Hunt v. State Farm Florida Insurance Co., (Fla. 2d DCA April 5, 2013)
1. Whether an appraisal award establishing the validity of an insured’s claim satisfies the condition precedent required to bring a bad faith action.
2. Whether a civil remedy notice provided under section 624.155, Florida Statutes, was invalid for failure to include a definite cure amount.
Terry Hunt appealed a final summary judgment in favor of his insurer, State Farm, in his bad-faith lawsuit. The Second District Court of Appeal (2nd DCA) reversed the trial court, finding that the trial court erred in ruling that Mr. Hunt could not maintain a bad-faith claim without a breach-of-contract judgment against State Farm. The 2nd DCA also found that the trial court erred in ruling that the civil remedy notice provided under section 624.155, Florida Statutes (2006), was invalid for failure to include a definite cure amount.
Mr. Hunt’s home sustained sinkhole damage in July 2006 and he filed a claim
with State Farm. Mr. Hunt disagreed with State Farm’s damages estimate and in April 2007, he sued State Farm and filed a civil remedy notice of insurer violation (CRN) pursuant to section 624.155. The Florida Department of Financial Services accepted the CRN on April 25, 2007, which began a sixty-day period in which State Farm could cure its alleged wrongful conduct pursuant to Florida Statute § 624.155(3)(a). State Farm moved to dismiss Mr. Hunt’s lawsuit and to require an appraisal and the trial court abated the lawsuit and granted the motion for appraisal.
In October 2008, a $162,571.61 appraisal award was entered in Mr. Hunt’s favor and State Farm paid that amount. The trial court awarded Mr. Hunt attorney’s fees in February 2010 pursuant to Florida Statute § 627.428, Fla. Stat. (2009) and Goff v. State Farm Fla. Ins. Co., 999 So. 2d 684, 688 (Fla. 2d DCA 2008) (holding insurer’s payment of appraisal award after insured files suit but before judgment is functional equivalent of confession of judgment, entitling insured to section 627.428 attorney’s fees).
Mr. Hunt voluntarily dismissed his lawsuit but subsequently filed a bad-faith action in the fall of 2010, essentially seeking delay damages for the period between when the claim was paid and when he maintains it should have been paid. State Farm moved for summary judgment or, alternatively, dismissal, arguing that Mr. Hunt (1) had not obtained a judgment against State Farm in the first lawsuit and (2) had not specified a definite cure amount in his CRN.
The Appraisal Satisfied the Favorable Resolution Requirement
The 2nd DCA recognized the trial court’s ruling was based on Blanchard v. State Farm Mutual Automobile Insurance Co., 575 So. 2d 1289, 1291 (Fla. 1991), in which the supreme court held that a bad-faith action cannot accrue until the underlying lawsuit seeking insurance benefits is resolved in the insured’s favor:
[A]n insured’s underlying first-party action for insurancebenefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. . . . Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.
The trial court’s decision was also supported by Vest v. Travelers Ins. Co., 753 So. 2d 1270, 1276 (Fla. 2000) (“[B]ringing a cause of action in court for violation of section 624.155(1)(b)1 is premature until there is a determination of liability and extent of damages owed on the first-party insurance contract.”).
The 2nd DCA however recognized that “[a] judgment on a breach of contract action is not the only way of obtaining a favorable resolution.” Trafalgar at Greenacres, Ltd. v. Zurich Am. Ins. Co., 100 So. 3d 1155, 1158 (Fla. 4th DCA 2012). For example, “an arbitration award establishing the validity of an insured’s claim satisfies the condition precedent required to bring a bad faith action.” Id. (citing Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216 (Fla. 2006)).
Accordingly, the 2nd DCA ruled that similarly, as in Mr. Hunt’s case, an appraisal award established the validity of Mr. Hunt’s claim and satisfied this condition precedent.
While the trial court’s second justification for granting summary judgment was its finding that “[Mr. Hunt's] civil remedy notice is invalid because there is no definite ‘cure’ amount, ” Mr. Hunt argued that Florida law imposes no such requirement.
The 2nd DCA recognized that the trial court’s order relied on Talat Enterprises, Inc. v. Aetna Casualty & Surety Co., 753 So.2d 1278 (Fla. 2000), as support. Talat recites the unremarkable proposition that “for there to be a ‘cure,’ what ha[s] to be ‘cured’ is the non-payment of the contractual amount due the insured” and that “the remedy itself does not ripen if the insurer pays what is owed on the insurance policy during the cure period.” Id. at 1284.
The 2nd DCA ruled that Talat does not hold that the CRN must provide a specific cure amount and that Section 624.155, Florida Statutes, on its face, does not require a specific cure amount. The 2nd DCA was hesitant to impose a requirement beyond that directed by the legislature even though State Farm relied on two federal cases, Longpoint Condominium Ass’n v.Allstate Insurance Co., No. 5:05CV45RHWCS, 2005 WL 1315810 (N.D. Fla. 2005), and 316, Inc. v. Maryland Casualty Co., 625 F. Supp. 2d 1187 (N.D. Fla. 2008), for its argument that the CRN requires a specific cure amount. The 2nd DCA opined that Longpoint stated that the CRN must be “sufficient to apprise [the insurer] of the assertion that it ha[s] inadequately investigated the claim and failed to pay the [amount of the] demand,” but does not hold that the CRN must include the amount of the demand. Similarly, the 2nd DCA found that 316 does not sweep as broadly as State Farm urged.
The 2nd DCA opined that in Vest, the supreme court stated that the insured may submit a CRN before liability or damages have been determined. The insurer’s appropriate response to the CRN is not dependent on such a determination, but rather the insurer must make a good-faith evaluation of what is owed . . . based upon proof of loss required by the policy and [the insurer's] expertise in advance of a determination by a court or arbitration. The Vest court further explained that “[w]hat is owed on the contract is in turn governed by whether all conditions precedent for payment contained within the policy have been met.”
Finally, the 2nd DCA acknowledged recognition of the holdings of several federal court decisions that section 624.155(3)(b) does not require the CRN to allege a specific cure amount and concluded that it “as is apparent from our discussion, we must agree.”