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Demase v. State Farm Florida Insurance Co.

Florida Court of Appeals, Fifth District

March 29, 2018



          Appeal from the Circuit Court for Hernando County, Richard Tombrink, Jr., Judge.

          Nancy A. Lauten and George A. Vaka, of Vaka Law Group, Tampa, and Kelly L. Kubiak, of Merlin Law Group, Tampa, for Appellants.

          Lee Craig and Matthew J. Lavisky, of Butler Weihmuller Katz Craig LLP, Tampa, for Appellee.

          ORFINGER, J.

         Thomas and Joanne Demase appeal a final order dismissing their bad faith lawsuit against their insurer, State Farm Florida Insurance Company, with prejudice. They argue that the trial court erred in ruling that they could not maintain a bad faith action without alleging that there had been a favorable resolution of an underlying civil action for insurance benefits against State Farm, whether in the form of a judgment, arbitration, appraisal, or action on the contract. We agree and reverse the order of dismissal.

         The Demases' home was insured under an insurance policy issued by State Farm. In October 2009, their home sustained suspected sinkhole damage, which they reported to State Farm. State Farm hired Geohazards, Inc., which confirmed the existence of sinkhole activity at the property and recommended certain repairs. The Demases performed the recommended repairs, resulting in further damage to their home. Geohazards then re-inspected the home and made additional recommendations. In August 2012, a neutral evaluator agreed there was sinkhole activity at the property and recommended further repairs. The Demases agreed to proceed with the neutral evaluator's recommended repairs under protest. However, in April 2013, State Farm hired MCD of Central Florida to inspect the property. MCD opined that there was no sinkhole activity affecting the Demases' property. When the Demases persisted with their claim for insurance benefits, State Farm demanded additional documentation, inspections, and examinations under oath. The Demases complied with all of these demands.

         On August 27, 2014, the Demases served 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. The Demases demanded the immediate tender of "all insurance monies due and owing . . . that would reasonably place [them] back to their pre-loss condition." The Department of Financial Services accepted the CRN on August 27, 2014, which began a sixty-day period in which State Farm could cure its alleged wrongful conduct. See § 624.155(3)(a), Fla. Stat. (2014). While State Farm paid nothing during the sixty-day cure period, on April 10, 2015, it conceded that the Demases' home could not be repaired and tendered the policy limits.

         The Demases then brought a first-party bad faith lawsuit against State Farm, asserting various purported violations of sections 624.155(1)(b)1. and 626.9541 (1)(i), Florida Statutes (2014). State Farm moved to dismiss the complaint, relying on Blanchard v. State Farm Mutual Automobile Insurance Co., 575 So.2d 1289, 1291 (Fla. 1991), which held that "an insured's underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue." State Farm argued that before a bad faith claim could be asserted, the Demases were required to obtain an appraisal award, an arbitration award, or a judgment in an underlying breach of contract case, which they did not do. The Demases responded that a first-party bad faith action ripens when two conditions have been satisfied: (1) the insurer raises no defense that would defeat coverage; and (2) the actual extent of the insured's loss has been determined. They submitted that State Farm's payment of the insurance policy limits after the expiration of the sixty-day cure period found in section 624.155 satisfied those requirements, and was the "functional equivalent of a determination of liability-in other words . . . the payment established that [they] had a valid claim."

         The trial court dismissed the Demases' 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 Complaint also fails to allege that the Defendant's liability for coverage and the extent of damages has been determined."

         This Court reviews orders granting motions to dismiss de novo. E.g., Wallace v. Dean, 3 So.3d 1035, 1045 (Fla. 2009). In assessing the adequacy of the pleading of a claim, we take the factual allegations in the complaint as true and draw all reasonable inferences in favor of the pleader. Jordan v. Nienhuis, 203 So.3d 974, 976 (Fla. 5th DCA 2016); Ray Coudriet Builders, Inc. v. R.K. Edwards, Inc., 157 So.3d 484, 485 (Fla. 5th DCA 2015).

         As we shall explain, we hold that an underlying action on the insurance contract is not required for there to be a determination of the insurer's liability and the extent of the damages as a prerequisite to filing a statutory bad faith action. Instead, an insurer's payment of an insurance claim after the sixty-day cure period provided by section 624.155(3) constitutes a determination of an insurer's liability for coverage and extent of damages under section 624.155(1)(b) even when there is no underlying action.

         A cause of action for first-party bad faith did not exist at common law. QBE Ins. Corp. v. Chalfonte Condo. Apartment Ass'n, 94 So.3d 541, 546 (Fla. 2012). In 1982, the Florida Legislature created a first-party bad faith cause of action by enacting section 624.155, Florida Statutes, thereby imposing a duty on insurers to settle their policyholders' claims in good faith. Ch. 82-243, § 9, Laws of Fla. The statute was "designed and intended to provide a civil remedy for any person damaged by an insurer's conduct." QBE Ins. Corp., 94 So.3d at 546. Specifically, section 624.155(1)(a) provides that "[a]ny person may bring a civil action against an insurer when such person is damaged" by a violation by the insurer of certain statutory provisions, including section 626.9541(1)(i), which prohibits unfair methods of competition and unfair and deceptive trade practices regarding claim settlement practices. Section 624.155(1)(b)1. gives an insured a civil remedy against an insurer for "[n]ot 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." The damages recoverable by the insured in a bad faith action are those amounts that are the reasonably foreseeable consequences of the insurer's bad faith, which include, but are not limited to, interest, court costs, reasonable attorney's fees, and, in appropriate cases, punitive damages. § 624.155(4), (5), (8), Fla. Stat. (2014).

         As a condition to bringing such a bad faith action, Florida's Department of Financial Services and the insurer must be given sixty days' written notice of the claim. See § 624.155(3)(a), Fla. Stat. (2014). "The sixty-day window is designed to be a cure period that will encourage payment of the underlying claim, and avoid unnecessary bad faith litigation." Talat Enters., Inc. v. Aetna Cas. & Sur. Co., 753 So.2d 1278, 1282 (Fla. 2000) (citation omitted). This cure period allows the insurer "a final opportunity 'to comply with their claim-handling obligations when a good-faith decision by the insurer would indicate that contractual benefits are owed.'" Fridman v. Safeco Ins. Co. of Ill., 185 So.3d 1214, 1220 (Fla. 2016) (quoting Talat Enters., 753 So.2d at 1284). "[I]f an insurer fails to respond to a civil remedy notice within the sixty-day window, there is 'a presumption of bad faith sufficient to shift the burden to the insurer to show why it did not respond.'" Id. (quoting Imhof v. Nationwide Mut. Ins. Co., 643 So.2d 617, 619 (Fla. 1994), receded from in part on other grounds, State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So.2d 55, 63 (Fla. 1995)). Hence, a statutory bad faith claim under section 624.155 is ripe for litigation when there has been (1) a determination of the insurer's ...

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