What is Insurance Company Bad Faith?

Many in our industry forget that insurance companies in Florida, at least in the first-party context, did not traditionally owe a duty of good faith and fair dealing. See Baxter v. Royal Indem. Co., 285 So. 2d 652, 656 (Fla. 1st DCA 1973). In fact, it was not until 1982 that the Florida legislature enacted what is now commonly called “the Bad Faith Statute.”

Under Florida Statute 624.155(1)(b)(1), a person may bring a lawsuit against an insurance company when that person is damaged by the commission of certain acts by the insurance company. The statute lists many actions by an insurance company which could result in a bad faith action some of which are:

  1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests
  2. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made
  3. Except as to liability coverages, failing to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

See § 624.155, Fla. Stat.(1)(b)(1)-(3).

Over the next few weeks, we will be discussing cases that deal with bad faith, the pre-requisites that are required before filing a bad faith action and damages that can be recovered in bad faith actions. Stay tuned!

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