Insurance Coverage and Bad Faith

First DCA Denies Citizens Property Insurance Corporation Immunity From Bad Faith Claims

First DCA Denies Citizens Property Insurance Corporation Immunity From Bad Faith Claims

In Perdido Sun Condominium Association, Inc. v. Citizens Property Ins. Corp., Case No. 1D13-1951 (Fla. 1st DCA January 23, 2014), the First District Court of Appeal addressed whether Citizens is entitled to immunity from claims alleging bad faith insurance practices. In denying immunity to Citizens, the First District acknowledged conflict with a decision from the Fifth District Court of Appeal, Citizens Property Ins. Corp. v. Garfinkel, 25 So. 3d 62 (Fla. 5th DCA 2009), disapproved on other grounds, Citizens Property Ins. Corp. v. San Perdido Association Inc., 104 So. 3d 344 (Fla. 2012), and certified the immunity issue to the Florida Supreme Court for its resolution.

In Perdido Sun, the condominium had sustained damage from a 2004 hurricane, and it previously recovered property insurance benefits under its Citizens policy. Thereafter, the condominium brought a bad faith claim pursuant to section 624.155, Florida Statutes, alleging Citizens failed to attempt in good faith to settle the property insurance claim. That statute provides a civil remedy when a person is damaged by the insurer’s acts in “not attempting in good faith to settle claims when, under all the circumstances, 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.”

The trial judge dismissed the lawsuit, ruling that Citizens was immune from the bad faith claim based on section 627.351(6)(s)1, Florida Statute. That statute generally creates immunity for Citizens but lists five exceptions.  The exception addressed by the First District allows Citizens to be sued for “any willful tort.” The First District denied immunity, ruling that a bad faith claim pursuant to section 624.155 constitutes a “willful tort.”

The First District acknowledged that there is no statutory definition of “willful tort.” In reaching its construction of the term, the First District relied on general definitions of “willful” (‘with actual knowledge or belief that such act or omission constitutes such violation and with specific intent nevertheless to commit such act of omission”) and “tort” (a “civil wrong”).

According to section 627.351(6)(s)2, Citizens has a “duty to its policyholders to handle claims carefully, timely, diligently, and in good faith.” The First District reasoned that a violation of such duty fell within the broad definition of a “tort.” Thus, the First District allowed the condominium to sue Citizens for bad faith, provided the condominium proved its “cause of action, including the willfulness” of Citizens’ actions.

In our view, the First District’s decision in Perdido Sun fails to appreciate that willfulness is not an element of a bad faith cause of action. To prove a claim under section 624.155, a plaintiff must show that the insurer failed to settle when 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.” Under Florida case law, the “could and should have” language requires more than negligence, but that language does not equate with “willfulness.” Nor do the requirements of fairness, honesty and due regard equate with “willfulness.” As noted, the First District defined “willful” as the insurer having actual knowledge that its act violates a statute but nevertheless the insurer intends to commit its act. That definition of “willful” does not apply to the typical bad faith claim brought under section 624.155.

Furthermore, in reaching its decision, the First District did not expressly address any of the factors which caused the Fifth District to find immunity in Garfinkel. Among other things, the Fifth District had relied on the legislative history which showed the legislature considered and rejected an exception to Citizens’ immunity based on bad faith claims handling acts. The Fifth District also construed Citizens’ immunity consistently with the immunity enjoyed by other state insurance entities, such as the Florida Insurance Gurantee Association. The First District did not explain its analysis of the legislative history or the other statutory analogies.

In our view, courts considering Citizens’ immunity under section 627.351(6)(s)1, Florida Statute, should also contrast that statute with the legislature’s treatment of state officers, employees and agents’ immunity under the general sovereign immunity statute, section 768.28(9)(a), Florida Statutes. Section 768.28(9)(a) grants immunity to state officers, employees and agents for acts committed within the scope of their employment unless they “acted in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.” In creating these three exceptions to immunity in section 768.28(9)(a), the legislature differentiated between “bad faith” and “willful” acts. By creating separate exceptions, the legislature acknowledged that “bad faith” does not mean the same as “willful.” Further, the legislature demonstrated that it knew how to create an exception to immunity based on “bad faith.” As a result, there is no justification for construing the “willful tort” language of section 627.351(6)(s)1 to include a bad faith insurance claim. If the legislature had intended to deny immunity for bad faith insurance claims, it knew how to use language to create that result. The courts should not create an exception which the legislature intentionally omitted.