In Florida, an insured cannot file a bad faith action against his or her carrier without first resolving the underlying claim. Specifically, there needs to be a determination of liability and a determination as to the amount of the loss. This requirement is referred to as the “Favorable Resolution Requirement.” Carriers often argue a judgment must be entered against it before an insured’s bad faith claim is proper and an appraisal award is not an equivalent. Advocates for insureds take the position that if a carrier pays an appraisal award, the underlying issues are resolved. If the carrier acted unfairly towards its insured during the handling of the claim, then a bad faith claim under Florida Statute 624.155 is ripe.
On April 5, 2013, Florida’s Second District Court of Appeal dealt with this issue in Hunt v. State Farm Florida Insurance Company. In Hunt, the Second District held a breach of contract action resulting in a favorable judgment for an insured is not a condition precedent to the commencement of a statutory bad faith claim. The Second District held the entry of an appraisal award is the functional equivalent of a confession of judgment, and a bad faith claim is ripe after the appraisal award has been paid.
Hunt stands for the proposition that the appraisal award satisfies the Favorable Resolution Requirement. Insureds are still required to file a Civil Remedy Notice against their carriers, allowing the carrier sixty days to cure the claimed misconduct. Next week, I will discuss whether an insured is required to include a cure amount in the Civil Remedy Notice.