Just because an insurer paid the full policy limits on a claim, and argues that the damages weren’t even covered, doesn’t mean it can escape a bad-faith lawsuit. It’s the type of court decision that has rankled Florida insurance carriers for years — until state lawmakers changed the bad-faith statute in 2022 and 2023.
A panel of the Florida 4th District Court of Appeal this week reversed a Palm Beach County judge’s decision to dismiss a lawsuit filed by a homeowner who had to wait more than three years to receive full compensation for the damages. Homeowner Susan Cingari says she was forced to file a lawsuit against First Protective Insurance Co. to compel an appraisal even though the insurer didn’t dispute, at least initially, that coverage was owed.
First Protective said the payments it made were “gratuitous” because the damage to Cingari’s home was caused by a sinkhole, a peril excluded by its policy.
“Notably, the insurer’s statements that it ‘proceeded under an erroneous policy interpretation’ in the umpire appointment suit and ‘gratuitously’ paid the policy limits and appraisal award certainly raise an inference that the insurer did not properly investigate the claim,” the panel’s opinion says.
Cigari filed a claim with First Protective after her home in Boca Raton was damaged by a sinkhole in 2015. Over the course of a year, the insurer made two payments totaling $59,456, but Cigara said that wasn’t enough. She filed a lawsuit in the 15th Judicial Circuit in Palm Beach County that sought to compel an appraisal.
The insurer said its claim investigation was delayed because the Waterside at Boca Trail Community Association refused to allow its adjuster access to Cigari’s property.
In 2019, an umpire awarded Cigari $304,620.35. First Protective paid, but the bad faith lawsuit continued to move forward.
First Protective argued that it did not learn until after it paid the full policy limits that the damage to Cigari’s home was caused by an excluded peril. Judge Joseph Curley said in his findings that experts on both sides agreed that damage to Cigari’s home was caused by earth movement. On Aug. 3, 2022, Curley granted First Protective’s motion for summary judgment and dismissed the bad faith suit.
Cigari appealed. She argued that First Protective was not entitled to summary judgment because it never obtained a ruling on its motion to amend its answer in the bad faith suit to assert that no coverage was owed under the policy.
The 4th District panel said insurers are required by Florida statutes to properly and promptly investigate claims, including the cause of the damage.
The appellate court reversed the trial court’s decision and remanded the case for further proceedings. The panel also granted a motion by Cigari that requires the insurer to pay her attorney fees, although one of the members of the three-judge panel dissented in that decision.
It’s not certain if such a bad-faith action would have been upheld if the claim had come after the passage of laws that raised the bar on bringing bad-faith suits. The Florida Legislature in 2022 barred bad-faith claims until after a court has decided that the insurance company breached the policy contract. A few months later, lawmakers approved a sweeping tort-reform law that prohibits bad-faith lawsuits if an insurer tenders the lesser of the policy limits or the amount demanded within 90 days of notice of a claim.
Florida appeal courts also have yet to fully settle the question of what determines when the new laws apply — the date of the policy or the date of the claim or litigation.
**Article obtained from: Insurance Journal, By: Jim Sams, Published 01/05/2023
https://www.insurancejournal.com/news/southeast/2024/01/05/754572.htm
