While a homeowner’s insurance carrier can be liable to an insured for bad faith, there are precursors to pursuing this type of legal action. The insured must provide statutory notice of an alleged breach of contract to the insurer, so the insurance carrier has time to cure the alleged breach. Aside from this requirement, the insured also must establish liability and damages under the policy. A recent case from Florida’s 4th District Court of Appeals raises the question as to whether a policyholder must obtain a judgement in a civil lawsuit for breach of contract before a bad faith action becomes ripe for litigation.
In Cammarata v. State Farm Florida Insurance Company, the insureds filed a homeowners’ insurance claim for damage to their home during Hurricane Wilma. The insurer determined that the damage did not exceed the deductible, so no amount of compensation was due under the policy. The insured made a demand for policy limits. The parties participated in the appraisal process with both parties’ experts submitting damage estimates. The neutral umpire ruled that the value of the damages were closer to the insureds’ expert’s estimate and that the amount exceeded the deductible. The insurer accepted this determination and paid benefits consistent with the findings of the umpire.
The insured filed an action for bad faith alleging the insurer failed to exercise good faith in attempting to settle the claim. The insurer filed for summary judgment based on the claim that there had been no court judgment finding a breach of contract, so the bad faith lawsuit was not ripe for litigation. The insured contended that the appraisal award was sufficient to constitute a basis for moving forward on the bad faith claim.
In analyzing the competing claims regarding the issue of ripeness, the court considered several prior decisions. In Lime Bay Condominium, Inc. v. State Farm Florida Insurance Co., the court sided with the insurer indicating that the insured “did not, and could not, allege that there had been a final determination of liability since the breach of contract lawsuit was still pending.” While the court conceded this decision supported the insurer’s position, the court indicated the reference to the “breach of contract” action was an acknowledgement of the stage of the proceeding rather than an indication of the requirements for ripeness.
The court also considered Trafalgar at Greenacres, Ltd. V. Zurich American Insurance Co., in which the court determined that an arbitration award was sufficient to make an insurance bad faith action ripe for litigation. The court reasoned that “a judgment on a breach of contract action is not the only way of obtaining a “favorable resolution” necessary to proceed with a bad faith claim.” The court held that a determination regarding the insurance company’s liability for coverage and the extent of damages rather than a judgment of breach of contract is required for a bad faith claim to be ripe.
A homeowner who prevails during the appraisal process can cite this case as permitting an appraisal award to immediately pursue a lawsuit for bad faith.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].