First Party Bad Faith Versus Third-Party Bad Faith in Florida
January 3, 2019
Every responsible policyholder expects that their insurance provider will uphold their promise of responding to claims fairly and promptly. Nevertheless, it’s not uncommon for insurers to break the rules when settling legitimate claims that ought to be covered.
When an insurance agent or company fails to act as it is contractually obliged, it is said to be acting in bad faith. There are all kinds of ways that insurers can act in bad faith, but how complicated your case is will largely depend on the type of bad faith case you’re dealing with.
What determines the type of case? Who’s involved.
What Constitutes a Florida Bad Faith Claim?
If you feel that your insurance company is neglecting its duties, you should get in touch with a insurer is acting in bad faith.
Any aggrieved party may take statutory action against an insurer by filing a civil remedy notice. The insurer then has a 60-day period to respond to the civil remedy notice. If the insurer fails to take the appropriate action within the 60-day period, the aggrieved party can then submit a bad faith claim.
The Two Types of Bad Faith Claims in Florida
Insurance bad faith is generally addressed as either a first-party or third-party claim.
First-party insurance bad faith claims typically involve an insurer who unreasonably denies a claim or refuses to investigate a claim properly.
Third-party insurance bad faith claims typically involve an insurer who unreasonably fails to indemnify, defend, or settle a claim as per the policy limits. It may also include an insurer who fails to investigate a third-party claim properly.
First-Party Bad Faith
First-party insurance covers the insured for injury, damage or loss sustained to their property or person.
Examples of first-party insurance policies include:
- Fire insurance
- Health insurance
- Medical coverage in a homeowner’s policy
- Flood, earthquake, tornado insurance, etc.
First-party bad faith actions, therefore, include an insurer’s failure to try and settle claims in good faith when under all circumstances, the insurer was able to and should have done so had they acted fairly and honestly with regards to the interests of the insured.
Examples of first-party bad faith actions include:
- Inadequate claim processing
- Inadequate/improper claim investigation
- Delayed claim payment
- Unreasonable denial of claim
Third-Party Bad Faith
Third-party insurance covers the insured with regards to their liability in case he/she is sued by another person/party for damage, injury, or loss that occurs due to the actions of the insured. Third-party insurance coverage compensates the insured for the amount of damage, injury, or loss owed.
Many third-party insurance policies also establish a contractual agreement for the insurer to defend the insured during litigation. The insurance company therefore has to find and pay for an attorney to represent the insured.
Examples of third-party insurance policies include:
- Professional liability insurance (i.e., malpractice insurance)
- Liability insurance covered under a homeowner’s or automobile policy
- Commercial liability insurance
Statutory third-party bad faith is described under Florida’s Unfair Insurance Trade Practices Act, in which the insurer is held accountable for claim settlement violations with regards to specific misconduct that amounts to bad faith.
Under the common law, Florida courts allow for a third-party claimant to hold the insurer liable if the insurer breaches its duty, such as failing in its duty to defend the insured against third-party claimants.
Examples of third-party insurance bad faith claims include:
- Material misrepresentation when settling claims
- Attempting to settle claims based on applications that were altered without the consent or knowledge of the insured
- Denial of legitimate claims
- Failure to conduct proper/adequate investigations as per the available information
- Failure to implement the necessary standards for appropriate investigation and settlement of claims
- Failure to act promptly upon notifications of claims
As mentioned above, third party claims tend to be more difficult to litigate due to the fact that there is an extra party involved. Rather than a claimant fighting to get covered by their insurer for something in their policy, these types of claims involve the negligence or wrongdoing of a separate party and the attempt to get their insurance to cover someone they have wronged.
One of the first steps in fighting back against bad faith is to understand which type of claim you have.
About the Author:Since 1994, seasoned litigation and trial lawyer Anthony B. White has helped thousands of accident victims seek damages due to injuries sustained as a result of another party’s negligence. Included in America’s Registry of Outstanding Professionals and selected to the 2012, 2013, and 2014 editions of Florida Super Lawyers, Mr. White specializes in car accidents, insurance disputes, wrongful death, product liability, and medical malpractice cases. He is a longstanding member of the Florida Justice Association and the American Association for Justice and currently sits on the Board of Directors of the Broward County Justice Association.