What is “First Party” Bad Faith and How Do You Sue Your Own Insurance Company for Bad Faith?
“First party” bad faith is when your own insurance company does not act in good faith toward you in terms of paying or settling a claim. That might be an unreasonable claim delay, an improper interpretation of a policy term that unreasonably favors the insurer, or another bad faith action. In Florida, the law did not allow you to sue your own insurance company for bad faith until 1982 when the Florida Legislature enacted Section 624.155 of the Florida Statutes. That law is titled “Civil Remedy,” and it created bad faith lawsuits against your own insurance company, i.e. first party bad faith. This law extended the duty of an insurer to act in good faith in handling claims to its own insureds, and created consequences for an insurer acting in bad faith in the first party situation.
Before you can sue your own insurance company for bad faith in Florida, you must first give “the [Florida Department of Financial Services] and the authorized insurer …60 days written notice of the violation” of the Civil Remedy statute, that is Section 624.155(3)(a), Fla. Stat.. This notice is commonly referred to as the “Civil Remedy Notice” or “CRN.” The statute further provides that “[n]o action shall lie if, within 60 days after filing notice, the damages are paid or the circumstances giving rise to the violation are corrected.” § 624.155(3)(d), Fla. Stat.. That means the insurance company has a sixty-day window to pay the claim. The Florida Supreme Court has described this as one final opportunity “to comply with their claim-handling obligations when a good-faith decision by the insurer would indicate that contractual benefits are owed.” See Talat Enters., Inc. v. Aetna Cas. & Sur. Co., 753 So.2d 1278, 1284 (Fla.2000).
If the insurance company fails to respond to a civil remedy notice within the sixty-day window or fails to pay the claim, there is a presumption that they have engaged in bad faith. You may then file a lawsuit against the insurer for two things: 1) an action for the benefits owed to you, and 2) an action for bad faith (i.e., a violation of the Civil Remedy statute in Florida). Your bad faith case will be put on hold until you win your case for the benefits owed. In other words, you have to win your case for the benefits before the law allows you to proceed with the bad faith case. In the bad faith case, the insurance company has the burden to prove (offer evidence to prove) why it did not respond. Basically, the insurer must show why it acted in good faith on your claim.
If you win a case for bad faith in Florida, you are allowed to recover the total amount of the your, which may include any interest on unpaid benefits, reasonable attorney’s fees and costs, and any damages caused by violations of a law of this state (such as financial losses that you can show were the result of the insurer not paying the benefit they should have paid had they acted in good faith.
If you have questions about whether you have a bad faith claim for an unpaid insurance loss, call Attorney John V. Tucker at (727) 572-5000.