Florida Supreme Court Hears Oral Argument on
Citizens' Claim of "Sovereign Immunity" in First-Party Bad Faith
Actions
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Article Courtesy of The Florida Insurance Coverage Law Blog
By Francisco
Garcia
Published October 13, 2014
Earlier this year, the Florida Supreme Court agreed
to review a First District Court of Appeal order which held that
"Citizens' immunity does not extend to the 'willful tort' of failing to
attempt in good faith to settle claims as provided by section 624.155,
Florida Statutes."1 On Tuesday, October 7th, both Citizens and the
insured, Perdido Sun Condominium Association, presented their respective
arguments to the Court on what may be one of the most important issues
faced in first-party property claim arena: whether Citizens Property
Insurance Corporation is immune from suit under the cause of action
created by Section 624.155(1)(B), Florida Statutes, for not attempting
in good faith to settle claims.
I highly recommend reading both parties' briefs on the issue, which can
be accessed from the Florida Supreme Court website. In short, Citizens'
position is that Florida law grants the insurer immunity from liability
for failing to attempt in good faith to settle claims, also known as
"bad faith" causes of actions. Citizens relies heavily on Section
627.351(6)(S) of the Florida Statutes, which states:
(s) 1. There shall be no liability on the part of, and no cause of
action of any nature shall arise against, any assessable insurer or its
agents or employees, the corporation or its agents or employees, members
of the board of governors or their respective designees at a board
meeting, corporation committee members, or the office or its
representatives, for any action taken by them in the performance of
their duties or responsibilities under this subsection. Such immunity
does not apply to:
a. Any of the foregoing persons or entities for any willful tort;
b. The corporation or its producing agents for breach of any contract or
agreement pertaining to insurance coverage;
c. The corporation with respect to issuance or payment of debt;
d. Any assessable insurer with respect to any action to enforce an
assessable insurer's obligations to the corporation under this
subsection; or
e. The corporation in any pending or future action for breach of
contract or for benefits under a policy issued by the corporation; in
any such action, the corporation shall be liable to the policyholders
and beneficiaries for attorney's fees under s. 627.428.
Citizens argues, in part, that the appellate court erred in reversing
the trial court's final order dismissing the insured's complaint
because: (i) bad faith claims handling is not explicitly listed as one
of the five exceptions to the immunity granted by Florida law, and (ii)
an insured's failure to attempt in good faith to settle claims is not a
"willful tort."
The insured, however, notes that Section 624.155 of the Florida Statutes
imposes a legal duty upon insurers to act in good faith towards their
insured, and a willful breach of that duty is a tort. Thus, Perdido Sun
asserts the appellate court correctly determined that bad faith conduct,
such as the actions allegedly committed by Citizens in that case, is
excepted from Citizens' limited grant of statutory immunity.
While the insured raises various valid legal arguments in its Answer
Brief on the Merits, I think one of the most powerful points is the
severe adverse effect on homeowners throughout Florida if the Court were
to agree with Citizens' position:
Finally, there are strong public policy considerations that weigh
against allowing Citizens to be immune from bad faith liability. First
and foremost, what are the people of the State of Florida going to do
when the next hurricane hits and Citizens can ignore or delay paying
claims indefinitely because it has nothing to lose by doing so? It takes
years to get a breach of contract case to judgment and even then the
insurer only pays what it should have originally paid under the policy.
Without the threat of bad faith liability Citizens, like any other
insurer, has no incentive to timely pay claims.
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In other words, the entire reason for Citizens' existence is to pay
claims promptly and in good faith in the event of a catastrophe.
Citizens argues that it should be able to deny or delay paying claims
... in bad faith ... and be immune from any penalty. This position is
totally contrary to the legislative intent behind Citizens' creation and
the reason for its continued existence. The argument that such immunity
is necessary to preserve Citizens' reserves is also entirely circular,
"In order to preserve our assets so that we can pay claims ... we should
be able to improperly deny claims in bad faith." Citizens' position
simply defies logic.
Needless to say, the Florida Supreme Court's decision will be one that
could forever change the way insurance claims are handled by Citizens
and its adjusters. Make sure to check our blog for updates and
developments on this case.
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