There were many excellent presenters and attendees offering good observations at the 23rd National Advanced Forum on Bad Faith Litigation, held recently in Orlando, Florida. After the main Forum Conference concluded, there was a Florida Workshop on Bad Faith Litigation. Some of the comments at the Workshop are worth some further thought.
A person in the Workshop audience addressed Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 (Fla. 4th DCA September 5, 2012). He and another Workshopper offered that the opinion in this case shows that the Defendant Insurance Company paid within the time prescribed by law in a First-Party Bad Faith Claim. I could not recall that being mentioned in the opinion. That's because it wasn't mentioned in the opinion.
I pulled the case up on a tablet, read the opinion, and related this result during the Workshop. It bears repeating.
The Trafalgar opinion certainly reflects a difficult ruling to understand. The Workshoppers spent a lot of time trying to understand it, someone even suggesting that perhaps the opinion resulted from legal advocacy. I said that was clearly not the case. The issues were raised by counsel, but the Court is the one which treated those issues their own way in this case.
After taking the opportunity to read the opinion again, it appears that the answer lies in the facts and the timeline of events which resulted in the Appellate Panel in this case unanimously reversing the Trial Court's Summary Judgment in favor of the Insurance Company "and remand[ing] for trial on Trafalgar's bad faith action." Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *3 (Fla. 4th DCA September 5, 2012)(STATED NOT FINAL).*
*For ease of reference, the facts and the timeline of events which resulted in this opinion and result, are summarized in the extension of this post, below.
The opinion quoted settled Florida law concerning the requirements of a statutory First-Party Bad Faith action in Florida. Such an action is premature unless (1) Coverage is not contested, or Coverage exists because it has been determined adversely to the Insurance Company, and (2) there has been a final determination of liability and the extent of the insured's damages. In this particular case, the Appellate panel was satisfied that the first condition was met because "Zurich had waived any defense to coverage by acknowledging and paying a loss amount to Trafalgar" and the second condition was also met here, in their view, because "the appraisal award resulted in a final determination of the loss amount." Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *2 (Fla. 4th DCA September 5, 2012).
Understandably, Zurich contended that the first condition, that Coverage existed, was not met here because it obtained a Summary Judgment on the underlying Breach of Contract Cause of Action. The opinion seems to address this contention by referring instead to the second condition which the panel was required to address on this statutory First-Party Bad Faith Claim, that there was a final determination of liability and the extent of damages: "Thus, we hold that the appraisal award constitutes a 'favorable resolution' of an action for insurance benefits, so that Trafalgar has satisfied the necessary prerequisite to filing a bad faith claim." Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *2 (Fla. 4th DCA September 5, 2012). Moreover, in addition to seemingly missing the mark on which of the two requirements the Court was aiming at, there is no such requirement in Florida First-Party Bad Faith Law, and no requirement imposing a "favorable resolution" by that name, other than in this opinion.
As another Workshopper observed of this case, we do not know from this opinion what was stated in the required Civil Remedy Notice of Insurer Violation of Florida's Bad-Faith Statute. The opinion in this case just does not even refer to it, let alone summarize it in any way. I still agree with that observation, as I did at the Florida Workshop, and I would add this related observation, in addition to the above observations also: We also do not know anything from this opinion about what Coverages were provided in the Policy at issue nor does it contain a word about what Coverages and Damages Trafalgar actually claimed in this case.
The moral of this Trafalgar battle: It pays to read the Policy, the pleadings and Exhibits, and the reported case.
The moral also applies to an important decision of the Florida Supreme Court which was also mentioned in the Florida Workshop recently: Cunningham v. Standard Guaranty Insurance Co., 630 So. 2d 179 (Fla. 1994). The comment was made that the Court in this case did not require the Carrier's agreement to pay Policy Limits. That is not so. A so-called "Cunningham Agreement," the Florida Supreme Court held in the Cunningham case, allows a Liability Insurance Company to contest Bad Faith by agreeing to try the Bad-Faith action before the Underlying Liability Case against the Insured and further that if the trier of fact in the Bad-Faith action does not find Bad Faith then the Underlying Liability Claims against the Insured will be settled for Policy Limits, and the Insured will not be exposed to a Judgment in Excess of the Policy Limits. The Supreme Court approved this stipulation, and it has forever afterward been followed in Florida in one form or another:
In an arrangement such as the one in the instant case, trying the bad-faith claim before the underlying negligence action would result in a full release of the insured if no bad faith were found, thereby avoiding a time consuming and expensive trial on negligence and damages. We see no reason why the stipulation should not have been recognized.
Cunningham v. Standard Guaranty Insurance Co., 630 So. 2d 179, 182 (Fla. 1994).
To say again, the moral of the story, as they say, is to know the story.
Please Read The Disclaimer.
*Trafalgar submitted a Claim for Damage to its shopping center from Hurricane Wilma in 2005. Zurich made part payments on the Claim at the following times:
January, 2006: Zurich paid Trafalgar $468,381.30 on the Claim after subtracting Trafalgar's $150,000.00 deductible.
April, 2006: Zurich paid Trafalgar another $112,475.10.
June, 2006: Trafalgar provided a Proof of Loss. (Why there was no POL earlier, or whether the Insurance Company demanded a POL at any time, are facts not addressed in the opinion.) At this time, Trafalgar' s claim was for what the opinion termed "total damages" of $1,826,938.54.
September, 2006: Trafalgar filed suit "alleging that Zurich breached its contract of insurance by failing to pay all proceeds due." Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *1 (Fla. 4th DCA September 5, 2012). The opinion does not detail what Coverages were claimed by Trafalgar under this clearly Commercial Property Insurance Policy, and simply does not say for example whether Trafalgar's Claim was strictly for physical damage to covered property, or also for such things as Business Interruption, Extra Expense, Civil Authority, Service Interruption, Ingress/egress, or any other form or type of Coverage.
October, 2006: Stating that its investigation was complete, Zurich "tendered" another payment, "bringing the total payments to $641,730.32." At this time, Zurich also demanded Appraisal in accordance with the Policy. Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *1 (Fla. 4th DCA September 5, 2012). [Emphasis added.] However, to say again, the opinion does not recite what the Coverages in this Policy were nor does it state even one of the Coverages which Trafalgar invoked in this case.
September, 2007: An Appraisal Award was entered in Trafalgar's favor for the total sum of $1,504,663.10.
Within 30 days after the September, 2007 Appraisal Award: Zurich paid the Appraisal Award, "after deducting its previous payments and the deductible amount." Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *1 (Fla. 4th DCA September 5, 2012).
Thereafter: Zurich filed a Motion for Summary Judgment on Trafalgar's Breach of Contract Claim "[b]ased on its payment of the appraisal award ...." Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *1 (Fla. 4th DCA September 5, 2012). [Emphasis added.] The Trial Court granted Summary Judgment for Zurich on the Breach of Contract Claim "but also granted Trafalgar's motion to amend its complaint to state a cause of action for statutory bad faith, deeming the amended complaint to be filed" on that same date. Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *1 (Fla. 4th DCA September 5, 2012).
Again: Please Read The Disclaimer. And what the Courts select from the record of a litigated case to put in their Opinions to decide that case.
Emily Holbrook linked to Insurance Claims and Issues Blog last week in the Cavalcade of Risk #171 on her Risk Management Monitor Blog. Here is a link to the November 7, 2012, post, "Computer Models Doing Good After Hurricane Sandy? Not so Much."
