In one of our previous blog entries, we provided a brief overview of insurance bad faith, including some examples of certain situations that strongly suggest bad faith claims handling on the part of your insurance provider. Insurance bad faith can be addressed in two distinct categories: first-party claims and third-party claims. But in both first-party and third-party claims, the insurance company is contractually obligated to pay benefits to their policyholder for covered claims.
First-Party Bad Faith Claims
First-party insurance covers the policyholder for those damages or losses sustained to their person or property.
Examples of first-party insurance include:
- Health insurance;
- Medical payment coverage in a homeowner’s policy; and
- Fire, flood, tornado, or earthquake insurance.
A first-party insurance claim involves the policyholder making a claim against their insurance company. Thus, they are a first-party claimant of the insurance company.
Florida statutory law establishes a cause of action for first-party insurance bad faith for the insurer’s failure to “attempt in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fair and honestly towards its insured and with due regard for her or his interests…”
Third-Party Bad Faith Claims
Unlike first-party insurance, third-party insurance covers the policyholder with regard to their liability if he or she is sued by another person for injury or damage sustained as a result of the policyholder’s actions.
Types of third-party insurance include:
- Liability insurance coverage under an automobile or homeowner’s policy;
- Professional liability (i.e. malpractice) insurance; and
- Commercial liability insurance.
Like first-party insurance, third-party insurance compensates the policyholder for the amount of damages owed. However, many third-party insurance policies establish a contractual duty for the insurance company to defend the policyholder during the litigation process. The insurance company selects an attorney to represent the policy holder and pay for their fees.
Statutory Bad-Faith. Under Florida’s Unfair Insurance Trade Practices Act, an insurance company is held liable for unfair claim settlement practices with regard to specific instances of misconduct that amount to bad-faith.
- Failing to acknowledge or promptly respond to communication;
- Denying claims without doing a reasonable investigation; and
- Denying claims without articulating any reasoning for doing so.
Common Law Bad Faith. Florida courts have held that a third-party claimant may hold an insurance company liable for excess damages against its policyholder if the insurer breaches its duty of good faith to the policyholder. This includes a breach of the duty to defend the policy holder against a third-party claimant.
Pre-Filing Requirements for Statutory Bad Faith Claims
A plaintiff asserting a statutory claim for insurance bad faith must first provide 60 days written notice of an alleged violation of the statute on the part of the insurance company. Upon receiving notice of the allegations, the insurance company has an opportunity to “cure” the purported bad faith violation by paying the plaintiff’s damages.
If the insurance company cures the violation within the 60-day period, then the bad faith claim goes away. If the insurance company fails to respond to the plaintiff’s notice of bad faith violation on time, the court will treat the allegations of the notice as true that the insurer is liable for bad faith. As a result, the insurance company has the burden of rebutting the notice’s allegations in order to avoid liability.
Consult an Experienced Florida Insurance Claim Lawyer
Insurance law can be a tricky legal area to navigate, even for seasoned attorneys. Proficiency in insurance law takes years of dedicated practice with a sharper mind than the average competition. Therefore, you should consult a Florida insurance claim lawyer with a sophisticated understanding of Florida insurance law. At the Morgan Law Group, P.A., our talented insurance claim attorneys have more than 25 years of collective experience handling insurance bad faith lawsuits. We are dedicated to helping you recover the benefits to which you are entitled under your insurance policy.