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What are insurer bad faith claims?

Florida has two types of bad faith claims: first-party bad faith and third-party bad faith. First-party bad faith claims occur when an insurance company unreasonably denies, delays, or undervalues a claim made by its policyholder.

On the other hand, third-party bad faith claims occur when an insurance company unreasonably fails to defend, indemnify, or settle a claim within policy limits or to investigate a claim for a different party. For example, this claim may arise when the insured buys liability insurance from the insurance company to protect against claims from another.

Need help regarding insurer bad faith claims? Schedule your consultation today with a top insurance procurement and coverage attorney.

What legal issues typically arise related to insurer bad faith claims?

An insured may try to set up a bad faith claim by proposing a settlement offer that would be difficult for the insurer to comply with. Aware of this difficulty, the claimant will wait for the insurer to fail to settle and then bring a bad faith claim. In some circumstances the claimant may make a settlement offer containing an arbitrary acceptance deadline before the insurer even has the opportunity to complete a full investigation of the claim. When the insurer is reluctant to accept the claimant’s demands immediately, the policyholder often chooses to file a bad faith claim.

Critically, Section 627.426, Florida Statutes, imposes specific time requirements that an insurer must comply with before denying coverage based on a coverage defense.

The following situations commonly head to policyholders filing bad faith claims against their insurers:

  • An insurance company unreasonably denies a valid claim, such as denying a claim without a proper investigation.
  • An insurance company unreasonably delays payment of a valid claim.
  • An insurer fails or refuses to defend a claim against its insured covered under a valid policy, despite no breach from the insured releasing the insurer from liability.
  • An insurance company makes an unreasonably low settlement offer.

What are relevant laws related to insurer bad faith claims in Florida?

Much of Florida law related to actions for insurer bad faith claims comes from common law, or case law, based on the previous judicial decisions of Florida courts. For instance, Florida courts can decide how to interpret an insurance policy, whether and when an insurance policy will be enforced, and whether specific provisions are enforceable. Courts can also impose damage awards exceeding the coverage limits allowed by the insurance policy. However, Florida only recognizes a common law cause of action for third-party bad faith, not first-party bad faith.

Statutorily, Florida’s bad faith statute permits a civil action against an insurer if the insurer fails to settle a claim when, under all the circumstances, it could and should have been settled. Section 95.11 sets the statute of limitations for claims founded on a written instrument (the insurance policy) in Florida, typically five years from the date of the injury. However, the notice provisions of section 624.155 may toll the statute of limitations for a time.

What is required to prove a case of insurer bad faith claims in Florida?

The standard for evaluating bad faith claims is whether the insurer acted fairly and honestly toward its insured with due regard for its interests. A court will determine whether an insurer has acted in bad faith in handling claims under a totality of the circumstances standard.

A court will evaluate an insurer’s conduct based on the following:

  • Whether the insurer was able to obtain a reservation of the right to deny coverage if defenses were provided;
  • Efforts or measures taken by the insurer to resolve the coverage dispute promptly or in such a way as to limit any potential prejudice to the insureds;
  • The substance of the coverage dispute or the weight of legal authority on the coverage issue;
  • The insurer’s diligence and thoroughness in investigating the facts specifically pertinent to coverage; and
  • Efforts made by the insurer to settle the liability claim in the face of the coverage dispute.

When a set of facts is appropriate to meet the requirements of insurer bad faith claims, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as compensatory damages.

Have more questions about an insurer bad faith claim-related situation?

Crucially, this overview of insurer bad faith claims does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.

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