In Major Bad Faith Legislation Filed in Tallahassee, I promised a further analysis of Florida Senate Bill 1592, explaining why this bill is bad for property insurance policyholders. Two striking parts of the bill is the elimination of accountability for good faith conduct and the prevention of common law remedies. This bill as written applies to more than just third-party claims practices — it applies to first-party claims conduct. Here is an analysis substantially made by Ruck DeMinico of our firm:

1.  §624.155(2)(b)1:

  • (2)(b)1: “Acting in gross disregard of the insured’s interest by failing to accept a good faith written demand to settle claims within the policy limits if, under all the circumstances existing at the relevant time, it could and should have done so, had it acted fairly and honestly toward its insured."
  • Under (2)(b)1., the current statute wording is manipulated to eliminate insurer’s duty of good faith. "Good faith" wording is left in the section, however it would now apply to the insured, not the insurer ("…good faith written demand…").
  • Adds a new proof standard of "acting in gross disregard of the insured’s interest." (Currently "fairly and honestly toward its insured").
  • In effect, eliminates insurer’s affirmative duty of good faith and replaces it with anything less than gross disregard is ok.
  • Action brought under (2)(b)1. — Insurer has an affirmative defense if the insured fails to fully cooperate in providing all relevant information and in presenting the claim.

2.  Insurer is not liable in excess of policy limits or the appraisal award, whichever is less, if it makes timely payment of the appraisal award.

  • However, if the insurer does not make a timely payment of appraisal award, there is no presumption that the insurer acted in bad faith.

3.  §624.155(10):

  • Insurer does not owe a fiduciary duty to the insured.
  • Insurer retains the right to protect privileged work-product. Claim file is considered work-product. In order to obtain the claim file, the insured would be required to show the material is needed to prepare the case and cannot obtain the equivalent by other means without undue hardship.
  • Adds for the insurer that "the attorney-client privilege remains absolute."

4.  §624.155(11): Attorneys fees and costs may not include any multiplier or enhancement for taking on difficult or risky cases on a contingent fee.

5.  Eliminates common-law bad faith cause of action. As to first-party claims, this language preempts any decision by the Florida Supreme Court on this issue currently pending before them in QBE Insurance Corp. v. Chalfonte Condominium Apartment Association as discussed in Common Law Good Faith Duty Before Florida Supreme Court.

The bill guts consumer protections that have been in place for nearly thirty years. Strangely, the Civil Remedy law was first passed because Florida Courts would not recognize a first-party cause of action for bad faith conduct causing injury to policyholders. This proposed law takes away policyholders’ statutory protections and, unlike the majority of other states, prevents Florida common-law from recognizing a breach of the good faith duty.

This bill should not be taken lightly as it just passed the Senate Committee this morning by a 4-3 vote.