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Florida’s Supreme Court Hands Down Important Decision for Property Insurers

Blogs, Insurance Coverage

In a recent decision, the Florida Supreme Court clarifies Florida law on insurance and importantly holds there is no common law first-party bad-faith cause of action in Florida. The significance of this ruling for policy holders in Florida, means policy holders may only pursue first-party bad-faith claims under Florida’s “Bad-Faith” statute, § 624.155 of the Florida Statutes, if they win the initial breach of contract case against their insurer.

QBE Insurance Corp. v. Chalfonte Condominium Apartment Association, No. SC09-441 (May 31, 2012) (a copy of which is attached here), arose from property damage caused by Hurricane Wilma in 2005. Chalfonte filed a claim with QBE, its property insurer, submitting an estimate of damages and a sworn proof of loss. Dissatisfied with the investigation and processing of its claim, Chalfonte filed suit against QBE in federal district court, alleging amongst other claims, breach of contract and breach of the implied warranty of good faith and fair dealing. After trial, a jury found for Chalfonte on both claims and awarded $8,140,099.68 in damages.

On appeal, the Eleventh Circuit certified five questions to the Florida Supreme Court, including whether Florida law recognizes a claim for breach of the implied warranty of good faith and fair dealing by an insured against the insurer based on the insurer’s failure to investigate and assess the insured’s claim within a reasonable period of time. The Florida Supreme Court held there is no common law first-party bad-faith action in Florida. The Court further stated that a cause of action for breach of an implied covenant of good faith and fair dealing does not exist as a separate claim from a first-party statutory bad-faith claim in Florida. As a result of the Florida Court’s ruling, such first party claims against an insurer must be brought under §624.155 of the Florida Statutes. 

The Court also held that an insured cannot bring a claim against an insurer for failure to comply with the language and type-size requirements in the statute, and an insurer’s failure to comply with the statutory requirements does not render noncompliant provisions in an insurance policy void. Finally, the Court held a contractual provision mandating payment of benefits upon “entry of a final judgment” does not waive the insurer’s procedural right to post a bond and stay the execution of judgment pending appeal. 

The requirement that all bad-faith claims be brought under §624.155 of the Florida Statutes benefits insurers in two ways. First, under the statute, insurers must be given a 60-day notice of the violation before an action is brought. The insurer has 60 days after the filing of a notice to rectify the alleged violation and prevent the filing of an action. Second, the statute provides the court should only award punitive damages if there is a showing that the violation occurred with such frequency as to indicate a general business practice. Additionally, an insured bringing an action for punitive damages must post discovery costs, and if punitive damages are not awarded, the cost of discovery is awarded to the insurer. 

[1] See Chalfonte Condominium Apartment Association v. QBE Ins. Corp., 561 F.3d 1267, 1271 (8th Cir. 2009) (“under Florida law, an insured’s § 624.155 claim does not accrue until the insured prevails against its insurer on a claim for benefits under an insurance policy.”)