Claims and Bad Faith Law Blog

Negotiating Claims and Avoiding Bad Faith While Conducting Settlement Negotiations.

In Staple v. LM Gen. Ins. Co., No. 24-3935, 2024 WL 4882649 (E.D. Pa. Nov. 25, 2024), the Court gave a short and insightful seminar on negotiating claims and avoiding bad faith in conducting them:

    Arbitrarily low settlement offers may be probative of bad faith when they are not reasonably based on the value of a claim. [Citations omitted.]   However, “an insurer’s low, but reasonable estimate of damages” does not “constitute bad faith.”  [Citations omitted.]  Similarly, “negotiating by offering a figure at the low end of the settlement range does not necessarily constitute bad faith, particularly when the valuation of the injuries and damages of a claim is difficult.”  [Citations omitted.]  Thus, to be probative of bad faith, an insurer’s settlement offer must be not only low, but unreasonably so given an objective valuation of the claim.

Staple, 2024 WL 4882649, at *5.

In the Staple UIM (underinsured motorist) case, the Court granted the insurance carrier’s motion to dismiss the bad faith claim but also granted the plaintiff leave to amend.

Bad faith claims in UIM cases, like the ones presented under the Pennsylvania bad faith statute at issue in Staple, are discussed throughout Chapter 9 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements), but principally in § 9:12, Tortious Breach of Contract and the Tort of Bad Faith Breach, and in § 9:14, Express Statutory Causes of Action.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.

TEXAS LAWYER GUIDES FIFTH CIRCUIT IN LOUISIANA BAD FAITH LAW.

In First Utd. Pentecostal Church v. Church Mut. Ins. Co., 119 F.4^th 417, 427 (5^th Cir. 2024), a panel of the Fifth Circuit Court of Appeals affirmed a trial judge’s holding which accepted as “credible” an expert’s adjustment to an Xactimate estimate of repair damage.  The panel said that this holding was not clearly error.

The trial judge sat in a federal court in Louisiana.  Despite this holding, the District Court held that the insurance company’s delay in paying hurricane damage claims was arbitrary or capricious or without probable cause, and therefore actionable as bad faith under Louisiana law.

The Fifth Circuit panel was composed of two Louisiana lawyers and one Texas lawyer.  The Fifth Circuit panel’s opinion was written by the Texas lawyer in this appeal from Louisiana.  The Fifth Circuit panel reversed the Louisiana District Judge and substituted its own judgment to the contrary.  Contrary to what the trial judge held in this regard, the Texas judge led the Fifth Circuit panel into a discussion of Louisiana insurance bad faith law and held that the record conduct of the carrier in question did not fall to the level of being arbitrary or capricious or without probable cause under Louisiana law.

Finding facts and legal holdings.  These can be hard things to deal with, apparently.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.

POLICY LIMITATIONS PERIODS: CONTRACT CLAIMS AND PENNSYLVANIA STATUTORY BAD FAITH CLAIMS.

In Houtz v. State Farm Fire & Cas. Co., ___ F. Supp. 3d ___, No. 23-3579, 2024 WL 4556054 (E.D. Pa. Oct. 23, 2024), a Federal Judge in the Eastern District of Pennsylvania said that the suit limitations provision set out in the homeowners insurance policy at bar was enforceable in that case because it was reasonable.  Houtz, 2024 WL 4556054, at *2.

The Pennsylvania Bad Faith Statute required a different result because the statute contains its own suit limitations provision.  That is the limitations period to look at to determine a limitations defense to a Pennsylvania statutory bad faith claim.  Houtz, 2024 WL 4556054, at *3 n.1.

In this case, the Federal Judge consulted both the contractual limitations provision as to the policyholders’ breach of contract claim, and the statutory limitations provision as to the policyholders’ statutory insurer bad faith claim.  The Court in this case held that both claims are barred and accordingly dismissed the homeowners’ amended complaint with prejudice in this case.  Houtz, 2024 WL 4556054, at *5.

The Court in the Houtz case also began its examination of the statutory limitations period with this universal observation, which is also of universal interest in my judgment:  “Every insurance contract is governed by the well-established duty of good faith.”  Houtz, 2024 WL 4556054, at *3.  Clearly, for Mr. and Mrs. Houtz and policyholders similarly situated as they were in this case, the fact that there may be an implied covenant of good faith and fair dealing is not enough by itself to carry the day in an insurance bad faith case.

A raft of supporting case law is set out for the holding that a covenant of good faith and fair dealing is implied in every contract, including insurance contracts, in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 1:1, Brief Summary of the Area (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements).  Contractual and Statutory Limitations Periods in first-party cases like Houtz are discussed in 2 id. § 11:15, Statutes of Limitations.

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REASONABLENESS JUDICIALLY CONSIDERED: WHEN LIABILITY IS REASONABLY CLEAR, REASONABLE OFFERS.

In Urban v. Zurich Am. Ins. Co., ___ F. Supp. 3d ___, No. 21-CV-11182-AK, 2024 WL 4379927 (D. Mass. Sept. 30, 2024), a U.S. District Judge in Massachusetts considered whether the liability insurance carrier defendant had violated Massachusetts statutes by failing to make a reasonable offer after the policyholder’s-insured’s liability had become reasonably clear.

          As to whether the policyholder-insured’s liability was reasonably clear at any point during the underlying claim, this case involved the possibility of a jury finding of comparative negligence.  The Court pointed out that “[w]hile comparative negligence can, in some cases, prevent liability from becoming reasonably clear,” insurance carriers have an obligation to make a reasonable settlement offer, which they cannot avoid “by hiding behind the gamesmanship of anticipated success at trial.”  Urban, 2024 WL 4379927, at *21. 

          As to the reasonableness of the carrier’s offers, the Court noted that under Massachusetts law (as under the law in most if not all U.S. jurisdictions) all insurance carriers are subject to the following legal standard:  “Reasonableness can be measured by looking to the undisputed evidence indicating the damages suffered against the offer tendered.”  Urban, 2024 WL 4379927, at *6. 

          The Court in this case awarded double damages against the defendant carrier in the amount of “$2,841,358.26, plus attorneys’ fees” because it failed to make a reasonable offer after the liability of its policyholder-insured had become reasonably clear in the underlying case.  Urban, 2024 WL 4379927, at *25.

Statutory bases for liability in settlement, such as in the Urban case and Massachusetts General Laws chapter 176D, § 3(9)(f) which was the statutory provision involved in the Court’s determinations in that case, are discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28 (Thomson Reuters West Publishing Co. Third Edition & 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Check out my Substack newsletter. 

NO DEMAND IS NECESSARY. NEVER.

The duty of a liability insurance carrier to act in good faith in settlement does not depend on a demand from the injured claimant.  Not now, not for years.

        “The modern view is that absence of a third party's settlement demand will not insulate a liability insurer from exposure to liability to pay sums beyond its policy limits as a result of its bad faith and unfair dealing in settlement.  Regardless of other situations where good faith duties apply, courts now impose the good faith duty in settlement whenever:

• Liability is high
• Damages are relatively great
• The insured has either excess insurance or other financial resources beyond the liability insurer's policy limits, or the insured will be exposed to judgment beyond the policy limits.”

1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:14, Demand From Third Party (West Publishing Co. 3d Edition & 2024 Supplements)(citing authorities, pro and con; citations omitted here).

          From time to time a commentator will nonetheless declare that a liability carrier must receive a settlement demand, or what the injured claimant’s attorney will almost certainly call a settlement offer, before the liability carrier has good faith settlement duties. Sometimes these statements appear without warning in respected publications like Recent Case, Louis Jimenez v. GEICO Secure Insurance Company, ___ F. Supp. 3d ___, 2024 WL 1623155 (D. Nev. April 12, 2024), 46 Ins. Litig. Rptr. 397 (Aug. 19, 2024).  The Jimenez case and this case comment both illustrate the courts’ move away from concentrating on the presence or absence of a settlement demand in the bad faith case law.

          The comment recites that the judge in the Jimenez case “found the reasoning” in an earlier case “persuasive and applicable to Jimenez’s case.”  46 Ins. Litig. Rptr. at 398.

          No, he didn’t.

          The earlier case was  Chowning v. Nationwide which was decided by a magistrate judge in Nevada a year earlier.  Chowning v. Nationwide Ins. Co. of Am., No. 22-cv-00798-CDS-EJY, 2023 WL 2971435 (D. Nev. 2023) (USMJ).

          As the Jimenez Court wrote, “GEICO argues that I should follow Chowning, which held that a [statutory unfair claims settlement practices] claim was futile without a settlement demand from the injured party.”  Jimenez, 2024 WL 1623155, at *3.  But the Jimenez Court disagreed.  The district judge in that case did not find the decision by a magistrate judge in Chowning to be “controlling law”:

        The Supreme Court of Nevada has not decided the precise question of whether a settlement demand from the claimant is a prerequisite to an insurance bad faith claim. See Chowning, 2023 WL 2971435, at *6. Neither party cites controlling law on this point.

Jimenez, 2024 WL 1623155, at *3 (emphasis added).

          “However,” as the comment described the Jimenez Court’s decision,  “the court emphasized that this duty does not extend to proactively initiating settlement negotiations without a request or demand from the claimant or their representatives.”  46 Ins. Litig. Rptr. at 398.

          Again, no, it didn’t.

          Nevada law was involved in the Jimenez case and the Jimenez Court applied Nevada Supreme Court decisions which establish that a liability carrier cannot be held liable for its alleged bad faith in settlement if it “’has no opportunity to settle within policy limits … [o]r, if settlement is possible beyond policy limits, … that the insured would be willing to contribute the excess amount.’”  Jimenez, 2024 WL 1623155, at *2, quoting Allstate Ins. Co. v. Miller, 125 Nev. 300, 212 P.3d 318, 328 (2009) (en banc).

          Applying the Nevada law of bad faith, as interpreted by the Nevada Supreme Court and followed in the Jimenez case, the policyholder’s complaint at issue failed in its claim of bad faith in settlement because it did not contain any allegation that the defendant carrier had “an opportunity to settle, either within policy limits or outside of policy limits with Jimenez’s contributions.”  Jimenez, 2024 WL 1623155, at *3.

          Without an allegation that the defendant carrier had an opportunity to settle, both the common law claim of bad faith and the statutory claim of bad faith failed, and for that reason both of these claims were dismissed.   Jimenez, 2024 WL 1623155, at *3 & *4.

          The Jimenez decision is thoughtful and researched.  Not once did the Jimenez Court write that a demand (or offer) is necessary to a viable claim of bad faith in settlement; what Nevada law requires is what all modern jurisdictions require, which is an opportunity for the liability carrier “to settle within policy limits or in excess of policy limits with contribution” from the bad-faith plaintiff.  Jimenez, 2024 WL 1623155, at *4.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.

THE LATEST ON NO COVERAGE, NO BAD FAITH.

"Where there is no duty to defend and no right to indemnification under an insurance policy, courts have dismissed claims for bad faith and violations of the UIPA [New Mexico Unfair Insurance Practices Act]."  Mayer Botz Enter's LLC v. Cent. Mut. Ins. Co., No. 1:21-cv-00992-MLG-LF, 2024 WL 1015145, at *4 (D.N.M. March 8, 2024) (summary judgment entered for carrier on first-party bad-faith and UIPA claims).

The latest decisions on the issue of whether there can be a cause of action or an actionable claim for insurer bad faith even when there is no insurance coverage under the policy at issue (some courts hold that there can), are explored at length in first-party and in third-party bad faith cases in the 2 Volumes of DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition West Publishing Co., 2024 Supplements in process).

Please read the disclaimer.  This blog article ©2024 Dennis J. Wall.  All rights reserved.

VIRGINIA'S UNFAIR CLAIM SETTLEMENT PRACTICES ACT: A QUICK LOOK.

Virginia's Unfair Claim Settlement Practices Act is codified in Va. Code Ann. § 38.2-510.  It parallels the National Association of Insurance Commissioners' Model Unfair Claims Settlement Practices Act in pertinent part.  It has been held that the Virginia Unfair Claim Settlement Practices Act does not convey a cause of action.  Sustainable Sea Prod's Int'l, LLC v. Am. Emp. Surplus Lines Ins. Co., No. 3:21cv697, 2022 WL 3573247, at *4 (E.D. Va. Aug. 19, 2022).

Virginia's statute is one of many Unfair Claim Settlement Practices Acts given a look while exploring third-party and first-party bad faith statute and case law in the 2 Volumes of DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition West Publishing Co., 2024 Supplements in process).

Please read the disclaimer.  This blog article ©2024 Dennis J. Wall.  All rights reserved.

SOME STATES HAVE BAD FAITH TORTS, SOME HAVE PENALTIES STATUTES.

In Snyder v. Erie Ins. Co., No. 1:22-cv-01205-STA-jay, 2023 WL 9503402 (W.D. Tenn. Dec. 12, 2023), the District Court summarized Tennessee law and the law applicable to this case:

       Tennessee insurers have a duty to act in good faith, and, while there is no separate tort for breach of good faith, Tennessee statutory law allows insureds to seek a penalty up to 25% of the total liability when a claim is denied in bad faith. [Citation omitted.]  Tennessee's bad faith statute provides as follows:

    The insurance companies of this state, and foreign insurance companies and other persons or corporations doing an insurance or fidelity bonding business in this state, in all cases when a loss occurs and they refuse to pay the loss within sixty (60) days after a demand has been made by the holder of the policy or fidelity bond on which the loss occurred, shall be liable to pay the holder of the policy or fidelity bond, in addition to the loss and interest on the bond, a sum not exceeding twenty-five percent (25%) on the liability for the loss; provided, that it is made to appear to the court or jury trying the case that the refusal to pay the loss was not in good faith, and that the failure to pay inflicted additional expense, loss, or injury including attorney fees upon the holder of the policy or fidelity bond; and provided, further, that the additional liability, within the limit prescribed, shall, in the discretion of the court or jury trying the case, be measured by the additional expense, loss, and injury including attorney fees thus entailed.

Tenn. Code. Ann. § 56-7-105(a). Thus, under the statute, to recover a bad faith penalty, a plaintiff must prove (1) that the policy of insurance had, by its terms, become due and payable; (2) the plaintiff made a formal demand for payment and then waited sixty days after making the demand before filing suit; and (3) the refusal to pay was made in bad faith.

Snyder, 2023 WL 9503402, at *6-*7.  Under Tennessee law as in this case, negligence alone is not legally sufficient to impose extracontractual damages for a failure to settle a claim.  Snyder, 2023 WL 9503402, at *7.

Express statutory causes of action in first-party insurance cases, including under penalties statutes like the Tennessee statute at issue in Snyder, are discussed in Volume 2 of Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:14 (West Publishing Co. 3d Edition and 2023 Supplements, 2024 Supplements in process).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.

FLORIDA INSURANCE LAW CHANGES: THE 2023 REPORT, continued ....

 

(Shepard's/McGraw-Hill, c. 1985)

This article continues the review of Florida Insurance Law changes made during the 2023 Florida Legislature, so far, that began here on November 20, 2023.

 

1. REPEAL OF SO-CALLED "ONE-WAY" ATTORNEY'S FEES STATUTES.

Section 627.428 of the Florida Statutes basically allowed prevailing policyholders and other prevailing insureds to recover their attorney's fees and costs from their insurance carriers that forced them to prove their entitlement to insurance coverage.[1]  Section 626.9373 of the Florida Statutes similarly allowed the recovery of fees and costs in lawsuits involving insurance coverage issues under policies issued by surplus lines carriers and on which the insureds prevailed.[2] 

            The 2023 Florida Legislature repealed both of these statutes.   There is no legislative history extant as yet behind the repeal, but when the insurance industry issued a call for the repeal of these statutes, the industry justified their repeal by calling them "one-way" attorney's fees statutes.

2. AFTER REPEALING TWO "ONE-WAY" ATTORNEY'S FEES STATUTES, THE 2023 FLORIDA LEGISLATURE ADDED ONE.

New Section 86.121 makes available what the insurance industry referred to as "one-way attorney fee statutes" while advocating for the repeal of Sections 627.428 and 626.9373, discussed above.  The newly available attorney's fees can only be awarded "to the named insured, omnibus insured, or named beneficiary under a policy issued by the insurer, " and only "upon rendition of a declaratory judgment in favor of the named insured, omnibus insured, or named beneficiary,"[3] and only in "an action brought for declaratory relief in state or federal court to determine insurance coverage after the insurer has made a total coverage denial of a claim."^[4] Here is another condition on the availability of attorney's fees under this new statute:  They are only available in declaratory relief actions brought under Chapter 86, the Florida Declaratory Judgment Act:  "Such fees are limited to those incurred in the action brought under this chapter for declaratory relief to determine coverage of insurance issued under the Florida Insurance Code."^[5]

 

3. WHEN TENDER BECOMES IMMUNITY.

Liability insurance carriers were given immunity in a new subsection 624.155(4).[6]   The new addition to Florida's Bad Faith Statute conferred immunity upon "the insurer" in "[a]n action for bad faith involving a liability insurance claim," if the insurer "tenders the lesser" of its policy limits or the amount demanded by the claimant.  The immunity applies if the tender takes place "within 90 days after receiving actual notice of a claim," and the claim or the actual notice (it is not clear which, but apparently an unsupported demand does not qualify) "is accompanied by sufficient evidence to support the amount of the claim."

4. THE FLORIDA LEGISLATURE ADOPTS A LEGAL DEFENSE OF "COMPARATIVE BAD FAITH." 

In 2023, the Florida Legislature enacted a "duty to act in good faith" in matters involving information, demands, setting deadlines, and "in attempting to settle the claim[.]"^[7]  Although the new legislation did not make these newly made legal duties actionable, the 2023 Florida Legislature made these new "good faith duties" for "[t]he insured, claimant, and representative of the insured or claimant" to apply  in "any bad faith action[.]"^[8]

             The focus of these new statutory provisions can only be understood in the context of Florida Insurance Bad Faith Law which has always focused on the extracontractual or bad faith exposure of the insurance company in the face of all such conduct.

            The central issue in insurance bad faith failure-to-settle cases in Florida, as elsewhere, has always been whether the insurance carrier has attempted in good faith to settle claims, when under all the circumstances of the claim, the carrier could and should have done so, had the carrier acted fairly and honestly toward the insured and with due regard for her or his interests.^[9]  That context explains why the 2023 Florida Legislature fashioned a legal duty that makes certain conduct subject to a determination of whether that conduct is legally taken in good faith, namely, in furnishing "information regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim."[10]  Under the language of the new subsection, violation of a new legal duty is now a comparative defense to the insurer's own bad faith. 

5. & 6. TWO MORE, BUT THEY'RE NOT REALLY WHAT YOU MIGHT CALL "INSURANCE" STATUTES, ALTHOUGH THEY DO HAVE AN IMPACT ON INSURERS.
6. The 2023 Florida Legislature shortened the statute of limitations that applies to an action founded on negligence to two from four years.[11]
7. The 2023  Florida Legislature also rewrote the Florida Comparative Fault Statute, Section 768.81.  It limited  comparative negligence to cases involving 50 percent or less of the plaintiff's adjudicated "fault," and it reintroduced contributory negligence as a complete defense in Florida negligence litigation where the person suing is found to have more fault than 50 percent for his or her own harm.[12]

These are the most significant changes wrought by the 2023 Florida Legislature to Florida Insurance Law, and this review has included a couple of other significant changes as well.  More detailed reviews of all these changes can be found in Volumes 1 and 2 of DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition and 2023 Supplements), especially in Chapters 3, 5, 9, and 11.  Many of the different and voluminous 2023 Florida Insurance Law changes are also brought into the sunlight in the various forthcoming editions of CATASTROPHE CLAIMS:  INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS, and Insurance Litigation Reporter.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

 

[1]Fla. Stat. § 627.428, repealed by 2023 Fla. Sess. Law Serv. Ch. 2023-15 § 11 (C.S.C.S.H.B. 837) (West).

[2] Fla. Stat. § 627.9373, repealed by 2023 Fla. Sess. Law Serv. Ch. 2023-15 § 10 (C.S.C.S.H.B. 837) (West).

[3] Fla. Stat. Ann. 86.121(1)(b).

[4] Section 86.121(1). 

[5] Section 86.121(1)(b).

[6] Fla. Stat. Ann. § 624.155(4) (West), enacted by 2023 Fla. Sess. Law Serv. Ch. 2023-15, § 4 (C.S.C.S.H.B. 837) (West).

[7] Fla. Stat. Ann. § 624.155(5)(b)1.

[8] Section 624.155(5)(b)1.

[9] This is a summary of the express language of the Bad Faith Statute, which remains in place even after the newly enacted Subsection (5).  It is also an application of the express language of the unchanged Florida Standard Jury Instruction 404.4, titled "Insurer's Bad Faith (Failure to Settle)."

[10] Fla. Stat. Ann. § 624.155(5)(b)1, enacted by 2023 Fla. Sess. Law Serv. Ch. 2023-15, § 4 (C.S.C.S.H.B. 837) (West).

[11] Fla. Stat. Ann. 95.11(4)(a) (West), as amended by 2023 Fla. Sess. Law Serv. Ch. 2023-15 § 3 (C.S.C.S.H.B. 837) (West).

[12] Fla. Stat. § 768.81(2) & (6) (West), as amended by 2023 Fla. Sess. Law Serv. Ch. 2023-15 § 9 (C.S.C.S.H.B. 837) (West).

GIVE THANKS! THE 2023 FLORIDA LEGISLATURE WILL EVENTUALLY ADJOURN!

It was not the purpose of the 2023 Florida Legislature to lower insurance rates.  The insurance rates paid by Florida homeowners are still the highest in the United States.

    The 2023 changes were crafted for the insurance industry by the insurance industry.  It's going to take time for Florida consumers to be aware of positive results in their homeowner's insurance rates, the Florida Insurance Commissioner has testified.[1]  The Chair of the Florida Senate Banking & Insurance Committee has testified to much the same:

The full positive impacts of our efforts will take time to be fully experienced and felt by our constituents.[2]

    In other words, rates were not on the legislators' minds in 2023.  Something else caught their focus.  Not insurance rates, and certainly not homeowner's insurance rates, but something the insurance companies called "lawsuit abuse."

    In 2023 the Florida Legislature focused on "HB 837, a sweeping tort measure" which the Florida Bar News reported that "the insurance industry said was needed to combat 'lawsuit abuse.'"[3]  More precisely, the "sweeping tort measure" which was the focus of the 2023 Florida Legislature more than homeowner's insurance rates, was a Committee Substitute for a Committee Substitute for House Bill 837.

    Only one of the more celebrated statutory changes affected homeowner's insurance and that was a change that affected all types of insurance in Florida:  repealing the availability of attorney's fees in the event of prevailing in a dispute with an insurance company over coverage or over the amount of benefits due under an insurance policy.

TO BE CONTINUED ....

[1] Testimony of Hon. Michael Yaworsky, Florida Insurance Commissioner, to the Florida Senate Banking & Insurance Committee, Oct. 10, 2023, quoted in Jim Ash, More Insurance-Related Litigation Reform Bills Unlikely This Session, 50 FLA. B. NEWS, November 2023, at 9.  The Insurance Commissioner's testimony was supported by testimony from the Hon. Tim Cerio, CEO of "Citizens, the state-run property insurer of last resort." November 2023 Florida Bar News Insurance-Related Litigation Reform Bills article, supra, at 9, quoting Hon. Tim Cerio.

[2] Florida Senate Banking & Insurance Committee Chair Jim Boyd, Oct. 10, 2023, quoted in November 2023 Florida Bar News Insurance-Related Litigation Reform Bills article, supra, at 1.

[3] November 2023 Florida Bar News Insurance-Related Litigation Reform Bills article, supra, at 9.

The changes to Florida Insurance Law and particularly to Florida Insurance Bad Faith Law are brought to light -- and highlighted -- in Volumes 1 and 2 of DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition and 2023 Supplements), especially in Chapters 3, 5, 9, and 11.  Many of the different and voluminous 2023 Florida Insurance Law changes are also hauled into the sunlight in the forthcoming editions of  CATASTROPHE CLAIMS:  INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS, and Insurance Litigation Reporter.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

“INVESTIGATIVE EXPENSES” RECOVERABLE IN INSURANCE BAD FAITH, WASHINGTON CPA CASE.

Women's March in Washington, D.C., 2017.

“Investigative expenses” that are possibly a part of insurance coverage in an insurance bad faith case are recoverable under the Washington Consumer Protection Act, as opposed to “litigation expenses” that are not recoverable under the CPA, the Court held in Nielsen v. Cal. Cap. Ins. Co., No. 2:22-CV-0177-TOR, 2023 WL 6222537, at *5 (E.D. Wash. Sept. 25, 2023) (holding that, at a minimum in the eyes of the Court, “however, a genuine issue of material fact exists as to whether Dr. Soto’s [the treating physician’s] reply to Dr. Battaglia’s IME report and Mr. Dietz’s [the policyholder’s “insurance expert’s”] evaluation of Defendant’s alleged insurance malpractice related to the investigation of an unfair act or practice separate from the instigation of her CPA claim.”).

Women's March in Washington, D.C., 2019.  (Sarah Silbiger / New York Times)

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

FLORIDA APPRAISAL DID NOT DETERMINE CARRIER'S LIABILITY OR INSURED'S DAMAGES.

Under the Florida Bad Faith Statute in first-party cases -- which is the only source of a bad-faith claim or cause of action in a first-party case in Florida -- there must first be a determination of the carrier's liability and of the insured's damages, among other things.  An appraisal award of the difference between Replacement Value and Actual Cash Value did not determine the carrier's liability, so it was held to be a legally insufficient springboard for the statutory first-party bad faith claim in Ricol Holdings, LLC v. Westchester Surplus Lines Ins. Co., ___ F. Supp. 3d ___, No. 3:23cv12248-TKW-ZCB, 2023 WL 4948005, at *3-*4 (N.D. Fla. July 26, 2023).

 

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.  Express statutory causes of action in first-party bad faith cases, including under Florida law, are discussed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14 (3d Edition West Publishing Co., 2023 Supplements).  Far from being overlooked or forgotten, third-party cases are discussed in multiple sections in Volume 1, id., including Statutory Bases of Liability for Bad Faith in claims involving Settlement, § 3:28, in claims involving Refusal to Defend, § 3:63, and in claims involving the Conduct of the Defense, § 3:92.

WHEN BAD FAITH CLAIMS ARE NOT LINKED TO CONTRACT BREACHES.

It has been held under Pennsylvania's Bad Faith Statute,[1] that a bad faith claim may not always depend on the outcome of a breach of contract claim:  "Under those circumstances, especially when the bad faith claim is not solely based upon a denial of coverage, a bad faith claim is not contingent on the underlying breach of contract claim."[2]

 

[1] 42 Pa. Cons. Stat. Ann. § 8371.

[2]  In re Lewis (Lewis v. U.S. Bank Nat'l Ass'n), 627 B.R. 602, 617 (E.D. Pa. Bankr. 2021).

ASIC has been a very large provider of force-placed insurance policies; it was the subject of the insurance-related claims in this case.  The most frequently alleged claims and causes of action in force-placed insurance cases, including cases involving alleged bad faith, are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:35 (3d Edition West Publishing Company, 2023 Supplements in process).

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

CIVIL REMEDY NOTICE TO ACT IN GOOD FAITH

Many jurisdictions have "bad faith statutes" which require the claimant to provide a Civil Remedy Notice of Insurer Violation of the statute, and which provide a "cure period" within which the carrier can foreclose litigation over the alleged violation by "curing" it.  The statutory "cure period" is not tolled in Florida when the carrier invokes a policy's appraisal provision after the policyholder has filed a Civil Remedy Notice (CRN).[1]

 

[1] E.g., Apex Roofing & Restor., LLC v. State Farm Fla. Ins. Co., 343 So. 3d 1223, 1225 (Fla. 5th DCA 2022); Zaleski v. State Farm Fla. Ins. Co., 315 So. 3d 7, 12 (Fla. 4th DCA 2021), review denied & attorney's fees awarded, No. SC 21-707, 2021 WL 5292345 (Fla. Nov. 15, 2021).

Statutory and Common Law requirements concerning Civil Remedy Notices, addressed mostly in first-party cases, are set forth in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:21 (West Publishing Co. 3d Edition, 2023 Supplements in process).  Decisions in third-party cases are discussed in 1 id., § 3:30.

CALIFORNIA'S UNFAIR COMPETITION LAW, COVID COVERAGE, AND IMPLIED COVENANT BREACH.

With reference to California's Unfair Competition Law specifically, it may be "that allegations sufficient to support a cause of action for breach of the covenant of good faith and fair dealing are also sufficient to support a claim for violation of the UCL."  Shusha, Inc. v. Century-Nat'l Ins. Co., 87 Cal. App. 5th 250, 303 Cal. Rptr. 3d 100, 114 n. 11 (Cal. 2d DCA, Div. 7 2022) (COVID insurance coverage case involving a commercial policy for lost business income; Century-National did not dispute that possibility in this case), review granted, 307 Cal. Rptr. 3d 1, 527 P.3d 271 (2023).

Express Statutory Causes of Action in first-party cases in the United States are discussed in Section 9:14 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition, 2023 Supplements in process).

This blog article ©2023 Dennis J. Wall.  All rights reserved.

THE ORIGIN OF FIRST-PARTY "BAD FAITH" IN MINNESOTA.

    "In 2008, the Minnesota Legislature created a private cause of action for bad faith in first-party insurance."[1]  The Minnesota statute is Minnesota Statute Section 604.18.[2]

    The Eighth Circuit quickly and clearly summarized the statute in 2022:

    To make a bad faith claim, the insured must establish both that the insurer lacked a reasonable basis for denying the insurance benefits and that the insurer knew it lacked a reasonable basis for denying benefits or acted in reckless disregard of the lack of a reasonable basis.[3]

Or, as the Minnesota Supreme Court put it in a slightly lengthier interpretation, reaching the same result: 

    Several things are clear from the plain text and structure of the statute. First, the burden rests with the insured to prove that the insurer violated the standard of conduct. Second, to prevail, the insured must establish two independent facts: (1) the insurer did not have a reasonable basis for denying the benefits of the insurance policy, and (2) the insurer either knew it lacked a reasonable basis for denying the benefits or it recklessly disregarded the fact that it lacked a reasonable basis for denying the benefits.[4]

 

[1] Friedberg v. Chubb & Son, Inc., 800 F. Supp. 2d 1020, 1025 (D. Minn. 2011) (Keyes, United States Magistrate Judge). 

[2] Minn. Stat. § 604.18 (West; Westlaw current with legislation effective through April 19, 2023 from the 2023 Regular Session).  By its terms, the Minnesota statute allows for an award of costs and attorney's fees under certain conditions.

[3] Wobig v. Safeco Ins. Co. of Am., 40 F. 4th 843, 848 (8th Cir. 2022) (construing and applying Minn. Stat. § 604.18 subd. 2(a)).

[4] Peterson v. W. Nat'l Mut. Ins. Co., 946 N.W.2d 903, 910 (Minn. 2020).

 

Express Statutory Causes of Action in first-party cases in the United States are discussed in Section 9:14 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition, 2023 Supplements in process).

This blog article ©2023 Dennis J. Wall.  All rights reserved.

TWO BITES AT THE "BAD FAITH" APPLE IN NEVADA?

In Nevada, violation of an unfair claims settlement practices statute is apparently separately actionable from the implied duty of good faith and fair dealing.[1] 

 

[1] See Rosas v. GEICO Cas. Co., 365 F. Supp. 3d 1123, 1126-27 (D. Nev. 2019).

Express Statutory Causes of Action in first-party cases in the United States are discussed in Section 9:14 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition, 2023 Supplements in process).

This blog article ©2023 Dennis J. Wall.  All rights reserved.

First-Party, Third-Party Bad Faith Different, Even in Florida.

(Black Hole.  Image by NASA)

An outlier observation was made in dicta, well-intentioned dicta if not well-reasoned, but still dicta, in Lewis v. Allied World Spec. Ins. Co., No. 20-cv-20677-ALTMAN/Reid, 2023 WL 2770538 (S.D. Fla. April 4, 2023).

    Citing to Florida Supreme Court decisions in which the Supreme court addressed statutory bad-faith actions under Fla. Stat. § 624.155(1)(b) for alleged bad faith failure to settle, and holding that such statutory actions will always require an underlying determination of liability regardless of whether the statutory bad-faith action has been brought for alleged first-party or third-party bad faith failure to settle, the federal judge concluded from this that all first-party bad faith actions and third-party bad faith actions are always treated the same in Florida.

    Put it down to the fact that this federal judge was appointed in 2019.  He has not been a judge that long.  The only way that this federal judge could have honestly reached such a conclusion is by being ignorant of Florida law in the area of insurer bad faith. 

    Florida is a jurisdiction, for example, where first-party bad faith common law claims do not exist but third-party bad faith common law claims do exist.  In Florida, first-party bad faith claims can only be pursued under the statute addressed by the Florida Supreme Court in the decisions cited by this federal judge, which was otherwise unmentioned in the Lewis opinion.  Thus unburdened by the truth of  Florida insurer bad faith law, the federal judge in Lewis was free to write that Florida courts have always treated "first- and third-party bad-faith claims" the same.  Lewis, 2023 WL 2770538, at *5.

    Not so.  This judicial decision is featured in the context of overwhelming contrary authority in Florida as well as throughout history and the United States, in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:4, The Question of Bad Faith -- Extracontractual Liability of First-Party Insurers as Tort or Breach of Contract:  Differences From Third-Party Claims Situations (West Publishing Company 3d Edition, 2023 Supplements in process).

Please read the disclaimer.  This Blog article ©2023 Dennis J. Wall.  All rights reserved.

 

A NEW CIVIL REMEDY NOTICE IN FLORIDA'S BAD FAITH STATUTE ... Continued.

This article continues an article begun here on July 3, 2023.  

(Photo by Dennis Wall)

A further question which this new statute raises concerns the question of liability for bad faith by liability insurance companies in Florida generally.

          This new statute is part of a Bad Faith Statute that applies to "any person … damaged" by certain alleged conduct of an insurance company.[1]  However, despite its popular name, the so-called Bad Faith Statute, Fla. Stat. § 624.155, is not triggered by bad faith but by alleged violations of specified statutes and actions.

          In fact, the term "bad faith" was never before used in the statute, although it did refer to "good faith" one time in its description of an insurance company's actions.[2]

          This new, 2023 Section 624.155(4)(a) introduces a concept into third-party bad faith actions of damages less than policy limits, or it would make no sense to immunize a liability insurer from an "action for bad faith" when it pays less than policy limits.  (Note that the statute is not yet officially published even as of today.  The new language is accessible either on an unsecured web site as 2023 Florida Session Law Ch. 2023-15 which the reader can approach at her or his peril, or on a secure provider such as Westlaw or LexisNexis.)  The cases and statutes collected in DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition, 2023 Supplements in process), and in other treatises -- including cases and statutes from Florida  -- establish the widely held view that there should be no bad-faith when damages are less than policy limits.  That actually seems to have been the universally shared view in this nation, until the enactment of this new Florida Statute in 2023.

            So this is a very big deal indeed.

 

[1] See Section 624.155(1):  "Any person may bring a civil action against an insurer when such person is damaged[.]"

[2] See Section 624.155(1)(b)1 ("Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests") (emphasis added).

 

These and similar issues are addressed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28, Legal Bases of Liability in Settlement -- Statutory (West Publishing Company 3d Edition, 2023 Supplements in process).

This blog article ©2023 Dennis J. Wall.

A NEW CIVIL REMEDY NOTICE IN FLORIDA'S BAD FAITH STATUTE.

This article continues from  CHANGES IN LATITUDE, 2023 CHANGES ATTITUDE: FLORIDA LEGISLATURE & BAD FAITH, posted June 5, 2023.  There may have been some articles on related topics posted here in the interim, as well.  That is all to the good.

(Image provided by Florida Blue)

First, the 90-day period specified in new Subsection (4)(a) of Florida's Bad Faith Statute, Fla. Stat. § 624.155, begins for every liability carrier "after receiving actual notice[.]"[1]  The liability carrier must therefore receive the notice before the specified period can begin.  The "actual notice" that the liability carrier must receive within the specified timeframe is not defined in the statute.  It is an open question under this new statute whether actual knowledge of the situation will be sufficient or whether notice must be provided to the carrier before the period of immunity can begin.

          Another question concerns the new requirement that "the actual notice of a claim" – rather than, say, the settlement demand of a third-party claimant – must be "accompanied by sufficient evidence to support the amount of the claim."[2]  Perhaps surprisingly, the "sufficient evidence" required by the new statute is required to accompany notice to the liability carrier and not to accompany any settlement demands.

          In any case, the new statute does not offer any guidance as to what might constitute "sufficient evidence to support the amount of the claim" before this new immunity can become available.   That question appears to have been left to the Florida courts or perhaps to future sessions of the Florida Legislature.

[1] Section 624.155(4)(a).  Note that the statute is not yet officially published even as of today.  The new language is accessible either on an unsecured web site as 2023 Florida Session Law Ch. 2023-15 which the reader can approach at her or his peril, or on a secure provider such as Westlaw or LexisNexis.  

[2] Section 624.155(4)(a).

To be continued the day after Independence Day ....  These and similar issues are addressed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28, Legal Bases of Liability in Settlement -- Statutory (West Publishing Company 3d Edition, 2023 Supplements in process).

 

This blog article ©2023 Dennis J. Wall.

CHANGES IN LATITUDE, 2023 CHANGES ATTITUDE: FLORIDA LEGISLATURE & BAD FAITH

After leaving Florida's Bad Faith Statute alone in 2022, the Florida Legislature attacked it with a vengeance in 2023.

          The Florida Legislature apparently introduced different concepts of third-party insurance bad faith in 2023.  The effective date of amendments to Florida's Bad Faith Statute, Section 624.155, is unclear as a general matter, but it is probable that a court of competent jurisdiction will hold, or a new constitutionally permissible revision will be enacted by the Florida Legislature to provide, that the effective date of these amendments to Section 624.155 is March 24, 2023.[1]

          The special conditions attached to Section 624.155 by the 2023 Florida Legislature include conditions which affect the exposure of liability insurance companies to damages for bad faith.[2]  In basic terms, no "action for bad faith involving a liability insurance claim," including an action at common law,  will lie against a liability insurer if the insurer tenders the lesser of (1) its policy limits or (2) "the amount demanded by the claimant" within a specified 90-day period.[3]  The specified 90-day period for this immunity from liability for bad faith raises questions.

To be continued ....

[1] The session law in which this new provision was enacted is  2023 Fla. Sess. Law Serv. Ch. 2023-15, § 4 (C.S.C.S.H.B. 837) (West).  This session law has two savings clauses which seem potentially pertinent here.  One addresses rights under an insurance contract, which seems perhaps most pertinent here, id. § 29  (savings clause as to "right[s] under an insurance contract," stated not to be construed to "impair" any such rights in effect on or before March 24, 2023,  the effective date of this act and the date this act became a law; act stated applicable respecting such rights "under an insurance contract … issued or renewed after the effective date of this act.").  A second savings clause addresses the filing date of "causes of action," providing in full  that "[e]xcept as otherwise expressly provided in this act, this act shall apply to causes of action filed after the effective date of this act."  Id. § 30.  Absent constitutional adjustment by the Florida Legislature, courts, counsel and clients in future cases will have to address these issues, which are open at the time of this writing.

[2] Fla. Stat. Ann. § 624.155(4)(a) (West; Westlaw current with laws, joint and concurrent resolutions and memorials through April 18, 2023, in effect from the 2023 Special B Session and the 2023 first regular session), enacted by 2023 Fla. Sess. Law Serv. Ch. 2023-15, § 4 (C.S.C.S.H.B. 837 (West).

[3] Section 624.155(4)(a).

 

The changes made by the Florida Legislature in 2023 to Insurer Bad Faith Laws are discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28 Legal Bases of Liability in Settlement -- Statutory (West Publishing Company 3d Edition, 2023 Supplements in process).

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.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

BAD FAITH EXPOSURE, PROPERTY INSURERS, AND FLORIDA.

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

The original version of Section 624.1551 was effective May 26, 2022.  It put limitations on Florida's Bad Faith Statute whenever property insurers are involved:

Notwithstanding any provision of s. 624.155, a claimant must establish that the property insurer breached the insurance contract to prevail in a claim for extracontractual damages under s. 624.155(1)(b).^[1]

            Until Section 624.1551 was enacted in May, 2022, there was never any requirement in Florida law that any insurance carrier could only be liable for alleged bad faith conduct if a court adjudicated that it also breached its insurance contract, in this case, a property insurance contract.  It will also be recalled that in Florida, first-party bad faith is never actionable except under the Bad Faith Statute, Section 624.155.[2]  Without the benefit of an action under Section 624.155, there is no room for bad-faith actions or any other claims for extracontractual damages against property insurers in Florida.[3]

          In December, 2022, the Florida Legislature amended the recently enacted Section 624.1551 in Special Session, in pertinent part as follows:

Notwithstanding any provision of s. 624.155 to the contrary, in any claim for extracontractual damages under s. 624.155(1)(b), no action shall lie until a named or omnibus insured or a named beneficiary has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract and a final judgment or decree has been rendered against the insurer.  Acceptance of an offer of judgment under s. 768.79 or the payment of an appraisal award does not constitute an adverse adjudication under this section.^[4] 

To be continued ....   All these changes to Bad Faith Law are reported and analyzed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:17, Fairly or Reasonably Debatable Claims (West Publishing Company, 3d Edition, 2023 Supplements in process).

[1]  Fla. Stat. § 624.1551, as amended by 2022 Fla. Sess. Law Serv. Ch. 2022-268, § 6 (S.B. 2) (West).

[2] See, e.g.,  § 9:14, supra.  "There was no such thing as first-party bad faith in Florida until Section 624.155 was enacted."  Dennis J. Wall, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, 45 Ins. Litig. Rptr. 73, 77 (March 3, 2023).

[3] E.g., State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55, 62 (Fla. 1995) ("Florida differs, however, from most jurisdictions given that first-party bad faith actions are actionable only under section 624.155 and not the common law."); Utd. Prop.& Cas. Ins. Co. v. Chernick, 94 So. 3d 646, 647 (Fla. 4th DCA 2012); Gen. Star Indem. Co. v. Atl. Hospitality of Fla., LLC, 93 So. 3d 501, 503 (Fla. 3d DCA 2012).

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

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

PROPERTY INSURERS REMOVED FROM REACH OF FLORIDA'S BAD FAITH STATUTE.

    Since the December 2022 amendments to Florida Statute Section 624.1551 became effective on December 16, 2022, so many limitations and restrictions have been added onto actions for extracontractual damages against property insurers, that property insurers have for most intents and purposes been removed from the reach of Florida's Bad Faith Statute.[1]

 

[1] See 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.  The original enactment of this statute in 2022, and subsequent amendments to it made in the same year, are all discussed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 9:14 & § 11:17.50 (3d Edition West Publishing Co., 2023 Supplements in process).

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

FLORIDA LEGISLATURE'S CHANGES TO BAD FAITH LAW IN 2023.

Florida's so-called "Bad Faith Statute," Section 624.155, was amended by the 2023 Florida Legislature.   (The Florida Legislature has not adjourned as of this writing and a special session is always possible in the future, so be prepared accordingly.)

     At the present time, there is a real question as to the effective dates of amendments to Section 624.155 and of amendments to other statutes and of the enactment of still more Florida statutes. The session law in which all these new provisions were enacted is  2023 Fla. Sess. Law Serv. Ch. 2023-15, § 4 (C.S.C.S.H.B. 837) (West).  [Caution:  This link may not be secure.  You may choose to view the Westlaw version online, or the print version instead.] Two savings clauses in this 2023 Session Law appear significant to the question of when these provisions are supposed to take effect.

    One is concerned with rights under an insurance contract,  id. § 29  (savings clause as to "right[s] under an insurance contract," stated not to be construed to "impair" any such rights in effect on or before March 24, 2023,  the effective date of this act and the date this act became a law; act stated applicable respecting such rights "under an insurance contract … issued or renewed after the effective date of this act.").

      A second savings clause addresses the filing date of "causes of action," providing in full  that "[e]xcept as otherwise expressly provided in this act, this act shall apply to causes of action filed after the effective date of this act."  Id. § 30. 

     These issues are open at this time.  Without  constitutional adjustment by the Florida Legislature, courts, counsel and clients will have to address these issues in future cases.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

PROPERTY INSURERS PROTECTED FROM BAD FAITH CLAIMS IN FLORIDA.

 

(Matt Whitaker / New York Times)

The 2022 Florida Legislature enacted the property insurers' list of protections from bad faith claims in Florida.  Topping the list was Florida's Bad Faith Statute,  Subsection 624.155(1)(b).  That was the property insurers' greatest concern, and it has been the greatest concern of every insurer doing business in Florida since it was enacted.

More precisely, the greatest concern to any insurer is the provision of the Bad Faith Statute that makes an insurer's bad-faith settlement conduct actionable in Florida.   Fla. Stat. § 627.155(1)(b)1.  Dr. Johnson once wrote that there is nothing like a person's impending execution to focus the mind.  Well, in Florida, there is nothing like the prospect of being sued to focus the mind (including insurers).

In 2022, things changed for property insurers in Florida.  Section 624.1551 was enacted to make exceptions for property insurers.  Alone among insurance companies, property insurers were granted a return to the past as far as bad faith liability in Florida  is concerned.   It used to be that there was no such thing as bad faith exposure to any insurance companies issuing "first-party" policies or insurance contracts for coverage claims by  their policyholders, such as health insurance companies and fire insurance carriers.

 Section 624.1551 changed the focus but only for property insurers.  Now people asking for "extracontractual" damages first must prove that the property insurer is liable for a breach of contract.  Here's the thing:  Bad-faith settlement conduct in Florida was never a breach of the insurance contract.

You thought the calendar said 2023?  Not in Florida, at least not for property insurers.  Their focus is on the past, and welcome to it.  You can stay as long as you don't try to sue a property insurer for bad faith.

The author's article, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, is scheduled for publication this week by Thomson Reuters' Insurance Litigation Reporter.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

STATUTORY BAD FAITH IN MINNESOTA.

(Gridview_Imagefull_FDACS)

"In 2008, the Minnesota Legislature created a private cause of action for bad faith in first-party insurance."  Friedberg v. Chubb & Son, Inc., 800 F. Supp. 2d 1020, 1025 (D. Minn. 2011) (Keyes, United States Magistrate Judge).  The Minnesota statute is Minn. Stat. § 604.18 (West; Westlaw current with legislation effective through February 22, 2023 from the 2023 Regular Session. Some statute sections may be more current, check credits under statute on Westlaw for details.).

The Eighth Circuit quickly and clearly summarized the statute in 2022:

    To make a bad faith claim, the insured must establish both that the insurer lacked a reasonable basis for denying the insurance benefits and that the insurer knew it lacked a reasonable basis for denying benefits or acted in reckless disregard of the lack of a reasonable basis.

Wobig v. Safeco Ins. Co. of Am., 40 F. 4th 843, 848 (8th Cir. 2022) (construing and applying Minn. Stat. § 604.18 subd. 2(a)).

Or, as the Minnesota Supreme Court put it in a slightly lengthier interpretation, reaching the same result: 

    Several things are clear from the plain text and structure of the statute. First, the burden rests with the insured to prove that the insurer violated the standard of conduct. Second, to prevail, the insured must establish two independent facts: (1) the insurer did not have a reasonable basis for denying the benefits of the insurance policy, and (2) the insurer either knew it lacked a reasonable basis for denying the benefits or it recklessly disregarded the fact that it lacked a reasonable basis for denying the benefits.

Peterson v. W. Nat'l Mut. Ins. Co., 946 N.W.2d 903, 910 (Minn. 2020).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

FLORIDA CHANGED PROPERTY INSURANCE LAWS IN 2022. INCLUDING BAD FAITH.

 

(Image via Central District of California's Website)

Section 624.155(1)(b) is clearly the target of Section 624.1551 and its amendments.  Section 624.1551 and its amendments were all enacted in 2022.  Although the Florida Legislature did not touch any part of Florida's Bad Faith Statute itself, Section 624.155, the changes made by the Legislature changed the law of insurer bad faith in Florida.

           Property insurers were obviously concerned about the risk of exposure to bad faith damages beyond and maybe even above their policy limits.  As a result, property insurers had every reason to make it especially hard to sue under Fla. Stat. § 624.155(1)(b) for extracontractual damages.  Section 624.155 itself was untouched by the Florida Legislature in 2022.  That includes Paragraph (b) of Subsection (1), which was chosen for limitation to property insurers through the enactment of new and amended Section 624.1551.

          It is not hard to identify the provision of Paragraph (b) of Subsection 624.155(1) that was the greatest concern to property insurers.  It is the same provision that has always been the greatest concern to insurance companies since Subsection  624.155(1) was first enacted:  The greatest concern to any insurer is Subparagraph (b)1.

           Over all, Paragraph (1)(b) of Section 624.155 provides that any person may bring a civil action against an insurance carrier when that person is damaged by the insurer's commission of any of the following acts:

1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests[.]

`         As the Florida Supreme Court has held since 1995, Subparagraph 1 of Paragraph 624.155(1)(b) "provides remedies for both first- and third-party causes of actions."^[1] Subparagraph 1 of Paragraph (1)(b) of the Bad Faith Statute sets the standard for all bad faith actions under Florida law, whether by statute or at common law, and whether third-party or first-party.[2]  It is certainly no coincidence that Subparagraph 1 of Florida Statute Paragraph 624.155(1)(b) is nearly identical to the language of Florida's Standard Jury Instruction for an Insurer's Bad Faith (Failure to Settle).^[3]

This blog article is based on an article in progress by the author, tentatively titled "Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida."

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

 

[1] State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55, 62 (Fla. 1995).

[2] See Laforet, 658 So. 2d at 63.

[3] Compare Fla. Stat. § 624.155(1)(b)1 with Florida Standard Jury Instruction 404.4, Insurer's Bad Faith (Failure to Settle).

.

"A FINAL JUDGMENT OR DECREE" BEFORE BAD FAITH: SETTLEMENT PROPHYLAXIS?

Judge's gavel.  (Handout photo by The Sun Sentinel)

The Florida Legislature amended Fla. Stat. § 624.1551 to require two things before a property insurer can be sued for bad faith under Fla. Stat. § 624.155(1)(b), part of Florida's Bad Faith Statute.  Both of the two new requirements became effective December 26, 2022.

The two new requirements in Section 624.1551 are, first, "an adverse adjudication by a court of law" (there goes an  arbitration award as the functional equivalent of a judgment) that the property insurer breached the policy and, second, "a final judgment or decree has been rendered against the insurer."  Presumably, this last requirement refers to a final judgment or decree by a court of law that the property insurer breached the policy.

What happens when the property insurer settles the breach of contract claim in order to forestall a bad faith claim, which now expressly requires that some sort of "final judgment or decree has been rendered against the insurer."  If the property insurer settles the contract claim, usually there will not be a final judgment or decree; in the ordinary simple breach-of-contract case there is just a settlement which is not ordinarily followed by a "final judgment or decree."

It appears to be a live issue of what effect will be given to the new statutory requirement of "a final judgment or decree … rendered against the insurer" when, by settling, the insurer prevents a final judgment or decree from being rendered ?

There clearly appears to be an issue.  Time will tell how it is resolved.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

STATUTORY CURE PERIODS, APPRAISAL PROVISIONS, AND CIVIL REMEDY NOTICES.

Hurricane Ian aftermath (Orlando Sentinel)

Many jurisdictions have "bad faith statutes" which require the claimant to provide a Civil Remedy Notice of Insurer Violation of the statute, and which themselves provide a "cure period" within which the carrier can foreclose litigation over the alleged violation by "curing" it.  The statutory "cure period" is not tolled in Florida when the carrier invokes a policy's appraisal provision after the policyholder has filed a Civil Remedy Notice (CRN).   E.g., Apex Roofing & Restor., LLC v. State Farm Fla. Ins. Co., 343 So. 3d 1223, 1225 (Fla. 5th DCA 2022); Zaleski v. State Farm Fla. Ins. Co., 315 So. 3d 7, 12 (Fla. 4th DCA 2021), review denied & attorney's fees awarded, No. SC 21-707, 2021 WL 5292345 (Fla. Nov. 15, 2021).

          Appraisal provisions and their role in generating as well as resolving claims, are discussed in Dennis J. Wall, § 2:7, Appraisal, in Volume 1 of John K. DiMugno, Steven Plitt, and Dennis J. Wall, CATASTROPHE CLAIMS (Thomson Reuters Dec. 2022 Edition).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.