• Bad-Faith Action Becomes Ripe Following Appraisal Award
  • February 20, 2015
  • Law Firm: Butler Weihmuller Katz Craig - Tampa Office
  • Cammarata v. State Farm Florida Ins. Co., No. 4D13-185 (Fla. 4th DCA Sept. 3, 2014)

    Significance:

    Florida's Fourth District Court of Appeal held that an insured can satisfy one of the conditions precedent to a first-party bad-faith action by getting an appraisal award. Previous court decisions suggested that an insured had to bring a breach of contract action and prevail on it before a bad-faith action can accrue. In Cammarata, the court clarified that liability for coverage and the extent of damages, not the insurer's liability for breach of contract, must be determined before a bad-faith action can become ripe. The court held that the settlement of the insureds' property-damage claim in the appraisal process determined the existence of liability and the extent of damages, thereby satisfying the necessary prerequisite to filing a bad-faith claim.

    Facts:

    In October 2005, the insureds sustained damages to their home as a result of Hurricane Wilma. Nearly two years later, in September 2007, the insureds filed a claim for benefits under their homeowners' policy. In October 2007, the insurer notified the insureds that it had inspected their home, estimated the amount of their damages to be lower than the policy deductible, and determined that it owed no payment to them as a result.

    The insureds requested that the insurer participate in the policy's appraisal process. The insureds' appraiser submitted a damage estimate that was higher than the policy deductible. The insurer's appraiser submitted a damage estimate that was lower than the policy deductible. The insurer then filed a petition requesting the court to appoint a neutral umpire pursuant to the policy. Ten days later, the insureds also filed a petition requesting the court to appoint a neutral umpire pursuant to the policy. The court then appointed a neutral umpire, who issued a damage estimate in an amount lower than the estimate prepared by the insureds' appraiser but higher than the estimate prepared by the insurer's appraiser and higher than the policy deductible.

    The insurer paid to the insureds the amount of the umpire's damage estimate minus the policy deductible. The circuit court entered an order dismissing with prejudice the parties' petitions to appoint a neutral umpire.

    After the trial court entered the agreed order dismissing with prejudice the parties' petitions to appoint a neutral umpire, the insureds filed their action against the insurer for not attempting in good faith to settle their claim.

    The trial court determined that the bad-faith action was premature because the insureds had not prevailed on their breach of contract action yet. The Fourth District Court of Appeal reversed.

    Issue:

    The court addressed the issue of whether the trial court erred in finding that because the insurer's liability for breach of contract had not been determined, the insureds' first-party bad-faith action was not ripe.

    Holding:

    The court held that an insurer's liability for coverage and the extent of damages, and not an insurer's liability for breach of contract, must be determined before a first-party bad-faith action becomes ripe.

    Analysis:

    The court's decision is based on Florida Supreme Court case law holding that an insured's underlying first-party action for insurance benefits against an insurer must be resolved favorably to the insured before the cause of action for failing to settle the claim in good faith can accrue. Blanchard v. State Farm Mut. Auto. Ins. Co., 575 So. 2d 1289, 1291 ("Absent a determination of the existence of liability ... and the extent of the [insured's] damages, a cause of action cannot exist for a bad faith failure to settle.").

    In reaching its decision, the Fourth District receded from its opinion in Lime Bay Condo. Inc. v. State Farm Florida Ins. Co., 94 So. 3d 698 (Fla. 4th DCA 2012) (where the court held that the existence of liability had not yet been determined despite a post-suit appraisal award because the breach of contract action was still pending). The court stated that it is compelled to recede from Lime Bay to the extent that case held that an insurer's liability for breach of contract must be determined before a bad-faith action becomes ripe, even though the insurer's liability for coverage and the extent of the insured's damages already have been determined by an appraisal award favoring the insured.

    The Fourth District expressly adopted its holding in Trafalgar at Greenacres, Ltd. v. Zurich American Ins. Co., 100 So. 3d 1155, 1158 (Fla. 4th DCA 2012), where the court held that an appraisal award (whether obtained prior to a lawsuit or during a lawsuit) satisfies the condition precedent of a "favorable resolution" under Blanchard, 575 So. 2d 1289.