FLORIDA LEGISLATURE PROPOSES DRASTIC CHANGES TO INSURER BAD FAITH

By Daniel P. Mitchell, Board Certified Civil Trial Lawyer

Two bills currently pending before the Florida Senate and House of Representatives portend drastic changes to Florida law pertaining to both first-party and third-party insurer bad faith.  The two bills, introduced near the start of the 2011 legislative session, are identical, and may be viewed at http://www.flsenate.gov/Session/Bill/2011/1187/BillText/Filed/PDF and http://www.flsenate.gov/Session/Bill/2011/1592/BillText/Filed/PDF.  Both propose changes to section 624.155 (statutory insurer bad faith), 627.311 (Florida JUA), and 627.727 (uninsured motorist), Florida Statutes.  For all details, the bills should be viewed in their entirety.  However, important highlights include:

1.         A violation of section 624.155(1) would require that an insurer act in gross disregard of an insured’s interest by failing to accept a written demand to settle within policy limits.  This provision requires consideration of circumstances existing “at the relevant time.”  Only an insured or its assignee may bring an action under the foregoing language, and stringent requirements are specified for violations in the third-party context.  Basically, these requirements are intended to eliminate bad faith “setups,” compare Cheverie v. Geisser, 783 So. 2d 1115 (Fla. 4th  DCA 2001), by mandating, among other things, that demands under separate coverages be stated, and may be accepted, separately.  Compare Giovo v. McDonald, 791 So. 2d 38 (Fla. 2d DCA 2001).  The only conditions that may be attached by the claimant to the settlement are the payment of an amount within policy limits (or of policy limits) and compliance with section 627.4137, Florida Statutes, requiring insurance disclosures.  The demand must accurately convey all information pertinent to the insurer’s decision to settle, and must be supplemented by the insured as more information becomes available.   The demand may be accepted by the insurer with 60 days by paying the amount demanded or policy limits, and a release.

2.         Special rules would apply to multiple claimant cases (compare Farinas v. Fla. Farm Bureau Gen. Ins. Co., 850 So. 2d  555 (4thDCA 2003)), that would allow the insurer to interplead policy limits, or tender policy limits and agree to binding arbitration.

3.         An insurer is not liable for an amount in excess of policy limits if it timely pays an appraisal award.

4.         Any presumption that the insurer acted in bad faith would be eliminated.  Compare Oak Casualty Ins. Co. v. Travelers Indemnity Co., 778 So. 2d 483 Fla. 3d DCA 2001).

5.         Civil Remedy Notices (CRNs) are eliminated for third-party cases.  CRNs must state with specificity the circumstances giving rise to the violation and the corrective action the insurer needs to take.

6.         The abolition of the work product privilege in Allstate Indemnity Co. v. Ruiz, 899 So. 2d  1121 (Fla. 2005) would be eliminated.  The attorney/client privilege is maintained for both first party and third-party actions.

7.         Third-party common-law bad faith would be superseded by the statute.  “Related causes of action” (e.g., possibly breach of implied covenant of good faith and fair dealing) would be superseded.  Section 766.1185 is not affected.

8.         Section 627.727(10) would be amended to make the measure of damages in a bad faith claim arising from an uninsured/underinsured motorist policy an amount not exceeding twice policy limits, along with costs, interest, and attorneys’ fees.

Once again, these are highlights only.  For complete details, the bills should be examined at the websites given above.