Insurance bad faith legal claims provide a valuable tool for policyholders who have their claims mishandled in a particularly egregious manner by an insurer.  Bad faith claims permit a court to award extra-contractual damages so insurers face a genuine monetary risk when they unfairly handle an insured’s claim.  However, bad faith insurance claims have been limited in Florida by the Florida Supreme Court decision of Perdido Sun Condominium Ass’n v. Citizens Property Insurance Corp.  This decision had the significant and unfortunate result of limiting homeowner’s rights against Citizens Property Insurance Corporation, Florida homeowner’s insurer of last resort.

The insured prevailed in a breach of contract claim against Citizens and filed a first-party insurance bad faith claim.  The bad faith claim was based on section 624.155(1), Florida Statutes, which provides in pertinent part:

Any person may bring a civil action against an insurer when such person is damaged:


(b) By the commission of any of the following acts by the insurer:

  1. Not 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 [.]

Pursuant to this provision the insured alleged four specific acts of bad faith committed by Citizens:

  • Using the appraisal process to forestall litigation rather than to participate in the process to resolve the dispute;
  • Engaging in conduct intended to delay or avoid full settlement of the policyholders’ claims;
  • Delaying payment of the appraisal award and attempting to condition payment of the award on execution of an unconditional release;
  • Refusing to pay the full amount due under the policy.

Citizens sought to have the bad faith lawsuit dismissed because the quasi-public insurer was protected by sovereign immunity subject to specific statutory exemptions.  The insurer argued that statutory bad faith under 624.155 was not one of the limited exceptions to immunity enumerated under Florida Statutes section 627.351(6)), which include:

  1. Acts constituting willful torts
  2. Issuance of payment of debt
  3. Breach of contract pertaining to insurance coverage
  4. Any assessable action to enforce an insurer’s obligations to Citizens
  5. Attorney fee awards when the insured is a prevailing party

The trial court agreed with the insurer and found that Citizens was protected against the statutory claim of bad faith under section 624.155.  The insured contended that the bad faith claim fell within the enumerated exceptions as a “willful tort,” and the District Court accepted this analysis.  According to the Supreme Court of Florida, analysis of the statute was necessary because the intent of the Florida Legislature turned on the expressly enumerated exceptions to Citizen’s immunity.

The court considered the exceptions set forth and observed that if the legislature had wanted to permit bad faith lawsuits against Citizens, an express exception permitting such lawsuits could have been included.  The court indicated that new exceptions should not be implied by the court when express exceptions to a law have been set forth by the legislature.

Florida’s highest court also rejected the premise that a cause of action for first-party bad faith is a “willful tort.”  The court considered the evolution of the common law regarding an insurer’s failure to exercise good faith when settling a third-party claim involving excess liability over policy limits.  This type of bad faith claim was distinguished by the court because the basis of liability is rooted in the fiduciary responsibility between an insurer and policyholder.  The insurance company owed a fiduciary duty to negotiate a settlement for the benefit of its insured despite the insurer’s contrary interests.

The legislature expressly addressed this issue in 1982, the court noted by enacting a statute that expressly authorized a first-party bad faith cause of action.  However, the court reasoned that the basis for a first-party bad faith cause of action was rooted in this statutory enactment rather than an act constituting a tort.  While the court ultimately conceded that the conduct of an insurer above and beyond constituting a breach of good faith and fair dealing could rise to the level of a willful tort, the facts of this case did not involve such egregious conduct.This decision significantly weakened the remedies available to aggrieved policyholders of Citizens Property Insurance Corporation.  The statutory bad faith cause of action does not provide access to the same measure of damages that non-Citizens policyholders have.  

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].

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