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Our Attorneys Review Court Ruling That Policyholders Do Not Need to Establish a Breach of Contract to Proceed with Bad Faith Action

Our Miami-Dade County homeowners coverage attorneys recognize that bad faith claims pose special challenges because the issues of liability and damages must be bifurcated in a separate legal proceeding from the first-party bad faith action.  Fortunately, this does not mean that an insured must obtain a breach of contract verdict or settlement before moving forward with the bad faith lawsuit.  Forms of alternative dispute resolution can constitute a sufficient determination of liability and damages to permit a bad faith action to move forward against recalcitrant homeowners insurers.

In the 2nd District Court of Appeal of Florida case, Hunt v. State Farm Florida Insurance Company, the court considered a bad faith claim brought by a homeowner based on the insurer’s failure to cover a claim related to sinkhole activity.  The trial court granted the insurance company’s motion for summary judgment based on the failure of the policyholder to satisfy a condition precedent before filing a bad faith action and a lack of adequate notice under the civil remedy notice (CRN) statute. 

The insured’s home was damaged by sinkhole activity.  The policyholder filed a claim with his insurance company that conflicted with the insurer’s estimate of the value of the claim.  Pursuant to the statute, the insured filed a CRN notice with the Florida Department of Financial Services.  The purpose of the required notice is to furnish the insurance company with a “cure” period of sixty days during which the insurance company has an opportunity to remedy its wrongdoing prior to a bad faith action moving forward.  The insurer filed a motion to dismiss the bad faith lawsuit and divert the parties to appraisal.  During the appraisal process, an appraisal award was entered in the amount of $165,571, which State Farm paid to the insured.  The trial court granted summary judgment for the insured and abated the lawsuit.

The trial court sided with the insurer on the issue of whether the policyholder must obtain a breach of contract judgment or settlement as a condition precedent to pursue a bad faith lawsuit.  The court relying on prior cases noted that “bringing a cause of action in court for violation of section 624.155(1)(b)1 is premature until there is a determination of liability and the extent of damages owed on the first-party insurance contract.”

However, the appellate court observed that prior Florida decisions had recognized that the “favorable resolution” requirement prior to pursuing a bad faith claim was not limited to a breach of contract judgment.  The court noted that an arbitration award had previously been found to satisfy the condition of a favorable resolution which merited moving forward with a bad faith claim.  The court reasoned that an appraisal award was analogous to an arbitration award for these purposes.  The appellate court also rejected the trial court’s grant of summary judgment based on the insufficient specificity of the CRN.  The insurer argued that the CRN was deficient because it did not specify the amount of money needed to “cure” the failure to pay under the policy.  The court observed the statute spelled out specific information that had to be part of the CRN:

  • Statutory provision and relevant language violated by the insurer
  • Name of any individual involved in the violation
  • Facts and circumstances involving the violation

Since this enumeration of the facts that must be included did not extend to the amount necessary to cure the violation, the insured was not required to indicate a specific amount of money needed to resolve the failure to provide benefits.  The court noted prior decisions had reached similar conclusions.

Greenberg, Stone, & Urbano:  Seeking Maximum Recovery for Policyholders from Homeowners Insurance Companies

Our Miami property damage attorneys at Greenberg, Stone & Urbano will tenaciously pursue the full compensation our clients are entitled to under the law.  For over 130 collective years, our firm has assisted homeowners with damage claims across South Florida.  We seek to obtain compensation for your tangible and intangible damages.  Our skill and dedication have earned us an AV rating from Martindale-Hubbell and recognition as one of South Florida’s top firms by the Miami Herald.   Call us at (888) 499-9700 or (305) 595-2400 or visit our website to schedule your initial consultation.

 

 

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