Florida Statutes authorize a civil lawsuit against an insurer when it does not attempt “in good faith to settle claims [and] it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.” Fla. Stat. § 624.155(1)(b)(1) (2011). In general terms, under Florida law, this “bad faith” lawsuit is not ripe for litigation until the insurance company is first held liable for benefits under the policy. Does this mean that a policyholder can’t sue for breach of contract and bad faith in the same lawsuit? Not necessarily, according to an opinion issued last week by Florida’s Fourth District Court of Appeal.

In Landmark Am. Ins. Co. v. Studio Imports, Ltd., Inc., 4D10-5001, 2011 WL 5554840 (Fla. 4th DCA Nov. 16, 2011), an insured commercial property suffered damage from Hurricane Wilma. The policyholder alleged that the insurance company took an unreasonable and unjustifiable amount of time to compensate it for property losses, which resulted in ruined business relationships and loss of goodwill. The policyholder filed a six-count lawsuit in circuit court. The insurance company moved to dismiss all six counts, and the court granted that motion as to four of those counts, leaving only two counts remaining: (1) breach of contract, and (2) statutory bad faith under Fla. Stat. 624.155.

The insurance company appealed, and the Fourth District agreed that the insurance company should not be required to defend against the breach of contract and bad faith claims at the same time. Rather than requiring the bad faith count be dismissed, the Fourth District looked to an earlier case from the First District, Vanguard Fire & Cas. Co. v. Golmon, 955 So.2d 591 (Fla. 1st DCA 2006), that held that

[T]he trial court has authority to abate the statutory claims, rather than to dismiss them, if it appears to the court that abatement would be in the interest of judicial economy.

The Fourth District followed the First District’s lead, but removed the qualifier to abatement that it must be in the interest of judicial economy, and held

The trial court can decide to either dismiss the bad faith claim without prejudice or abate the claim until the underlying breach of contract issue is resolved.

Under Studio Imports, it would appear that the trial court has full discretion to choose dismissal or abatement of a statutory bad faith count for any reason until liability has been established, which would mean that a lawsuit alleging both breach of contract and bad faith could be filed at the same time. There would be pros and cons to doing so, and any decision would require an analysis of the specific facts of each case. The results may also be different in other Florida District Courts.