Florida does not recognize a first-party bad faith cause of action at common law. Instead, it has a statutory scheme where a formal notice (CRN) must be sent that provides the specific statutory provisions which are violated, the relevant policy language relevant to violations, and the facts giving rise to the violations. Then, the insurance company gets 60 days to cure the defects of its actions.

While I have discussed these requirements in numerous posts, I would suggest reading, What Does a Property Insurance Policyholder Have To Do To File a Bad Faith Lawsuit In Florida?

One issue now raised in most of these statutory bad faith cases concerns the specificity of the facts alleged. One problem with this requirement is that the policyholder often does not know all of the bad faith facts, which the insurer secretly does. The policyholder simply knows that an insufficient amount is not fully or timely being paid. Today, a Florida appellate court ruled on facts that support a proper notice under the statutory requirement.1 The facts of the case are as follows:

The Homeowners own a home insured by United. In late 2018, the home suffered extensive water damage to the floors, walls, baseboards, and other building components from a failed shower pan in the master bathroom. United acknowledged coverage for the loss, determined the amount of the loss was $2,640.08, and, after applying the $2,500 deductible, paid the Homeowners $140.08.

The Homeowners disputed the estimate, arguing United significantly undervalued the loss, largely due to inability to match the existing floor tile. In February 2019, the Homeowners’ adjuster provided United with a detailed estimate valuing the total amount of the loss at $277,800.28.

Months later, the Homeowners’ adjuster provided United with a ‘reduced’ estimate valuing the total amount of the loss at $216,892.47. United ultimately sent a second adjuster to the home and made a supplemental payment of only $5,642.67.

The matter proceeded to appraisal, and, in August 2020, the Homeowners were awarded $136,958.19 for actual cash value, and $142,010.97 for replacement cash value.

I suggest that the difference between an initial estimate of $2,640.08 versus an actual cash value award of $136,958.19 screams of a possible bad faith adjustment by the insurer. Unfortunately, this currently goes on all the time in Florida. Maybe there are good faith reasons for the vast difference, but anybody in the property claims business would ask how the insurer was so far off the adjustment and what happened.

After the bad faith lawsuit was filed, the insurer then argued that the statutory notice was deficient, and a trial court agreed the facts alleged were “unclear” because they only had “partial specificity” and “conclusory allegations.” The trial judge was reversed with the court reasoning as follows:

Here, the Homeowners’ CRN listed the specific statutory provisions that United allegedly violated, referenced the specific policy language relevant to the violations, and gave a detailed recitation of the facts surrounding the violation. In relevant part, the CRN stated United gave ‘a lowball estimate that failed to include the floors at all, and otherwise under-scoped such items as drywall repairs and paint’ and ignored documentation showing that additional payments were owed. We hold the CRN sufficiently complied with section 624.155(3)(b)’s specificity requirements and ‘sufficiently put [United] on notice of the facts and circumstances giving rise to the violations and the corrective action required to remedy the violations.’ Zaleski, 315 So. 3d at 13 (reversing summary judgment in favor of the insurer, and finding the CRN explained the facts and circumstances of the violation with specificity where ‘the CRN stated that [the insurer] performed a cursory inspection of the property, failed to retain experts necessary to identify the repairs necessary to restore the property to its pre-loss condition, and gave a ‘lowball’ estimate that failed to encompass all covered damages’ and ‘the Homeowners provided [the insurer] with their detailed estimate’).

Regarding the trial court’s determination that the CRN was invalid because the ‘cure’ amount was unclear, we reject this determination as Florida law does not require a CRN to include a specific cure amount. See Fortune v. First Protective Ins. Co., 302 So. 3d 485, 491 (Fla. 2d DCA 2020) (‘Neither the statute nor this court’s precedent requires the CRN to contain a specific amount sought to cure the alleged bad faith.’); Hunt v. State Farm Fla. Ins. Co., 112 So. 3d 547, 551 (Fla. 2d DCA 2013) (‘On its face, [section 624.155] does not require a specific cure amount. We are hesitant to impose a requirement beyond that directed by the legislature.’ (footnote omitted)); see also Vest v. Travelers Ins. Co., 753 So. 2d 1270, 1275 (Fla. 2000) (recognizing that an insurer’s appropriate response to a CRN is not dependent on a determination of liability or damages, rather it ‘is based upon the insurer’s good-faith evaluation of what is owed on the insurance contract’); King v. Gov’t Emps. Ins. Co., 2012 WL 4052271, (M.D. Fla. Sept. 13, 2012) (‘Florida’s statute does not require an insured on the CRN to allege a specific amount owed to cure the violation by the insurer. . . . Rather, the CRN is designed to prevent insurers from playing a ‘guessing game’ as to what, and how, to cure within the sixty-day window.’).

At any rate, it is undisputed United received a copy of the Homeowners’ estimates, including the second ‘reduced’ estimate, prior to the filing of the CRN. United therefore clearly knew how to cure the alleged violation notwithstanding the fact that the CRN did not contain a specific cure amount and instead generally stated the estimated damage was more than $50,000. Stated differently, ‘common sense suggests that the action [United] could have taken to cure the alleged violation would be to increase the amount offered to settle [the Homeowners’] claim.’ Altheim v. GEICO Gen. Ins. Co., 2011 WL 161050 (M.D. Fla. Jan. 18, 2011).

How about “common sense” applying to legal reasoning?

The bottom-line lesson in this changing area of Florida bad faith law is that the better practice is to make certain that the insurer is sent estimates of the damage before sending the civil remedy notice and to point to that fact in the notice.

I also want to remind public adjusters that completing and filing a civil remedy notice is important for policyholders who are being treated unfairly by their insurance companies. Those mistreated policyholders should be referred to competent legal counsel. The completion and filing of the Civil Remedy Notice is the practice of law. It has become an increasingly technical and difficult area of the law that is still in flux.

Thought For The Day

Thanksgiving dinners take eighteen hours to prepare. They are consumed in twelve minutes. Half-times take twelve minutes. This is not coincidence.
—Erma Bombeck
1 Lugassy v. United Prop. & Cas. Ins. Co., No. 2D21-2929 (Fla. 4th DCA Nov. 23, 2022).