We are finishing up our discussion of the recent Florida Supreme Court decision regarding bad faith claims against state-backed Citizens Property Insurance Corp. Again, an insurance company that puts its own interests first — ahead of a policyholder’s interest — is acting in bad faith. The rule only holds for private insurers, though, and Citizens is a government entity. Under the doctrine of sovereign immunity, as well as state law, Citizens cannot be sued.
Every rule has an exception, of course, and Florida, like other states, has exempted certain types of actions from the protection of sovereign immunity. So, if Citizens does act in a way that disadvantages a policyholder, there may be other legal grounds for a lawsuit.
The statutory exceptions do include liability for a willful tort. The court noted that bad faith, however, is not considered a willful tort — or any kind of tort, for that matter — under Florida law. A willful tort, the court explained, would be fraud. In truth, the only action left to an insured is a claim for breach of contract.
The policyholder in this suit did prevail on the breach of contract claim, and Citizens was ordered to pay what it should have paid in the first place. Had the policyholder prevailed in the bad faith claim, however, the insurance company would have been liable for punitive damages — and punitive damages could add up to four times the damage award.
The threat of punitive damages is meant to keep insurance companies honest when it comes to the timely processing of claims. Without that protection, as one brief put it, Citizens has nothing to lose by taking its time, ignoring claims or denying claims indefinitely.
The next step for the lawsuit would be an appeal to the U.S. Supreme Court. The next step for consumer protection advocates could be pushing the Legislature to add bad faith to the list of exceptions. We’ll have to wait and see.
Source: Citizens Property Insurance Corp. v. Perdido Sun Condominium Association, Inc., No. SC14-185, 2015 WL 2236719 (Fla. May 14, 2015), via WestlawNextShare