This is the second installment in our three-part blog post discussing actions seeking punitive damages for insurance bad faith. (Click here to read Part I). This area of law is relatively complex and has evolved in recent years, so policyholders should seek legal advice from an experienced Florida insurance claims lawyer.
What types of conduct constitute acts of insurance bad faith?
The Florida Civil Remedy Statute provides a list of potential forms of conduct that might constitute bad faith:
- Not attempting in good faith to settle claims when the insurer would have done so under the circumstances if it had acted fairly and honestly toward the policyholder with due regard for the insured’s rights.
- Material misrepresentations by the insurer intended to minimize the payment of the claim or loss.
If an insurer engages in any of the following acts with sufficient frequency to be considered a general business practice, these adjustment or payment practices may amount to bad faith:
- Failing to establish practices or engage in an adequate investigation of claims
- Inadequate or untimely communications with an insured
- Failing to deny or affirm partial or full coverage of a claim and indicate a dollar amount of coverage
- Canceling or rescinding a policy in retaliation for a claim
- Extending repeated lowball offers despite a weak basis for denial
- Misrepresenting the policy terms or relevant facts
- Refusing to engage in negotiations prior to an actual threat of litigation
- Lack of adequate complaint or grievance handling procedures
- Inadequate identification of requested information and explanation of why the information is needed
- Failure to pay the full value of a claim
- Non-disclosure of the insured’s rights under the policy
- Exploitation of the financial vulnerability of the insured when settling a claim
- Failure to respond promptly or acknowledge communications with an insured
- Denying a claim or offering a compromise settlement without offering a policy based justification in writing
- “Claims extortion” like making unsubstantiated threats to bring arson or fraud charges
- Lack of timely notification of the insured of the need to provide additional information
- Spoliation of evidence
- Leveraging settlement of the uncontested portion of a claim on concessions regarding the disputed aspect of the claim
- Increasing premiums to retaliate for a filed claim
- Proposing unreasonably low counteroffers
- Excessive and/or unfounded requests for information or documents amounting to harassment
- Appealing an arbitration award to force an insured to accept a settlement
It is important to keep in mind that these are just illustrative examples rather than an exhaustive list of practices that might be considered bad faith.
Can a policyholder receive punitive damages if the insured cannot establish compensatory damages in the bad faith action?
An important issue decided in favor of the insured in the context of bad faith claims in Florida involves the availability of bad faith punitive damages when an insured does not have any compensatory damages. In Scott v. Progressive Express, the trial judge dismissed the insured’s punitive damages claim under Florida Statutes Section 624.155 because of a lack of compensatory damages beyond those addressed in the underlying claim for first-party insurance benefits. The 4th DCA reversed the trial court and found that a policyholder can seek punitive damages under the statute even if there are no bad faith compensatory damages. The court reasoned that a contrary decision would permit an insurer to engage in extremely egregious conduct and avoid punitive damage liability by eventually paying the contractual benefits because any compensatory bad faith damages would typically be non-existent or minimal.
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].