Florida: pending appraisal no bar to lawsuit

In Florida, policyholders must first file a civil remedy notice (CRN) against their insurer before they can file a lawsuit claiming bad faith. A Florida appeals court recently made it easier (and hopefully quicker) to file bad faith suits against insurance companies, holding that a policyholder need not wait until the appraisal process was completed, a typical requirement mandated by insurance policies, before filing a CRN. Landers v. State Farm Florida Ins. Co., No. 5D15-4032, 2018 WL 472407 (Fla. Ct. App. Jan. 19, 2018).

Landers, the policyholder in this case, submitted a claim to his insurer in 2009 for damage to his home resulting from a sinkhole. Despite acknowledging that the policy provided coverage, State Farm and Landers soon disagreed about the appropriate method of repair as well as the extent of the damage. State Farm, following the advice of its consultant, wanted to inject grout in selected points around the perimeter of the home. Landers, after securing an independent opinion requested that a process known as underpinning was required to properly stabilize the home. State Farm submitted the independent opinion to a neutral evaluator who concluded underpinning was unnecessary. State Farm and Landers also disputed the precise amount of the sinkhole loss and State Farm demanded appraisal pursuant to the policy’s language. Nevertheless, Landers agreed to State Farm’s grout filling repair method.

After the foundational repairs were finished in 2011, two years after the initial loss, State Farm again demanded appraisal, pursuant to the terms of the policy, in order to determine the extent of “cosmetic damage” to the home.

Landers then filed a CRN alleging State Farm delayed processing the claim, failed to promptly investigate the claim, failed to adjust the loss, and failed to tender the policy limits. Landers also claimed that the repairs performed on the home at State Farm’s recommendation were inadequate and that he still could not live in his house.

In response, State Farm demanded that all of the issues at dispute be submitted to appraisal. Landers then filed his breach of contract suit to which State Farm responded by seeking to compel the appraisal process called for in the policy. The trial court ordered appraisal and the court of appeals affirmed. At the end of the appraisal process, the appraisal panel found in Landers’ favor that the loss exceeded the policy limits. State Farm then tendered the policy limits to Landers, notably without any deduction for amounts already paid.

Landers then brought his bad faith suit against State Farm.

State Farm moved for summary judgment arguing that at the time the CRN was filed the appraisal process had not yet been completed and as such no amount was due to Landers under the policy. State Farm argued that the CRN was void because he did not yet have a claim before the appraisal process was complete. After the trial court granted State Farm’s Summary Judgment motion, the court of appeals considered the appraisal language in connection with Florida statute section 624.155.

Under section 624.155, a policyholder may bring a bad faith claim against his insurer only after filing with Florida’s Department of Financial Services and giving the insurer sixty days’ notice of the claim. In this time, the insurer can correct any violations and this correction would defeat any suit the policyholder could bring.

In this case, State Farm argued that the CRN, the statutory requirement before any bad faith lawsuit could be filed could itself not be filed until all of the conditions in the insurance policy were satisfied. The court of appeals, however, saw no such limitation when reading section 624.155 noting the section, “provides no time limitation for when a CRN may be filed and does not require a final determination of coverage and damages before it is filed. The statute simply states that ‘no action shall lie’ if the bad-faith allegation is corrected or the damages are paid within sixty days of the insurer receiving the notice.”

The court further reasoned that just because an appraisal process was ongoing did not render the CRN void and since State Farm failed to correct the alleged violation in sixty days provided in the statute, Landers was free to file his bad faith claim. The court was quick to note that bad faith was still to be determined, an issue for the trial court on remand.

There may be a number of takeaways from this case:

First, as a policyholder, it is important to note the time with which these types of lawsuits play out. Here the initial loss occurred in 2009. After dispute over what the appropriate repair method would be, these arguably substandard repairs were completed in 2011. Landers filed his CRN and lawsuit in 2012. The appraisal, which was mandated under the policy only completed (in Landers favor, as he had argued all along) in 2014. At this point it is five years post loss. Now, in 2018, nearly a decade after the loss, Landers has been given the court’s blessing to proceed with a bad faith claim.

Second, this opinion only gives Landers his day in court; it is far from certain whether the bad faith claim will hold up when it heads back down to the trial court. After all, State Farm did tender the policy limits once the appraisal was complete and did not deduct for repairs already paid out and that might defeat the bad faith claim.

Third, this decision will hopefully incentivize insurers to work with their policyholders, at least in Florida, to reduce bad faith filings by policyholders.

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