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Fourth District Court of Appeals Finds for Homeowners in Bad Faith Action

Bad faith in property insurance claims is widespread even though insurers have an obligation to settle claims efficiently and appropriately. Now, a Fourth District Court of Appeals has made it easier to be successful in a claim for bad faith.

Florida homeowners, Joseph and Judy Cammarata, sustained damage to their home as a result of Hurricane Wilma in 2005. Approximately two years later, they filed a claim with their property insurance company, State Farm Florida Insurance. Within a month, State Farm sent a representative to inspect the damage and give an estimate. The estimate came back to be less than the homeowners' deductible and the insurance company let them know that they would not be paying out on the claim. About six months later the couple requested that State Farm take part in an appraisal process that was part of their policy. State Farm willingly participated and both sides hired an appraiser. The homeowners' appraiser estimated the damage to be higher than the deductible and the insurance company's appraiser estimated that the damage was lower than the deductible. State Farm then asked a Florida court to appoint a neutral umpire to settle the dispute, which it did. The umpire found the damage to be in an amount higher than the deductible and State Farm issued a pay out to the homeowners.

The couple then brought a bad faith action against State Farm. The lower court dismissed the action based on 2012 case law providing that it must be found that the insurer was liable for breach of contract before a bad faith claim can be decided. This rule was found to apply even in the case that the liability of the insurer and the amount of damages had already been decided. The Fourth District Court of Appeals overturned this decision and refused to follow this precedent. The court found for the insureds and held that the insurance company did not have to be found liable for breach of contract in order for a bad faith claim to be adjudicated, but, that the issues of liability and amount of damages must be previously decided.

Accordingly, currently under Florida law, an insured only needs a favorable resolution in order to proceed with a bad faith lawsuit.

Pekar Law is a Tampa, Florida property insurance law firm. If you are facing a property insurance matter, call (813) 712-8762 for a free initial consultation.

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