Insurance Bad Faith

It is Bad Faith When an Insurance Company Does Not Act Fairly and Honestly


Florida law recognizes concepts of insurance “bad faith.” This means that an insurance company has a legal obligation to deal fairly and honestly towards others. If you have an insurance claim where the insurance company has not acted fairly and honestly, you should get a free consultation from a Lakeland insurance bad faith lawyer.

General Information About Bad Faith In Florida

At present, there is no such thing as “counter-bad faith” or bad faith of a claimant. There are two forms of insurance bad faith in Florida-first party and third party. First party bad faith is when an insurance company acts in bad faith toward its own insured.

Common law first party bad faith has been replaced by section 624.155, Florida Statutes. To preserve a first party bad faith claim, an insured is required to file a civil remedy notice of insurer violation (also known as a “civil remedy notice”) with the Florida Office of Insurance Regulation (FLOIR).

Failure to file the notice can be fatal to your bad faith claim. Further, there is a 60 day safe harbor given to insurance companies after the filing of a civil remedy notice. During that time frame, if the insurance company corrects the problem (usually by paying on the claim), then the “bad faith” is cured and you cannot sue for bad faith.

Boston Old Colony And The Insurance Company’s Duty

The key case to know when dealing with any insurance bad faith case in Florida is Boston Old Colony Insurance Company v. Gutierrez, 386 So. 2d 783 (Fla. 1980).

From Boston Old Colony, there are four responsibilities that an insurance company owes to its insured:

  1. to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business
  2. to advise the insured of settlement opportunities, to advise as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid the same
  3. investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying total recovery would do so
  4. to avoid acting in what the insurance company ‘considers to be its interest alone’

Examples of “Bad Faith”

Section 624.155, Florida Statutes defines the following as bad faith:

1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests;

2. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made; or

3. Except as to liability coverages, failing to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

Bad Faith Cases Focus Only On The Conduct Of The Insurance Company

Many insurance companies complain that bad faith cases in Florida are “unfair” because the conduct of the insurance company is at issue in the case while the conduct of the plaintiff is not.  See Berges v. Infinity Ins. Co., 896 So. 2d 665 (Fla. 2004)(“the focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in failing its obligations to the insured).

Hence, it is often said in Florida that there is no “reverse bad faith.”  While the Berges case rejected the notion that the conduct of the claimant and the plaintiff’s attorney are not “the focus,” however, that is not to say that the plaintiff’s conduct is not important.

In order to preserve the possibility of having a bad faith case, it is important for the plaintiff not to reach too far so as to create facts that take away from the credibility of a bad faith case (remember—bad faith cases are decided by juries).  Therefore, conduct on the part of a plaintiff that is deceptive or less than honest can result in the bad faith jury disbelieving that you would have settled your case had the insurance company acted appropriately.

“Third Party” Bad Faith Claims

On the other hand, third party bad faith is when the insurance company acts in bad faith toward a third party who is not in privity of contract with the insurance company. These cases are the product of common law, or a history of judicial cases that have been decided over time.

In third party bad faith, there is no civil remedy notice and no 60 day safe harbor to cure problems that may exist, however, you may be limited in remedies or the ability to get the insurance company’s claim file in discovery.

First Party Bad Faith Claims

First party bad faith actions are generally preferable to third party bad faith actions in Florida due to cases that have limited the effectiveness of third party cases. There are a number of judicial opinions on this subject to which the question of whether an insurance company has committed bad faith is a complex legal analysis.

Most bad faith claims in Florida are brought as first party claims by the person who was “insured” by the policy.  This is typically done by an “assignment” where the person who caused the accident agrees to allow the person who was injured to sue the insurance company for them.  As such, the injured person then “stands in the shoes” of the person who was insured.

The “damages” referred to in a bad faith case is a civil judgment against the insured person that goes above and beyond the insurance company policy limits.  For instance, if the policy limits are $10,000 but the civil judgment is $1,000,000, then there is $990,000 in “damages” caused by the insurance company’s failure to protect their insured when they could have and should have done so.

Insurance Bad Faith in Medical Malpractice Cases

270 Day “Safe Harbor” Period

Special rules apply to insurance bad faith in medical malpractice cases. A separate statute covers bad faith in medical malpractice cases. While a number of things can impact the “safe harbor” window in a medical malpractice bad faith case, a general assumption is that the “safe harbor” period for medical malpractice cases is up to 270 days or 9 months (it is actually 210 days plus a 60 day extension-see section 766.1185, Fla. Stat.).  Bad faith cases in medical malpractice are always complicated and cannot be predicted in advance.

What Happens If The Insurance Company Fails To Offer Policy Limits During The “Safe Harbor” Period?

The answer to that is not simple.  The failure to offer policy limits within the 270 day period does not result in a presumption that the insurance company has acted in bad faith.  Instead, the 270 day “safe harbor” merely provides the insurance company with a good “defense” if policy limits are offered.

If policy limits are not offered within the 270 day “safe harbor,” then the jury in a bad faith case for medical malpractice still gets to consider as listed in section 766.1185:

(a) The insurer’s willingness to negotiate with the claimant in anticipation of settlement.
(b) The propriety of the insurer’s methods of investigating and evaluating the claim.
(c) Whether the insurer timely informed the insured of an offer to settle within the limits of coverage, the right to retain personal counsel, and the risk of litigation.
(d) Whether the insured denied liability or requested that the case be defended after the insurer fully advised the insured as to the facts and risks.
(e) Whether the claimant imposed any condition, other than the tender of the policy limits, on the settlement of the claim.
(f) Whether the claimant provided relevant information to the insurer on a timely basis.
(g) Whether and when other defendants in the case settled or were dismissed from the case.
(h) Whether there were multiple claimants seeking, in the aggregate, compensation in excess of policy limits from the defendant or the defendant’s insurer.
(i) Whether the insured misrepresented material facts to the insurer or made material omissions of fact to the insurer.
(j) In addition to the foregoing, the court shall allow consideration of such additional factors as the court determines to be relevant.

*Because of factor (c) on the list, a plaintiff should, if possible, try to make a “demand” for policy limits within the “safe harbor” period.

Samiian v. FPIC

In Samiian v. FPIC, Case Number 1D14-3656 (Fla. 1st DCA December 1, 2015), the doctor’s insurance company offered policy limits and made an offer to participate in medical malpractice arbitration thinking that the benefits of the arbitration statutes would limit the doctor’s liability.  However, the insurance company failed to realize that the claimant had approximately $2 million per year in annual income.  Therefore, while the insurance company limited the doctor’s exposure on pain and suffering damages, the exposure to a lost wage claim was significant and resulted in a total arbitration award of approximately $35 million due to the lost wage claim.

Must Notify Insurer Of Amendments To Witness List

Section 766.1185, Fla. Stat. also says:If any party to an action alleging medical negligence amends its witness list after service of the complaint in such action, that party shall provide a copy of the amended witness list to the insurer of the defendant health care provider.

So far, there is no case in Florida that has interpreted this provision of the law, however, if you have a medical malpractice case with the potential for bad faith, then you need to be thinking ahead and know that you need to do this.  In the event that your case results in a jury verdict that is greater than the policy limits, the insurance company will likely use this as a defense.  Further, if you changed your witness list, the failure to provide a copy to the insurer may be considered prejudicial if there is an element of surprise.  Also, remember that all of the considerations in section 627.155, Fla. Stat. still apply and bad faith is still viewed in light of all circumstances (this is just one factor).

Doctor’s Right To “Veto” Settlement

Section 627.4147, Fla. Stat. was passed in 2011 and requires medical malpractice insurance policies to specify whether the doctor has a right to refuse consent to settle (aka “consent to settle clause”).  In cases where there is the doctor does not have to consent to a settlement, then the insurance company has complete control over whether the policy limits are offered.  On the other hand, when the policy does contact a consent to settle clause, then a doctor who does not consent to a settlement may provide the insurance company with a defense to bad faith.

Cases Without A Demand Letter

In Powell v. Prudential Property and Casualty Insurance Company, 584 So. 2d 12 (Fla. 3rd DCA 1991), “where liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations.  Therefore, the plaintiff (or injured person) is not required to send a demand letter before insurance bad faith can exist.  Instead, it is the insurance company’s internal claims practices that are at issue.

Every insurance company is supposed to perform their own independent evaluation of each claim.  This ensures that legitimate claims are paid appropriately and questionable or fraudulent claims are not.  When an insurance company sits back and waits for the plaintiff to send a demand letter before paying (and making that part of their business model), then the insurance company is not doing their due diligence in evaluating claims and is not protecting the interests of the people that they insure.

How Much Time Does Insurance Company Have To Respond To A Demand?

In Florida, there is no set standard as to how long an insurance company has to be given to respond to a plaintiff’s demand letter.  When a plaintiff’s attorney sends a demand letter, the attorney normally includes a deadline or expiration date.  In many cases, this deadline is 30 days.  If the insurance company has not responded to the plaintiff by that deadline, the plaintiff will file a lawsuit and can argue later (in the event of a judgment exceeding the policy limits) that the policy limits are “open” (meaning no limit) because the insurance company failed to timely respond to the demand letter.

In other cases and depending upon circumstances, a demand of less than two weeks may be acceptable in court.  In Hartford Accident & Indemnity Company v. Mathis, 511 So. 2d 601 (Fla. 4th DCA 1987), a failure to comply with a 10 day demand deadline set by the plaintiff was upheld.

The question of how much time an insurance company can take to respond to a demand is one of reasonableness and is judged in hindsight.

The So-Called “Set Up” Defense

In a Florida insurance bad faith case, the most common defense raised by insurance companies is that the personal injury plaintiff created a “set up” that “trapped” the insurance company.  This can often mean be an accusation that the personal injury unreasonably refused to do something or that the plaintiff made settlement demands that could not be met by any insurance company.  This is why an insurance company will try to see to it that everything in your attorney’s file becomes discoverable.

The purpose of the “set up” defense is to try to shift the focus away from the actions of the insurance company and onto the plaintiff by implying that the plaintiff was trying to trick the insurance company into something.  This is where it is important to mention that it should not be possible to “set up” an insurance company for bad faith.  Instead, bad faith claims are created where there is a problem with the way the insurance company handles its claims.  A “bad faith” claim is essentially a claim that there was something wrong with the way that the insurance company processes its claims (a “claims practice” case).

Failure To Produce A Document

As with many demand letters, there is a need to have certainty as to what the policy limits are.  In many cases, a plaintiff will have an idea what the policy limits are (usually due to an insurance declarations or disclosure page) and will demand what is believed to be the policy limits from the insurance company.

However, in making a decision of whether to settle or to pursue litigation, it is critical for the plaintiff to know what the actual policy limits are, including whether there are any coverage defenses or whether the insured has assets or other applicable insurance.

This is a reason why plaintiffs will include in a demand a letter a request for an affidavit from the insured regarding assets or may ask the insurance company to provide its policy and knowledge of other insurance coverage.  The failure of an insurance company to provide (or at least attempt to obtain) may be a reason why the claim does not settle.  In such an instance, there is an argument that can be made by an insured that the insurance company’s failure to act was a breach of the duties outlined in the Boston Old Colony case.  See Nichols v. Hartford Ins. Co. of the Midwest, 834 So. 2d 217 (Fla. 1st DCA 2002) and Berges v. Infinity Ins. Co., 896 So. 2d 665 (Fla. 2004)(where insurer failed to ask for an extension).

Is There Bad Faith When Multiple People Are Injured?

When there are multiple claimants to an insurance policy and the total value of all claims clearly exceeds the policy limits, the insurance company must choose a course of action in attempting to settle case that is reasonable.  The case on point providing guidance regarding multiple claimants is Farinas v. Florida Farm Bureau General Insurance Company, 850 So. 2d 555 (Fla. 4th DCA 2003).

In a case like Farinas, the insurance company is not going to be able to settle the claims of all of the claimants but yet the financial exposure to the insured exceeds the policy limits.  Under this scenario, the insurance company should try to resolve the most serious exposure risks first within the policy limits and should settle as many of the claims as possible in order of severity to minimize the exposure to the insured.  In these cases, the settlement strategy can only be criticized if the proposed settlement strategy is not “reasonable.”

Does A Personal Representative Have To Be Appointed In A Death Case In Order For An Insurance Company To Settle?

The case of Berges v. Infinity Ins. Co., 896 So. 2d 665 (Fla. 2004) addressed this issue.  An insurance company can settle (or offer to settle) a wrongful death claim with a person who is likely to become personal representative (assuming that a probate has not been filed).  The check should be made out with the name of the estate on it and, in order to cash it, an estate will need to be properly set up by someone.  Normally, an insurance company will re-issue a check if the names end up being different for some reason.

Therefore, if you are a survivor in a Florida wrongful death claim, you have the right to demand that the insurance company pay you even before you go to set up an estate in the appropriate local jurisdiction.  If the insurance company refuses to do so, then the insurance company may later be found to have acted in bad faith under Berges.

Legal Malpractice Is Often Included When A Plaintiff Wins Big At Trial

In the case of Arch Insurance Company v. Kubicki Draper, Case Number SC19-673 (Fla. 2021), the Florida Supreme Court held that insurance companies can sue the attorneys that they hire for legal malpractice.  This is an important consideration when a plaintiff has won big at trial because it creates a blame game between the defendant (who got sued), the insurance company (who is responsible to pay), and the defense lawyer or law firm (who conducted the trial).

Generally speaking, legal malpractice claims are not assignable.  However, insurance companies have a subrogation clause in their contracts that allows them to make a claim against defense when things go wrong at trial.  The Court found that insurers are not “strangers” to defense counsel who “bid” on the cause of action and “exploit” it.

In a nutshell, they don’t like it when a plaintiff wins at trial and they blame each other for the loss.  This plays to your advantage as a plaintiff.

What Should You Do If An Insurance Company Hasn’t Treated You Fairly And Honestly?

If you believe that you an insurance company has acted in bad faith with regard to your insurance claim, please contact a Florida bad faith attorney for an evaluation of the merits of your case. Please be aware that depending on the stage of your claim (i.e. litigation, post-judgment, etc.), clear answers may or may not exist as to whether bad faith exists.

Check Our Blog

For recent legal topics, please see our personal injury blog or read our answers to frequently asked questions.  We help clients located in Polk County, including Lakeland, Winter Haven, Bartow, and Haines City, Florida when an insurance company has acted in bad faith and failed to treat people fairly and honestly as they are required by law to do.

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October 27, 2016