In Florida, bad-faith actions against insurers pursuant to Section 624.155 cannot be brought until (1) the insured files a civil remedy notice (CRN) accepted by Florida’s Department of Financial Services; and (2) the underlying breach of contract lawsuit is “resolved in the insured’s favor.” See Blanchard v. State Farm Mut. Ins. Co., 575 So. 2d 1289, 1291 (Fla. 1991). Recently, Florida’s Second Distruct Court of Appeal ruled that (1) the insured’s CRN did not require the inclusion of a specific cure amount; and (2) payment of an appraisal award by the insurer satisfied the condition precedent to the insured’s bad-faith action.
In Hunt v. State Farm Florida Ins. Co., 2013 Fla. App. LEXIS 5528 (Fla. 2d Dist. Ct. App. Apr. 5, 2013), the insured, Hunt, sustained sinkhole damage in July 2006. Hunt disagreed with State Farm’s damage estimate, and in April 2007 sued for breach of contract and filed a CRN, which was accepted by the Department of Financial Services. The court granted State Farm’s motion for appraisal and abated the lawsuit pending an appraisal award. In October 2008, an appraisal award of $162,571.61 was entered in Hunt’s favor, and State Farm paid that amount. Following the payment of the appraisal award, Hunt voluntarily dismissed his breach of contract lawsuit but subsequently filed a bad-faith action. State Farm moved for summary judgment, arguing that Hunt had not obtained a “judgment” in the first lawsuit, which was a condition precedent to maintaining his bad faith action. The Second DCA disagreed, ruling that the payment of the appraisal award satisfied the “favorable resolution” requirement under Blanchard. Noting that prior courts have held that “a judgment is not the only way of obtaining a favorable resolution,” and that arbitration awards have previously established the insured’s condition precedent, the court concluded that an appraisal award similarly satisfied the validity of Hunt’s claim.
The Second DCA’s decision in Hunt provides the latest in a series of cases in Florida on the issue of what constitutes a “favorable resolution” to maintain a bad faith action. As discussed in our earlier blog entries, the Fourth DCA recently issued conflicting opinions on this very issue. Those courts that consider an appraisal award a “favorable resolution” do not appear to recognize the differences between appraisal, which resolves valuation only, and arbitration, which more fully addresses the coverage issues in dispute. Those Florida courts that have reached the opposite conclusion refuse to allow an insured to use a preemptive, early demand for appraisal as a basis for a bad faith claim.
It should be noted that State Farm also claimed that Hunt’s CRN was invalid because there was no specified “cure” amount claimed in his notice. The Second DCA disagreed, ruling that the plain language of Section 624.155 does not require a specific amount to be included in the notice, and that State Farm was otherwise sufficiently apprised of the assertion made by Hunt.