Bad faith insurance occurs when the insurer somehow fails to honor the terms of an insurance policy, acting in so-called “bad faith.”
Bad faith insurance claims can become surprisingly complex, particularly when a third party becomes involved. Courts sometimes rely on precedent from prior bad faith cases to make a final judgment, meaning that high-profile cases often cause a stir in the legal community due to potential changes in precedent.
A recent ruling by the Florida supreme court has drawn significant attention, with some predicting that the ruling will significantly change how bad faith insurance cases are handled in Florida.
Below, we’re going to detail the ruling, and why it is unlikely to cause much of a change. We also discuss how bad faith insurance cases work (and will continue to work) in Florida.
What Harvey v. GEICO Means to Bad Faith in Florida
In 2006, James Harvey, insured by GEICO, was ruled to be at fault in a car accident that resulted in the death of another driver, John Potts. Harvey had $100,000 in liability coverage, which was issued to the Potts estate. However, the adjuster did not respond to further requests for information from the Potts estate, and ultimately an $8.47 million wrongful death suit was brought against James Harvey. Mr. Harvey fought back, arguing that the suit never would have been brought against him had GEICO done their job properly.
After a protracted legal battle, a $9.2 million judgement was made against the insurer, stating that GEICO had acted in bad faith, but this was later overturned by the 4th District Court of Appeal. However, in September of this year, the Florida supreme court upheld the original judgment, agreeing that GEICO was liable for acting in bad faith.
Some insurers are concerned that this case will expand the precedent for what constitutes bad faith insurance in Florida, and warn of market chaos. However, the insurer’s standard of ordinary care really has not changed, and the ruling represents an upholding, not a change, of the current status quo.
How Florida Bad Faith Insurance Cases Work
In Florida, there are two types of bad faith insurance claims, first-party and third-party.
A first-party claim occurs when an insurance company unreasonably refuses to investigate or pay a claim that should pay out damages to the policyholder. For example, this would apply if your homeowner’s insurance wrongfully refused to pay out a claim for roof damage.
A third-party claim occurs when an insurer refuses to defend, settle, indemnify, or investigate a claim for a different party. For example, in the case above, GEICO was ruled to have acted in bad faith by refusing to provide information to the decedent’s estate (a third party).
Third-party claims are by nature much more complex than first-party claims, and may involve high-dollar, protracted legal battles such as in Harvey. However, Florida legislation is fortunately very specific about what constitutes bad faith insurance, meaning that these cases are usually more straightforward in Florida than in other states.
Florida’s Unfair Insurance Trade Practices Act lays out very specific terms for what constitutes bad faith Insurance. Under this act, insurers are obligated to handle claims in a timely and appropriate manner, keeping the insured and any involved third parties informed of the claims process. Insurers are also prohibited from denying claims without appropriate investigation, or misrepresenting facts to the insured.
What does this mean for you if you believe your insurer has acted in bad faith?
Basically, that things are the same now that they have been for years. Bad faith insurance claims are an essential part of insurance law. If you think that your insurer, or the insurer of another party, has acted in bad faith, we recommend speaking to a bad faith insurance attorney to determine if you have grounds for a claim.
About the Author:
A partner at Lawlor, White & Murphey and a distinguished personal injury lawyer, Ben Murphey tries complex disputes that include civdentil appeals, maritime and admiralty claims, wrongful death, and labor disputes. Mr. Murphey has been recognized for his excellence in the area of personal injury litigation by being rewarded with a 10/10 Avvo Rating and named a Super Lawyers “Rising Star” for the last four consecutive years (2011-2014). Mr. Murphey regularly tries cases in state and federal courts around the country, being admitted to practice before all Florida courts and the United States Court of Appeals for the 11th Circuit.