An insurer has a duty to exercise good faith in evaluating and examining the validity of claims against its insured. Florida Courts have long recognized a claim for violation of that duty to exercise good faith. The actions have traditionally been called “Bad Faith Lawsuits” filed against insurance companies. Prior to the enactment of Fla.Stat. §624.155, Florida law did not recognize any cause of action for a first party bad faith claim. Florida Statute §624.155 changed the law allowing first party bad faith claims. Fla.Stat. §624.155 states as follows: (1) Any person may bring a civil action against an insurer when such person is damaged: (a) By a violation of any of the following provisions by the insurer: 1. Section 626.954(1)(i), (o), or (x); 2. Section 626.9551; 3. Section 626.9705; 4. Section 626.9706; 5. Section 626.9707; or 6. Section 627.7282. (b) By the commission of any of the following acts by the insurer: 1. Not attempting in good faith to settle claims when, under all circumstances, it could and should have done so, had it acted fairly and honestly towards its insured and with due regard for his interests; 2. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made; or 3. Except as to liability coverages, failing to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance coverage. Notwithstanding the provisions of the above to the contrary, a person pursuing a remedy under this section need not prove that such act was committed or performed with such frequency as to indicate a general business practice. . . .
Although Florida Statute §624.155(1) states that “any person” may bring a civil action when there is a violation, the case law limits the actions to the insured. See Cardenas v. Miami Dade Yellow Cab Co., 538 So.2d 491 (Fla. 3d DCA 1989).
Upon a showing that the bad faith acts occur with such frequency as to indicate a general business practice, and are able to show that the acts are willful, wanton, malicious, and/or in reckless disregard of the rights of the insured, Florida Statute §624.155(4) allows a first party bad faith claim for punitive damages. Interestingly, any person pursing a claim for punitive damages under Fla.Stat. §624.155 must post the costs of discovery in advance of the action.
The Statute requires that a notice filled-out in a special form be provided to the Florida Department of Insurance and the insurer. If the notice is not appropriately completed, the bad faith action does not accrue. The bad faith lawsuit cannot be filed until 60 days after written notice is given to the Department of Insurance and the insurer. During the 60 days, the insurer may cure the bad faith by making payment on the claim.
In McLeod v. Continental Insurance Co., 591 So.2d 621 (Fla. 1992), the Florida Supreme Court held that damages recoverable in a first party bad faith suit are limited to the extent of the available coverage, but also allow the claimant to recover interest, court costs, and attorneys’ fees in both the underlying action and the bad faith action. In a footnote, the Supreme Court limited the award of mental anguish damages to instances in which the defendant acted with malice as defined under Fla. Stat. §624.155(4).
The 1992 Florida Legislature recently amended Fla. Stat. §627.727(10), allowing the claimant in a first party bad faith action under Fla. Stat. §624.155 to recover complete damages including the excess verdict amount awarded in the underlying claim. This amendment changes the law as defined by the Florida Supreme Court in the McLeod decision discussed above. The act will allow the following damages to be recovered upon successfully handling a first-party bad faith action: “The damages recoverable from an uninsured motorist carrier in an action brought under Fla.Stat. §624.155 shall include the total amount of the claimant’s damages, including the amount in excess of the policy limits, any interest on unpaid benefits, reasonable attorney’s fees and costs, and any damages caused by a violation of a law of the state. The total amount of the claimant’s damages are recoverable whether caused by an insurer or by a third-party tortfeasor. Since the Amendment was defined as remedial, it will act retroactively. The statute states in part: The purpose of subsection  of §627.727, Florida Statutes, relating to damages, is to reaffirm existing legislative intent, and as such is remedial rather than substantive. This section and §627.727(10), Florida Statutes, shall take effect upon this act becoming a law and, as it serves only to reaffirm the original legislative intent, §627.727(10), Florida Statutes, shall apply to all causes of action occurring after the effective date of §624.155 Florida Statutes. Prior to this change in the law, bad faith actions under Fla.Stat. §624.155 limited damages to the amount of insurance coverage available plus attorneys’ fees and costs in the underlying action and in the statutory bad faith action. Trial attorneys should take note of these changes and follow through on perfecting or defending first-party bad faith actions arising out of insurance claims.