Florida Does Not Recognize a Common Law First Party Bad Faith Cause of Action

In Swanson v. State Farm Mutual Auto. Ins. Co., Case No. 6:2019-cv-00422 (M.D. Fla. Apr. 22, 2019), an insured sued its insurer for common law bad faith, alleging an improper denial of benefits. The insurer moved to dismiss and its motion was granted. Florida law recognizes first and third party causes of action against insurers for bad faith. However,  while a common law cause of action in third-party bad faith claims has long been recognized in Florida, a first party bad faith claim against insurers may be asserted pursuant to Florida Statute section 624.155.

The insured argued that Florida law recognizes common law first party bad faith claim, where the insurer’s actions are so egregious and outrageous it elevates what would have been an ordinary bad faith cause of action into an independent, willful tort action. The insured pointed to alleged misconduct during the course of the proceedings on the part of the insurer, which resulted in a mistrial. The court rejected the insured’s argument, pointing out that the Florida Supreme Court has repeatedly held that the state does not recognize a common law first party bad faith action. The court therefore dismissed the lawsuit.

If the insurer had arguably conducted itself improperly in the underlying action, why didn’t the insured seek sanctions with that court? Likely because the conduct did not itself rise to the level of bad faith or vexatiousness required by the rules to sustain any such claim. This insured attempted to obtain fees in another way and as the court made clear, there was simply no other way in this context.

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Bad Faith Cure Period Begins to Run When CRN is Electronically Filed

The Second District Court of Appeals in Harper v. Geico Gen. Ins. Co., 2019 Fed. App. LEXIS 3211 (Fla. 2d Cir. Mar. 1, 2019) has essentially shorted the time an insurer can avoid a bad faith action. The Court held that the plain language of Florida’s bad faith statute, Section 624.155(3)(d) “states that no action shall lie if the damages are paid or corrective action is taken within sixty days after the insured files the CRN.” Here, “files” was interpreted by the Court to include the moment when a CRN is electronically filed and not printed, mailed and ultimately received by the insurer. In other words, once the CRN is filed by the insured, the sixty-day cure period begins to run. It is important to note that when the statute was originally enacted, the insured seeking to file a CRN would complete a paper form and mailed copies to both the Department of Financial Services and the insurance company.

The insurance company in Harper argued that it made payment to the insured person within the cure period, based on the date it actually received a physical copy of the CRN by mail. However, under the Court’s interpretation of the word “filed”, the insurance company made the payment sixty five days after the CRN was electronically filed, exposing itself to a bad faith action by the insured.

This case is a wake-up call to all insurers to be very mindful of the date the CRN is filed and to diary the 60-day cure period to take place from that date, not any other date. If you are interested in receiving a copy of this decision, please contact us at blog@miamimaritimelaw.co.

Fla Supreme Court Rejects Daubert Evidence Standard

The Florida Supreme Court rejected a 2013 law intended to bring the state’s expert witness standard in line with most others states—this is otherwise known as the Daubert standard. The change in standard was backed by the Republican-controlled Legislature and business groups but opposed by plaintiffs’ attorneys. Supporters of the Daubert standard maintain switching to it would keep “junk science” out of court cases, while opponents argue a change in standard would make cases more expensive and time-consuming.

Writing for the majority, Justice Peggy Quince noted Florida’s adherence to the Frye standard set by the 1923 U.S. Supreme Court decision and the Legislature’s attempt to impose the Daubert standard followed in federal courts and 41 states. Quince noted that “Frye relies on the scientific community to determine reliability whereas Daubert relies on the scientific savvy of trial judges to determine the significance of the methodology used.” Justices Barbara Pariente, R. Fred Lewis and Jorge Labarga concurred.

Justice Quince further noted that the Florida Legislature has authority over substantive law while the Court is responsible for procedural standards, and the question of standards was one for the Court alone to decide under the separation of powers, Quince said in the 39-page opinion. This  4-3 decision overturned a ruling by the Fourth District Court of Appeal and ordered reinstatement of an $8 million verdict for Richard DeLisle, who blamed his mesothelioma on exposure to asbestos in cigarette filters and in workplaces.

If you are interested in obtaining a copy of this decision or wish to contact us to discuss this case further, you may contact us at blog@miamimaritimelaw.co.

Justice Peggy Quince, author of the opinion

Picture provided by florida-issues.blogspot.com

Tight-Lipped Owner of Burned Home Breaches Insurance Contract

The right to remain silent may be a mainstay of American jurisprudence but—as a recent Eleventh Circuit Court of Appeals opinion attests—it may be costly to exercise that right when your insurance company wants to discuss your burned-down house.  In Hutchinson v. AllState Insurance Company, No. 18-10448 (11th Cir. July 10, 2018), the U.S. Court of Appeals for the Eleventh Circuit said that a man whose homeowner’s policy required him to be examined under oath did not meet the requirements under the policy when he instead sat silent, apparently upset over assertions by an Allstate Insurance lawyer that he had been avoiding the interview.

 

According to court filings, Hutchinson had $163,647 in dwelling coverage and another $114,553 in personal property coverage for his Hogansville home that burned down in 2014. According to a records search, the three-bedroom, one-bath house was built in 1930.  The insurer had doubts as to whether Hutchinson lived at the house, which an investigator termed “so run down that it was uninhabitable.” But in the end that did not matter. The opinion noted Hutchinson’s “undisputed refusal to answer substantive questions at his examination under oath constitutes a material breach of the insurance policy.”.

Hutchinson’s offer to sit for another interview more than a year after Allstate denied his claim was found to be irrelevant, since he had already breached his insurance contract. As detailed in court documents, after Hutchinson’s house burned down, he submitted a claim to Allstate, which launched an investigation, including acquiring his sworn statement. According to Allstate’s filings, the insurer requested the interview by mail and by phone, offering to accommodate Hutchinson’s schedule and desired meeting place, all to no avail. Eventually the insurer's attorney booked a conference room at a hotel and informed Hutchinson that he needed to attend, which he did.

However, according to transcript of the meeting, after preliminary formalities, Hutchinson objected to the contents of a letter the attorney had sent him saying Allstate had attempted to schedule the interview on several occasions but that he had not responded. “Now this is untrue; I’ve not received a letter,” Hutchinson is quoted as saying. “So I need—before we can move forward, this needs to be recanted. This needs to be corrected. Because I have gone out of my way—and I haven’t been difficult—to cooperate with Allstate regarding any request that has been made, period.”

In response, the insurer's attorney is quoted saying, “Allstate will not recant the truth, sir. I will tell you that I personally spoke to you. I sent the letter…So Allstate will not recant what it believes to be the truth.” The two sparred verbally, with Hutchinson demanding that the letter be “corrected” before he answered any questions and Allstate's attorney warning that failure to so could mean the claim’s denial.

After additional back-and-forth between the insured and the insurer's lawyer, Allstate's lawyer began questioning Hutchinson as to when he bought the house, had the utilities turned on and so forth, with Hutchinson sitting silent. Hutchinson’s last words before the interview concluded were “I told you before you got started with those questions that, before we can move on, we need to get this corrected. So …”

Allstate denied Hutchinson’s claim. More than a year later, his lawyer sent Allstate a demand letter threatening to sue if the claim were not paid within 60 days, and asserting that Hutchinson would be willing to sit for another sworn interview. Allstate responded that it would agree to a second interview “expressly subject to a full and complete reservation of rights and defenses by Allstate.” However, Hutchinson never offered a date for the second interview.

In 2016, Hutchinson sued the insurer for bad faith and breach of contract in Fulton County State Court. Allstate had the suit removed to the U.S. District Court for the Northern District of Georgia, where Senior Judge Clarence Cooper dismissed it on summary judgment. “Allstate unequivocally invoked its right to examine plaintiff under oath,” wrote Cooper. “While plaintiff technically appeared for the examination under oath, he failed to provide required, material information, with no legal excuse, by not responding to substantive questions. In essence, then, plaintiff did not ‘submit’ to examination under oath, as required by the policy.”

In upholding Cooper, the appellate panel wrote that Hutchinson did not argue that he was excused from answering questions under oath or that such refusal breached his contract. “Rather,” the opinion said, “Hutchinson contends that his offer to submit to an [examination under oath] over a year after Allstate denied his claim creates an issue of fact regarding his compliance with the contract. We disagree...Hutchinson’s belated offer did not cure his prior breach or reinstate Allstate’s obligation to pay his claim,” the opinion said.

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