When an insurance company fails to negotiate on a claim, or pay out the full amount due, the most common cause of action is breach of contract. At Colucci Law Group, we file many of these every day, and we usually succeed. A breach of contract simply means that you did what you were supposed to do, and the insurance company didn’t. But there may be situation where the insurer is actually lying, hiding facts, or putting their company’s interests ahead of yours, that is, dealing in “bad faith.” What then?
Mireading Case Law and Misunderstanding CRN
For a long time in Florida, it has been the belief, or at least the supposition that before you can file a bad-faith action, you have to file a breach of contract action. This comes from the real fact that before you can bring a bad-faith action, there must be a determination of the insurer’s liability, and the actual amount of damages owed. Most people have assumed this means by filing a breach of contract action.
A closer reading of case law reveals this is not correct. It stems from a misreading of the case Blanchard v. State Farm Mut. Auto. Ins., 575 So. 2d 1289 (Fla. 1991), in which the plaintiff attempted to “split the cause of action” by bringing a cause of action for bad faith while the original case for breach of contract was ongoing. The court held that the claim for breach had to be determined before the case for bad faith could be brought.
Because of the confusion, in 2000, the Florida Supreme Court ruled in Vest v. Travelers Ins. Co. 753 So. 2d 1270 (Fla. 2000) that there was no absolute requirement that there must be a breach of contract or other court ruling before a bad-faith claim could be brought. What is required, the Court explained, is that:
“a claim for bad faith pursuant to section 624.155(1)(b)1 is founded upon the obligation of the insurer to pay when all conditions under the policy would require an insurer exercising good faith and fair dealing towards its insured to pay…bringing a cause of action in court for violation of section 624.155(1)(b)1 is premature until there is a determination of liability and extent of damages owed on the first-party insurance contract.“
However, once there has been a determination of liability and extent of damages, by whatever means, then a claim under the statute may be made.
What Does it Mean for You?
If the insurance company isn’t answering your phone calls, hasn’t paid the contractor, or is slow to explain why they have paid certain claims in certain ways, this can be a sign of bad faith. If you have a lawyer helping you with your claim, these are things your lawyer needs to know. If you don’t, this is when you need to obtain a lawyer.
There are other ways liability and damages can be determined. In Barton v. Capitol Preferred Insurance Company, Inc. 208 So.3d 239 (Fla. 5th DCA 2016) the court held that payment of a settlement on a breach of contract claim (although it wasn’t in a judgment) was sufficient to determine liability and damages for a bad-faith claim. Arbitration, mediation, and other out-of-court negotiations may also be sufficient.
Here at Colucci Law Group, we’re constantly examining case law and statutes to find out what the judges and legislators are saying about these laws, and how to best implement them for you. Contact our office today if you have an insurance matter that needs review, and let us see how we can help.