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Florida Fifth DCA reverses trial court's dismissal of plaintiffs' bad faith lawsuit against home insurer, finds that insurer's payment of policy limits established liability and damages

On March 29, 2018, in Demase v. State Farm Florida Insurance Company, No. 5D16-2390, the Florida Fifth DCA reversed a trial court’s dismissal of plaintiff homeowners’ first-party bad faith case against their home insurer. The insured homeowners had filed a claim with State Farm after sustaining suspected sinkhole damage. After State Farm did not readily acknowledge liability for their claim, the homeowners filed a civil remedy notice (“CRN”) pursuant to section 624.155, Florida Statutes (2014), alleging that State Farm engaged in bad faith insurance practices by failing to promptly and properly investigate the claim, adjust the loss, and act with due diligence and good faith to resolve and pay the claim. State Farm allowed the 60-day “cure period” to expire without paying the claim, but a few months later tendered the policy limits. The homeowners then brought the faith lawsuit based on State Farm’s failure to tender the limits within the cure period. The trial court dismissed the complaint, reasoning that it did not allege there had been a favorable resolution of an underlying civil action for insurance benefits against the insurer-whether in the form of a judgment, arbitration, appraisal, or “action on the contract.”

The Fifth DCA noted that a statutory bad faith claim under section 624.155 is ripe for litigation when there has been (1) a determination of the insurer’s liability for coverage; (2) a determination of the extent of the insured’s damages; and (3) the required notice is filed pursuant to section 624.155(3)(a). The Fifth DCA cited several previous cases, by both DCAs and federal district courts, holding that a voluntary payment by the insurer of the policy limits is a sufficient determination of the insurer’s liability and damages to allow for the filing of a bad faith action. See, e.g., Brookins v. Goodson, 640 So. 2d 110 (Fla. 4th DCA 1994); Plante v. USF&G Specialty Ins. Co., No. 03-23157CIVGOLD, 2004 WL 741382, at *4 (S.D. Fla. Mar. 2, 2004); Sabatula v. State Farm Mut. Auto. Ins. Co., No. 5:11–CV–368-OC-37TBS, 2011 WL 4345302, at *5 (M.D. Fla. Sept. 16, 2011).