CONFESSION OF JUDGMENT, FLORIDA INSURER LAWS, AND BAD FAITH.

This article once again continues the report of changes to Florida insurers' laws in 2022, and again in 2023.

Beyond restricting first-party bad faith actions against property insurers in Florida, the 2022 Florida Legislature also restricted many other claims for relief against property insurers.  Before the provision commented on and republished here yesterday was enacted by the Florida Legislature, for example, the Florida courts had consistently applied the "confession of judgment doctrine" to hold insurance carriers of all kinds liable for their insureds' attorney's fees when:

1. The carrier denied its insured benefits to which the insured was entitled under the policy at issue;
2. The carrier's denial has forced the insured to file suit against the carrier, and
3. The carrier changes position and pays the claim before a judgment has been entered in the insured's favor.[1]

             It was carefully pointed out by a Florida appellate court when its decision was published on November 9, 2022 that "[n]othing in section 627.428(1) or anywhere in the insurance code prevents the entry of a confessed judgment."^[2]  Now it does.

            The barrier to a confessed judgment, or to application of the confession of judgment doctrine if you will, is clear from the quoted change that the Legislature made to Section 624.1551 with regard to property insurers in December of that same year.   From and after the amendment's effective date of December 16, 2022, "any claim for extracontractual damages under s. 624.155(1)(b)," i.e., under the main provisions of the Florida Bad Faith Statute, would depend on proof of "an adverse adjudication by a court of law," among other things, in order to file the action against "the property insurer[.]"[3] 

           In sum to this point, the Florida Legislature enacted changes to Florida's law of bad faith which are likely to be repeated in other jurisdictions.  One is that property insurers have been singled out for a "carveout" from bad faith liability.  In Florida in 2022, the carveout was made by the Legislature in the Florida Statutes.  There does not at first blush appear to be any reason to limit similar restrictions to statutory bad faith actions.  Such restrictions would seem to be readily adaptable to common law bad faith actions.

          Another change enacted by the Florida Legislature in 2022 that is  likely to be replicated and changed again, is the idea of limiting the carveout to just property insurers.  Other insurance carriers, liability carriers and other first-party carriers among the rest, may insist on their own special exemptions from exposure to extracontractual damages of any and all kinds, arguing that such carveouts from liability should not be limited to property insurers alone.  "Beyond the borders of Florida, the appeal of these sorts of statutory changes may be irresistible to property insurers in other jurisdictions.  Beyond geography, the appeal of changes like those made for property insurers by the 2022 Florida Legislature may be irresistible to many other insurers which issue other lines of insurance."[4]

The Confession of Judgment Doctrine and the changes made by the 2022 and 2023 Florida Legislatures to the Law of Insurer Bad Faith, are all discussed in detail in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:17, Fairly or Reasonably Debatable Claims (West Publishing Co., 3d Edition with 2023 Supplements in process).

[1]The confession of judgment doctrine applied by the Florida courts is well-summarized by the Court in Allstate Fire & Cas. Co. v. Castro, 351 So. 3d 127, 132 (Fla. 1st DCA 2022).   The Castro case involved a claim for uninsured (UM) motorist policy limits.

          In another case, a different appellate court held that it was the legal equivalent of a confession of judgment when a homeowner's insurer paid an appraisal award.  Therefore, the court held in that case, the homeowner's carrier's insureds were entitled to attorney's fees under Section 627.428; they prevailed in an action against their insurance carrier, even though the carrier paid the award before judgment could be entered in favor of the insured.  Bryant v. GeoVera Spec. Ins. Co., 271 So. 3d 1013, 1018-20 (Fla. 4th DCA 2019).  As can be seen from the quotation of Section 624.1551 in the text, it would appear that from and after December 16, 2022,  "the payment of an appraisal award does not constitute an adverse adjudication under this section."

[2] Allstate Fire & Casualty v. Castro, 351 So. 3d at 133.

[3] Fla. Stat. § 624.1551, as amended by 2022 Fla. Sess. Law Serv. Ch. 2022-271, § 2 (S.B. 2-A) (West), effective December 16, 2022.

[4] Wall, Consumers Had No Voice, 45 Ins. Litig. Rptr. at 90.  "The resulting situations are foreseeable, perhaps, but they have not yet taken place.  If and when they do, this article will serve as advance notice, and as a warning."  Id.

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