Does Florida Recognize “Reverse” Bad Faith Claims?

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Florida’s bad faith law provides some recourse for insured Floridians whose insurers do not deal with them fairly when handling their claim. The law currently entitles insured individuals whose insurers have not attempted to settle claims when the circumstances indicate an insurance company should have settled to bring a lawsuit.  The lawsuit can seek compensation for the damages or additional losses the insured has incurred as a result of the bad faith of the insurer. This ability to bring a bad faith action extends to even third parties, so long as they can show the bad faith of the insurance company “aggrieved” them.

Some carriers contend the obligation to deal fairly and honestly with the other party should apply to both parties to an insurance contract.  If a policyholder is able to sue the insurance company for dealing with him or her unfairly, insurance carrier’s reason they too should be able to bring a “bad faith” lawsuit against clients who engage in the same “bad faith” behavior?

An Example of the Bad Faith of the Insured

A recent decision from the Sixth Circuit Court of Appeals reviewing a case arising from an insurance dispute in Kentucky illustrates how an insured individual can act in bad faith. A homeowner submitted a claim to her insurance company for damage her home sustained in a fire. The insurance company initially approved the claim and had paid a substantial portion of the claim before suspecting that the fire had been intentionally set. The insurance company filed a lawsuit asking to have the insurance policy declared void and without effect. The insured homeowner countersued, claiming the insurance company breached its contract with her by not paying her claim for covered losses in full.

During the course of the case the homeowner eventually admitted that she had in fact intentionally set fire to her home despite her initial assertions to the contrary.  Once this was admitted, the insurance company amended its initial pleadings so as to assert a claim for insurance fraud as well as a common law claim for reverse bad faith (common law here refers to a right or cause of action that is contained in case decisions but not recognized by a statute). The trial court declared the policy void and awarded the insurance company damages but dismissed the claim for reverse bad faith. The insurer thereafter appealed.

On appeal, the insurer claimed that a duty of good faith extends to both parties to the contract. While the Sixth Circuit Court of Appeals acknowledged both parties to a contract must act in good faith, there is no claim for damages after a breach of that obligation unless there is a special relationship between the parties. Kentucky’s law (much like Florida’s bad faith law) provides protections to insured individuals from the unscrupulous acts of their insurers but not vice versa. Because the insured had already been ordered to make full restitution to the insurer and was serving a sentence in a criminal proceeding arising out of her fraudulent conduct, the court declined to recognize a claim for reverse bad faith.

No Reverse Bad Faith in Florida

Florida courts have visited the issue of claims for reverse bad faith and have held that insurance companies do not have the ability to bring a claim for reverse bad faith against their insured clients. The bad faith law in Florida provides a remedy only for aggrieved insured individuals and third-parties injured by an insurance company’s bad faith.

Our Florida bad faith insurance claim law firm is available to help residents in the Miami area and throughout Florida bring a bad faith claim against their insurer if they have been treated unfairly or unreasonably. The Law Firm J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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