On August 30, 2014, I wrote about a hot topic in Florida that concerns whether a policyholder can pursue a bad faith case against their insurance company after the claim proceeds through the appraisal process and an award is entered: In Florida, an Appraisal Award May Be a Final Determination of Liability For a Bad Faith Case. Continuing on the discussion of this topic is a recent case of Merlin Law Group attorney Kelly Kubiak from Florida’s Fourth District Court of Appeal (“4th DCA”), Cammarata v. State Farm Florida Insurance Company.1

The 4th DCA issued a thorough opinion on this topic complete with a detailed analysis of the case law in Florida related to appraisal and bad faith. In the case, the policyholders appealed a summary judgment finding that they could not pursue their bad faith case. The insurance carrier argued that because it’s liability for breach of the contract was not determined, the policyholder could not pursue the bad faith case. The policyholder argued that the insurance company’s liability for coverage and damages was determined in appraisal, so they could pursue the bad faith case.

The 4th DCA held that an insurer’s liability for coverage and extent of damages through the appraisal process can be used as spring board for the bad faith case. The 4th DCA rejected the argument there has to be a determination that the insurance company breached the contract of insurance before a bad faith case can proceed. The court specifically stated:

The appraisal award constituted a favorable resolution of an action for insurance benefits so that the insured satisfied the necessary prerequisite to filing a bad faith claim.

Those two prerequisites for a bad faith claim to proceed are:

  1. the determination of the insurance company’s liability, and
  2. the extent of damages determined.

In its thorough analysis of Florida Supreme Court law on the topic the 4th DCA issued its holding and noted that none of the Florida Supreme Court precedent on this topic requires the policyholder’s claim to be resolved by trial or arbitration or some other formal means. The court noted there was a favorable resolution to the policyholder’s claim by appraisal.

In its conclusion, the 4th DCA receded from an earlier opinion on this topic – one often cited by insurance carriers to support their argument that bad faith cases cannot proceed unless there is a determination they breached the contract of insurance. The court stated:

Because of the conflict between this court’s opinion in Lime Bay versus (1) the supreme court’s opinion in Vest, (2) this court’s opinion in Trafalgar, and (3) today’s opinion, we are compelled to recede from Lime Bay to the extent it held that an insurer’s liability for breach of contract must be determined before a bad faith action becomes ripe, even though the insurer’s liability for coverage and the extent of the insured’s damages already have been determined by an appraisal award favoring the insured.

This is a big win for policyholders and a great job by Kelly Kubiak and the appellate team.

1 Cammarata v. State Farm Florida Ins. Co., No. 4D13-185 (Fla. 4th DCA September 3, 2014).