(Article from Insurance Law Alert, April 2018)
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A Florida appellate court ruled that homeowners could pursue a bad faith claim against their property insurer even absent a favorable coverage ruling because the insurer’s tender of policy limits constituted a determination as to liability and damages. Demase v. State Farm Florida Ins. Co., 2018 WL 1525851 (Fla. Dist. App. Ct. Mar. 29, 2018).
The Demases sought coverage from State Farm for sinkhole-related property damage. Over the course of several years, State Farm investigated the damage, made recommendations and demanded additional documentation. The Demases complied with all of State Farm’s requests and after receiving no payment, served a civil remedy notice pursuant to state statutory law, alleging that State Farm engaged in bad faith insurance practices by failing to investigate and resolve the claim promptly. Under the relevant statute, § 624.155(a), Fla. Stat. (2014), State Farm had a 60 day period in which to cure its alleged wrongful conduct. State Farm took no action during that period, but tendered the limits of its policy several months later. The Demases thereafter sued State Farm for bad faith.
A Florida trial court dismissed the suit, reasoning that the bad faith claim could not proceed absent “a favorable resolution of an underlying civil action for insurance benefits against the insurer—whether in the form of a judgment, arbitration, appraisal, or action on the contract.” The appellate court reversed, holding that:
an underlying action on the insurance contract is not required for there to be a determination of the insurer’s liability and the extent of the damages as a prerequisite to filing a statutory bad faith action. Instead, an insurer’s payment of an insurance claim after the sixty-day cure period provided by section 624.155(3) constitutes a determination of an insurer’s liability for coverage and extent of damages under section 624.155(1)(b) even when there is no underlying action.