In a previous post, I discussed whether an insured can file a Civil Remedy Notice before coverage and liability are established and discussed Florida’s three requirements for bringing a bad-faith claim.1 In this post, I will go back to a fundamental question the United States Court of Appeals for the Eleventh Circuit certified to the Florida Supreme Court years ago. Under section 624.155(1)(b)(1), can an insured’s bad-faith claim accrue before the conclusion of the underlying litigation?2 The Florida Supreme Court answered in the negative.3
According to Florida Statutes § 624.155(1)(b)(1), any individual may bring a civil action against an insurer when such person is damaged as a result of an insurer’s first-party bad-faith violations.4 In Blanchard v. State Farm, the insureds won a verdict in the Florida state court against their insurance carrier for breach-of-contract.5 Later, they brought a bad-faith action in federal court.6
The insurance carrier argued that the claim for bad faith under section 624.155 had to be asserted in the original breach-of-contract action and that the insureds had “split their cause of action” by not bringing the bad faith claim in the “original suit.”7 The Florida Supreme Court did not agree and found the following:
[A]n insured’s underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. It follows that an insured’s claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.8
The court held that a breach-of-contract and extra-contractual action should not be both brought simultaneously and can only lie when an underlying breach-of-contract action is first concluded.
2 Blanchard v. State Farm Mut. Auto. Ins. Co., 575 So. 2d 1289, 1290 (Fla. 1991). This case regards an uninsured motorist claim, but courts have applied Blanchard to first-party property cases. See Vanguard Fire & Cas. Co. v. Golmon, 955 So. 2d 591, 593 (Fla. 1st DCA 2006).
4 As mentioned in my previous article, an insured must first file a Civil Remedy Notice, there must be a determination of liability, and there must be a determination of extent of the insured’s loss. See Vest v. Travelers Ins. Co., 753 So.2d 1270, 1273 (Fla. 2000).
5 Blanchard, 575 So. 2d at 1291.
8 Blanchard, 575 So. 2d at 1291 (emphasis added).