Florida Protects Its Citizens with Bad Faith Insurance Laws

Workers Comp Lawyer Palm Beach

Florida has a law, statute §624.155 titled, “Civil Remedy” that is commonly referred to as the “bad faith” statute.  This law has changed the way insurance claims are handled in Florida.

There is a difference between common law bad faith and statutory bad faith.  Florida courts have recognized an insurance company’s obligation of good faith and fair dealing with their insureds since the 1930’s.  The Florida Supreme Court in 1980 held that an insurance company has to advise their insured of settlement opportunities, the probable outcome of litigation, warn about the possibility of a judgment for more than the policy limits, explain what precautions can be taken to avoid a judgment for more than the policy limits, investigate the facts of the case, fairly consider settlement offers and, to settle the claim if possible in a reasonably prudent manner.  Two years later, the Florida legislature enacted Florida Statute §624.155 which spelled out the duties owed by an insurer to its insured.  It also gave a right to an insured to bring a civil action against an insurer when the insurance company violates these rules.

Florida Supreme Court held in 2000 that an insured may not bring a bad faith action against the insurance company if the carrier pays the contractual damages owed during the 60 day window provided by Florida Statute §624.155(5)d.

Since the Talat decision, there have been several other major reported cases in Florida that have further shaped bad faith law.  In 2004, the Florida Supreme Court considered the issue of an insurance carrier’s response to a policy limits settlement offer in the face of a claim involving significant injuries and a wrongful death.  The insurance company failed to pay its policy limits within the timeframe it was given despite having found complete fault against its own insured.  The Court stated that the question of a carrier’s bad faith claims handling was one for a jury to decide after examining all of the circumstances.  In this case, the Supreme Court found that there was competent, substantial evidence to uphold the jury’s finding of bad faith.  The Court found that the insurance carrier failed to take reasonable steps to complete the settlement, request an extension of time to do so or communicate with the insured or the claimant.  The Court found the insurer was liable for the full amount of the judgment against its insured, plus interest based on the jury’s finding of bad faith.

An insurance company also has to carefully consider claims involving multiple injured parties.  Following a crash that killed five young people and injured six others in addition to the driver himself, The Florida Farm Bureau General Insurance Company settled with the catastrophically injured driver of the other vehicle and the Estates of two individuals who were killed in the crash.  This exhausted the $300,000 policy.  The insurance company then filed a declaratory judgment action to determine if it had further duty to defend its insured since its policy limit was exhausted.  The trial court entered judgment in favor of the insured.  On appeal, the 4th District Court of Appeal addressed an insurance company’s obligation when there are multiple claims.  The Court found there are three specific duties: (1) The insurer is required to fully investigate all of the claims to determine how best to limit its insured’s liability; (2) The insurer should seek to settle as many claims as possible within the policy limits; (3) The insurer has a duty to avoid indiscriminately settling select claims and leaving the insured at risk of excess judgments that could have been minimized by wiser settlement practice.  The appellate court held that it was a question of fact as to whether the insurance company’s quick settlement with three claimants was reasonable and whether an investigation was conducted sufficiently in this case.

In 2006 a case was decided where a permissive driver operating the insured vehicle at a high rate of speed while intoxicated killed the claimant’s daughter.  After a demand for policy limits was made, the insurer tendered the same along with a release.  The claimant believed the release was too broad since it included both the driver and the owner of the vehicle.  The claimant attempted to have the carrier only release the owner but the carrier refused and a lawsuit followed.  An excess verdict was obtained, together with punitive damages.  In a subsequent bad faith suit, the insurer was granted a directed verdict since the Court found that it acted in good faith by attempting to obtain a release on behalf of the owner and driver.  On appeal, the appellate court held that once the insurer attempted to secure a release for both the driver and owner without success, it still had an obligation to avoid exposing the insured/owner to an excess verdict.  The Court stated that the insurer was obligated to take the necessary steps to protect the owner.  Thus, the focus in a bad faith suit must remain on the actions of the insurer in fulfilling its obligation to the insured, not on the claimant’s actions.

Recent decisions, both at the state and federal level reinforce the “totality of the circumstances” standard found in the Berges decision.  Practitioners in Florida handling automobile accident claims for their clients need to follow some basic common sense rules:

  1. Document all communications with the insurance company.
  2. Ask the insurance adjuster to pay the policy limits.
  3. Don’t ignore the claims adjuster; respond to attempts at contact and communicate clearly in writing.
  4. Cooperate with the insurance company by providing them, in a timely manner with any and all records and materials necessary to document the claim.
  5. Do not try to artificially create a bad faith case by “setting up” the carrier or try to trap them by failing to respond to communications or settlement opportunities.
  6. Don’t exaggerate the claim or overreach; be credible in your communication to the insurance company.
  7. Advise the insurance company of any problems they are creating by denying or delaying payment.
  8. Be specific in the conditions of settlement.
  9. Set realistic deadlines with the carrier and document specific reasons for rejecting a settlement offer.  Don’t make unrealistic time limiting demands or open-ended demands that are subject to confusion or multiple interpretations.
  10. If you intend to seek specific terminology for a release, provide it to the carrier.  Don’t assume that the carrier will provide you with an acceptable release if your demand is not clear.
  11. Avoid telephonic communications with the insurance company that are undocumented.  In other words, if you do have a telephone conversation with the adjuster, follow it with a specific letter confirming the conversation in detail.
  12. Remember, your communications with the insurance company, the materials you send the carrier and your overall behavior on behalf of your client can someday form the basis of the evidence for a bad faith action.  Be careful and mindful of what you write and what you say.  Be professional in all of your communications at all times.

Florida’s insurance laws regulate the conduct of the insurance carrier and how it treats both its insureds and claimants.  Florida statutes and case law require an insurance carrier to act reasonably and fairly and with regard to its insured’s interests.  Thorough knowledge of the rules regulating insurance claims in Florida is essential for the protection of claimants and insureds alike.

Jeff Davis, Florida AttorneySpecial thanks to our friend Jeff R. Davis, P.A., for providing some insight into Florida’s “bad faith” insurance laws.