• Florida Supreme Court Rules that Citizens Property Insurance Corporation Cannot be Sued for Bad Faith
  • June 1, 2015
  • Law Firm: Conroy Simberg - Hollywood Office
  • On May 14, 2015, the Florida Supreme Court issued its opinion in Citizens Property Insurance Corp. v. Perdido Sun Condominium Association, Inc., Case No. SC14-185, ruling that Citizens, the state-created entity that provides property insurance, is not liable for statutory first-party bad faith claims, overruling the contrary holding by the First District Court of Appeal.

    After prevailing in a breach of contract action against Citizens, its insured, Perdido Sun Condominium Association, sued Citizens for statutory bad faith, contending that Citizens (1) refused to pay the full amount owed to Perdido Sun under the insurance policy; (2) refused to take part in the required appraisal process and instead used that process in an attempt to forestall litigation; (3) delayed payment of the appraisal award and improperly attempted to condition payment of the award upon the execution of a universal release; and (4) engaged in a pattern and practice of seeking to avoid or delay full settlement of claims.

    Citizens moved to dismiss the bad-faith claim on the basis of Fla. Stat. § 627.351(6)(s)1., which provides immunities from liability for Citizens. Perdido Sun opposed the motion, arguing that the statute contains an applicable exception to immunity if Citizens committed a “willful tort.” The statute and exception are as follows:

    There shall be no liability on the part of, and no cause of action of any nature shall arise against, any assessable insurer or its agents or employees, the corporation or its agents or employees, members of the board of governors or their respective designees at a board meeting, corporation committee members, or the office or its representatives, for any action taken by them in the performance of their duties or responsibilities under this subsection. Such immunity does not apply to:

    1. Any of the foregoing persons or entities for any willful tort[.]

    The circuit court dismissed the suit and on appeal, the First District reversed, holding that Citizens was not immune from bad faith suits. The First District determined that bad faith is a “willful tort” and therefore, Citizens could be sued for statutory bad faith under Fla. Stat. § 624.155. In its opinion, however, the First District certified the following question to the Florida Supreme Court for resolution:

    WHETHER THE IMMUNITY OF CITIZENS PROPERTY INSURANCE CORPORATION, AS PROVIDED IN SECTION 627.351(6)(s), FLORIDA STATUTES, SHIELDS THE CORPORATION FROM SUIT UNDER THE CAUSE OF ACTION CREATED BY SECTION 624.155(1)(b), FLORIDA STATUTES[,] FOR NOT ATTEMPTING IN GOOD FAITH TO SETTLE CLAIMS?

    The First District also certified conflict with a decision of the Fifth District Court of Appeal, Citizens Property Insurance Corp. v. Garfinkel, 25 So. 3d 62 (Fla. 5th DCA 2009).

    The Florida Supreme Court addressed the issue as one of statutory construction in order to determine the intent of the Legislature. The court found no support for the argument that the Legislature intended for Citizens to be liable for a breach of the duty to act in good faith by allowing its policyholders to bring a statutory first-party bad faith cause of action. Although the Legislature codified Citizens’ duty to handle claims in good faith, Fla. Stat. § 627.351(6)(s)2., the Legislature did not list statutory first-party bad faith claims as one of the exceptions to Citizens’ immunity. In fact, the Legislature chose to immunize Citizens for “any action taken by [it] in the performance of [its] duties or responsibilities under . . . subsection [627.351(6)(s)],” which necessarily includes a breach of the duty of good faith.

    In addition to the foregoing analysis, the court disagreed with the First District’s conclusion that the statutory cause of action for first-party bad faith is a tort or specifically a “willful tort.” In reaching this conclusion, the court quoted from the Fifth District’s decision in Garfinkel, which had reviewed the history of the bad-faith cause of action. Third-party bad faith claims, which were recognized by the common law, were based on the fiduciary nature of the insurance carrier’s relationship with the insured. The courts had held that the insurance carrier was required to act in good faith to negotiate a settlement for the benefit of its insured, and not to protect its own interests alone. The Legislature, however, created a first-party bad faith cause of action which did not exist at common law when it the enacted § 624.155 in 1982. Thus, as the Fifth District stated in Garfinkel, 25 So. 3d at 68-69, statutory first-party bad faith causes of action “now exist in Florida not because they are torts, but because they are a statutory cause of action. Accordingly, a first-party bad faith claim cannot be wedged into the statutory exception for willful torts because it is not a tort of any variety.” Nevertheless, the Florida Supreme Court noted that, although bad faith is not a “willful tort,” it can be elevated to such by “egregious and outrageous actions” which were not alleged by Perdido Sun.

    We hope the foregoing has been informative. Please do not hesitate to contact the attorneys at Conroy Simberg with any questions you may have about this case or its effect on any cases which you may have pending.