to dismiss the lawsuit and compel appraisal.  The trial court granted the motion to dismiss, and ordered the parties to appraisal.  During appraisal an award of over $150,000.00 was issued in Mr. Hunt’s favor.  However, Mr. Hunt subsequently dismissed his initial lawsuit and filed a bad-faith action.

State Farm moved for summary judgment, and the trial court granted State Farm’s summary judgment.  It was granted because the trial court reasoned that Mr. Hunt had not obtained a judgment against State Farm and that he failed to state a specific amount in his Civil Remedy Notice.

Mr. Hunt then appealed the trial court’s adverse ruling to the Second District Court of Appeal.  That court concluded that an appraisal award establishing the validity of an insured’s claim satisfies the condition precedent required to bring a bad faith action.  In so doing, the appellate court relied on Trafalgar v. Zurich, 100 So.3d 1155 (Fla. 4th DCA 2012), which also noted that a “judgment on a breach of contract action is not the only way of obtaining a favorable resolution” against an insurance company.  The Trafalgar court noted that “an arbitration award establishing the validity of an insured’s claim satisfies the condition precedent required to bring a bad faith action.”

In regards to the claim that Mr. Hunt failed to state a specific amount, which would bar him from relief, the District Court of Appeals ruled that §624.155 Fla. Stat. does not require a specific cure amount in order for Mr. Hunt to bring a claim. They ruled that Mr. Hunt did what was required by the statute and that a specific amount is not necessary in order for him to pursue his cause of action.

This ruling will no doubt aid Florida insureds pursue bad faith claims against their insurance companies if their insurance company is conducting themselves in bad faith.  Please do not hesitate to contact our office if you wish to discuss your claim further.

Bad Faith Can Still Be Pursued Even After a Favorable Appraisal Award is Issued

insuranceclaimsandbadfaith.jpgIn 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.

Florida Supreme Court Ruling Obliterates Common Law Bad Faith Claims

badfaith.jpgThe Florida Supreme Court recently eradicated some significant protections for Floridians in a case involving damage from Hurricane Wilma and dissatisfaction with QBE Insurance Corp.’s handling of the claim and its investigation. In that case Florida’s high court addressed several issues of significant import.

The first issue addressed by the Florida Supreme Court was whether Florida law recognizes a first-party claim for breach of implied warranty of good faith and fair dealing if an insurance company fails to investigate and assess the claim within a reasonable time? The court answered that no such claim existed in Florida.

In reaching its conclusion, the court reasoned that the legislative history indicates that there is no common law first-party bad-faith action in Florida, and limited insured parties to the statutory remedy of filing a bad faith claim. While Florida’s high court acknowledged that several Florida courts have concluded that such claims are permissible, the Court went on to reason that those courts misapplied Florida law. In other words, Florida’s Supreme Court concluded that insureds may only file a claim for bad faith and may not assert a separate claim for breach of the implied warranty of good faith and fair dealing under a first-party insurance claim.

Next, the Court determined if an insured party may bring a claim against the insurer for failure to comply with the statutory language and font-size requirements. QBE partially failed to comply with the notice requirements under the statute. QBE’s Hurricane Deductible notice contained the word “windstorm” instead of hurricane and the font-size was 16.5 instead of the required 18 point. The Court needed to determine if the failure to comply opened QBE up to liability to its insured.

Because the plain language of the statute does not prescribe a penalty for failure to comply with the word-choice and font-size requirements the Court next had to look at whether they would imply one. Looking at the legislative intent when the statute was enacted was important to the Court’s determination. Because the Legislature had provided, in other sections, liabilities for failure to abide by the statutes the Court reasoned that it was clear that it was not the legislature’s intent to impose harsh penalties on insurers who failed to comply with this particular section. The underlying purpose for notice requirements was part of a larger design to provide access to affordable housing insurance in the state through higher hurricane deductibles; the Legislature was not intending to create another avenue for insured parties to sue.

In addition, the notice requirement was created to make certain that the insured was aware of the deductible, and the Plaintiff here, did not argue they weren’t aware of the deductible only that the notice didn’t comply with statute requirements. The Court determined QBE could not be held civilly liable for the failure to comply with the statute requirements and that the judgment was reduced by the policy’s deductible.

The final issued the Court addressed revolved around policy language requiring QBE to remit payments upon a “final judgment.” The plaintiff argued that QBE failed to remit payment within 30 days following the trial court’s final judgment and therefore QBE waived its right to a stay of execution by procuring a bond. The Court disagreed determining that the words “final judgment” would not supersede the ability of a party to obtain a stay of execution by bond and that the “final judgment” wording included any appeal period thereafter.

Insurance Companies Profit by Delaying Claims and Shorting Customers

insurance-bad.jpgThis should come as no surprise. Especially to those of you who have ever had to deal with your insurance company in submitting a claim.

Insurance companies are putting profits before service and people.

Yet despite record profits, reform to many laws pertaining to insurance claims, insurance rates continue to go up for all hard working Floridians.

A recent report reveals the sad state of affairs for many insurance companies.

The report illustrates how the insurance industry is making money by delaying claims and how it has shifted from a service industry to an industry that is driven purely by profit.

Unlike many other businesses, the insurance industry is bound by law to act in good faith with its customers. Because of their protective role in the lives of ordinary citizens, insurers have long operated as semi-public trusts.

But since the mid-1990s, a new profit-hungry model, combined with weak regulation, has upended that ancient social contract.

Claims have been converted into a money-making process for the insurance companies to the detriment of their policy holders. The change started when insurance companies altered their claims handling procedures. Rather than adjusting claims the traditional way, which gave claims managers wide latitude to serve customers, insurers embraced a computer-driven method that produced purposefully low offers to policy holders.

The low offers has had the effect of allowing insurance companies to either settle claims much cheaper or force unnecessary and costly litigation costs for both the insured and the insurance companies.

The objective was to make claims so expensive and so time-consuming that many policy holders would simply just fold, walk away settle for pennies on the dollar as to the actual value of their claim while many lawyers would start refusing to help policy holders in need.

Delay, deny, defend, has become the new battle cry for the insurance industry.

Our Miami insurance dispute lawyers handle insurance claims for homeowners. Our attorneys represented insurance companies before 2006, when we opened a firm dedicated to fighting for the rights of consumers. We understand how insurance companies work. And we have the knowledge and experience necessary to represent homeowners in disputes over an insurance claim.

Insurance Companies Engage in Unfair Claims Settlement Practice

Under Florida law, any person may bring a civil action against an insurer when such person is damaged by the insurer’s failure to attempt “[i]n good faith to settle claims when, under all circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for his interest.” See F. S. Sec. 624.155(1)(b)(1); see also Fla. Std. Jury Instr. (Civ) 3.1.

A. Historical Context & Evolution of Bad Faith Claims

Until the 20th Century, actions for breaches of insurance contracts were treated the same as any other breach of contract action, and damages were generally limited to those contemplated by the parties at the time they entered into the contract. With the passage of time, however, insurance contracts began to be viewed as distinguishable from other types of contracts because they came to “occupy a unique institutional role” in modern society and affected a large number of people whose rates were dependent upon the acts of not only themselves but also the acts of other insureds.

Consequently, courts began to recognize that carriers owed a duty to the insured to act in the insured’s best interest rather than their own. In recognition of the fact that courts uniformly have acknowledged that carriers owed their insured a duty of good faith and fair dealing, this duty evolved into the requirement that good faith be exercised or bad faith be avoided.

In Florida, third party bad faith actions were recognized as early as 1938. Florida, however, is in the minority in holding that an action against an insurer for bad faith failure to settle sounds in contract rather than tort. Most states treat such an action as a tort claim or a combination of tort and contract. Third party bad faith claims are recognized under both Florida common law, and Florida statute. First party bad faith claims, however, are entirely a creature of the legislature.

In Florida, there is neither a “set off” defense nor an affirmative defense of comparative bad faith. Similarly, while evidence of negligence may be considered by the jury as it may bear on the question of bad faith, a cause of action based solely on negligence, which does not rise to the level of bad faith, does not lie.

In sum, in determining whether an insurer has “acted fairly and honestly towards its insured and with due regard for his interest,” the Florida Supreme Court applies the “totality of the circumstances” standard, and not “fairly debatable” standard. Each case is determined on its own facts, and the question of the insurer’s failure to act in good faith with due regard for the interests of the insured is for the jury.

B. Claims Delay

A recent report reveals how insurance companies are profiting from delaying claims. Indeed, the National Association of Insurance Commissioners (NAIC) reported that the highest number of complaints coming from policy holders is unnecessary claim delays and claim denials.

Call us today if you think your insurance company is not handling your claim in bad faith.

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