On several occasions the following insurance industry argument has been addressed on this blog: the insurance company argues that since a claim proceeded to the contractual alternative dispute resolution process of appraisal and that it paid the award amount, there cannot be a bad faith case brought against it since they claim they followed the policy. This has been a hot topic in the Florida property insurance industry in the last couple of years. Florida’s Fourth District Court of Appeals ("4th DCA") has issued two opinions on this topic – State Farm Insurance Company v. Ulrich,1 and Trafalgar At Greenacres v. Zurich.2
In Ulrich, the most recent of the 4th DCA cases, State Farm filed a petition to the appellate court seeking the court to review non-final orders of the trial court that denied its motion to abate the bad faith action and denied its motion for protective order from bad faith discovery. State Farm claimed that since it invoked appraisal and paid the award, it could not be sued for bad faith. State Farm also argued there was no determination it breached the contract, the civil remedy notice was not specific enough, and the bad faith action should not be allowed to proceed.
The 4th DCA determined that State Farm was not entitled to the certiorari review it sought from the appellate court since there is an adequate remedy for appeal from a final order when that happens. State Farm was not materially harmed, according to the 4th DCA, and the non-final order denying a motion to dismiss a bad faith case is not subject to certiorari review. No coverage dispute was remaining so it was not the type of situation where discovery would irreparably harm State Farm.
The 4th DCA noted that in Trafalgar, it had held an appraisal award can be a "favorable resolution" to bring a bad faith case. State Farm argued that Trafalgar was wrongly decided. The 4th DCA was not persuaded by that argument. Last, the court rejected the argument that the civil remedy notice lacked the specificity required. The court noted that the Florida Department of Financial Services did not reject the civil remedy notice for lack of specificity; and pointed out that the case law has rejected the insurance company argument that the civil remedy notice must specify the cure amount within it.
The court dismissed State Farm’s petition. State Farm could argue the issues again on appeal from a final order.
These appraisal to bad faith cases are an important topic in the industry and each may involve different factual circumstances. They are important because it can be disingenuous for insurance carriers to argue that if they proceed through appraisal and pay any award, it wipes the slate clean on any mishandling of the claim.
1 State Farm Ins. Co. v. Ulrich, 120 So.3d 217 (Fla. 4th DCA 2013).
2 Trafalgar At Greenacres v. Zurich, 100 So. 3d 1155 (Fla. 4th DCA 2012).