Sometimes, we get our wires mixed up. Whether it’s in the literal sense or figuratively speaking, mix-ups can result in mistakes being made and consequences rearing their ugly heads. Even more so in the legal field. So, what happens when an insurance company mixes up its contractual duty with a statutory one? Well, one insurance carrier has been reminded of the cost of such a mix up recently.
A Tampa, FL resident suffered a loss due to lightning striking his home. Having caused significant damage, the Insured, Gerald Williams (“Williams”), reported the loss to his Insurer, State Farm Florida Insurance Company (“State Farm”). State Farm opened coverage and made several payments over time, but Williams contested the total amount of loss and invoked appraisal.[1] During appraisal, Williams filed his Civil Remedy Notice (CRN) to pursue a statutory bad faith claim against State Farm for its handling of the claim loss.[2] Ultimately, appraisal came out in favor of Williams, but it came more than sixty (60) days after Williams had filed his CRN. As a result, Williams filed his first-party bad faith action against State Farm in Hillsborough County.
State Farm, upon Williams’ filing of the action, moved to dismiss and for summary judgment on various grounds, but most notably, on the grounds that “the sixty-day cure period under [§]624.155 was tolled pending the filing of the appraisal award because there was no amount owed under the policy to Williams at the time the CRN was filed.” After a hearing was conducted, the lower court granted final summary judgment in State Farm’s favor solely on the above-noted ground. As a result, Williams appealed.
The 2nd DCA reviewed the lower court’s findings and ruled that the lower court had made an error in finding that State Farm had timely cured the CRN through the payment of the appraisal award. Referencing its previous opinion in Fortune v. First Protective Ins. Co., it held that, despite appraisal being conducted during the CRN’s cure period, Fla. Stat. §624.155 does not toll the statutory cure period until appraisal is completed. Statutorily, when a CRN is filed, the insurer has sixty (60) days to either 1) pay the damages or 2) correct the circumstances giving rise to the violation. Here, the 2nd DCA plainly stated that State Farm had “conflate[d] its contractual duty to ultimately pay the amounts due under the policy with its statutory duty to act reasonably and in good faith in evaluating the claim prior to the determination of damages.”
You see, insurers have two (2) independent duties when it comes to handling an insurance claim, each with its own procedural formalities: one contractual, another statutory.
- The contractual duty, as spelled out in Vest, states that an insurer must “timely evaluate and pay benefits owed on the insurance policy.”[3] Its formalities arise from the terms and conditions of the policy itself and outline what the parties must do prior to payment being issued. One formality, which was used in this matter, was the invoking of appraisal due to the parties disagreement on the amount of loss. These explicitly arose from the insurance policy itself.
- The statutory duty, on the other hand, directs an insurer to act reasonably and in good faith when evaluating a claim.[4] The Florida Legislature created a statute under which a civil action could be brought when an insured had been damaged by an insurer’s failure to act in good faith while evaluating its claim. Prior to an insured being able to file such an action, however, the Legislature affords the insurer the opportunity to cure the alleged bad faith within sixty (60) days through payment or correcting the circumstances giving rise to the alleged violation.
Here, the 2nd DCA affirmatively held that invoking the appraisal process and issuing payment of the appraisal award after the statutory cure period of sixty (60) days did not, as a matter of law, cure the alleged statutory bad faith claim sufficient to warrant final summary judgment on the matter.[5] Therefore, the 2nd DCA reversed and remanded the order for further proceedings.
The takeaway from this, as vocalized in Williams, is that payment of an appraisal award does not toll the statutory cure period as they arise from two distinct procedural formalities. To allow any tolling of the cure period when appraisal has been invoked would allow insurers to cause delay or otherwise act in bad faith while escaping liability as long as it makes payment within the sixty-day time period of the appraisal award.[6] So make sure that you, an insured, are filing or having your CRN’s filed in a timely fashion.
If you have a question regarding this article, or your claim in general, follow the link here, email us at info@schirmerlaw.com, call us at 754-260-5410, or stop by our Fort Lauderdale office for a free consultation. Your Loss is Our Concern.
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[1] For more on appraisals, please read our article here: https://www.schirmerlaw.com/blog/2022/a-growing-trend-for-insurance-companies-in-optio/
[2] For more information, please visit https://www.schirmerlaw.com/insurance-bad-faith/
[3] Vest v. Travelers Ins. Co., 753 So.2d 1270 (Fla. 2000)
[4] Zaleski v. State Farm Fla. Ins. Co., 315 So.3d 7 (Fla. 4th DCA 2021), citing Harvey v. GEICO Gen. Ins. Co., 259 So.3d 1 (Fla. 2018)
[5] However, there still remains the lingering question for a jury to determine, which is “whether State Farm’s initial evaluation during the 60-day cure period was reasonable.”
[6] Zaleski, 315 So.3d at 12 (Fla. 4th DCA 2021)
