Demase v. State Farm Florida Ins. Co.Demase v. State Farm Florida Ins. Co.
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.
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
The Demases then brought a first-party bad faith lawsuit against State Farm, asserting various purported violations of
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
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
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
In Blanchard, the United States Court of Appeals for the Eleventh Circuit asked the Florida Supreme Court the following question: “Does an insured‘s claim . . . under section 624.155(1)(b)(1)., Florida Statutes, for allegedly failing to settle the . . . claim in good faith accrue before the conclusion of the underlying litigation for the contractual . . . benefits?” 575 So. 2d at 1290. The supreme court answered that the insured must obtain the favorable resolution of the underlying first-party action for insurance benefits before the insured can sue for bad faith. Id. 1291. Although Blanchard refers to a favorable resolution of an “underlying first-party action,” “no language in Blanchard expressly states that an insured must have filed any breach of contract action before a bad faith claim accrues.” Cammarata, 152 So. 3d at 610.
In Vest, the supreme court clarified Blanchard and ascribed the “underlying first-party action” language to the procedural context in which the Blanchard case arose, stating:
Blanchard arose in the context of a certified question arising out of an issue as to whether the failure to pursue a bad-faith action for violation of section 624.155(1)(b)1[.] in an action for breach of the underlying insurance contract for nonpayment of benefits was the improper splitting of a cause of action. We held that it was not. Our decision in that case had to do with the timing of the bringing of causes of actions and not as to what
claims could be pursued when a claim for bad faith ripened.
753 So. 2d at 1275; see also Cammarata, 152 So. 3d at 610 (attributing “underlying first-party action” statement to Blanchard‘s “procedural context“). The Vest court then held that the Blanchard prerequisites are properly read as conditions that the plaintiff must establish before asserting a bad faith claim. 753 So. 2d at 1275. “Once those elements exist, there is no impediment as a matter of law to a recovery of damages for violation of section 624.155(1)(b)1[.] dating from the date of a proven violation.” Id. The court concluded that “[w]e continue to hold in accord with Blanchard that bringing a cause of action in court for violation of section 624.155(1)(b)1[.] is premature until there is a determination of liability and extent of damages owed on the first-party insurance contract.”1 Id. at 1276.
In Vest, the supreme court cited with approval the fourth district‘s decision in Brookins v. Goodson, 640 So. 2d 110 (Fla. 4th DCA 1994), disapproved of in part on other grounds by Laforet, 658 So. 2d at 62, which held that payment of the policy limits by an insurer was the “functional equivalent” of an allegation that there has been a final determination of the insurer‘s liability and damages. The supreme court described the issue in Brookins as “whether a settlement constituted the ‘determination of damages’ required by Blanchard . . . .” Vest, 753 So. 2d at 1273. It then quoted the following language from Brookins with approval:
The supreme court has recently held that to state a cause of action for first party bad faith there must be an allegation that there has been a determination of the insured‘s damages. Imhof v. Nationwide Mut. Ins. Co., 643 So. 2d 617 (Fla. 1994). The court did not, however, require that the damages be determined by litigation, that there be an allegation of a specific amount of damages or that the damages be in excess of the policy limits. The court was not faced with the circumstance presented here where the policy limits are subsequently tendered by the insurer. The insured in Imhof received an award of damages through arbitration of an amount less than the policy limits. The amount or extent of damages was held not to be determinative of whether an insured could bring a first party bad faith claim; the purpose of the allegation concerning a determination of damages was to show that “Imhof had a valid claim.” Id. at 618.
We hold that the payment of the policy limits by the insurer here is the functional equivalent of an allegation that there has been a determination of the insured‘s damages. It satisfies the purpose for the allegation-to show that the insured had a valid claim.
. . . .
Neither in Blanchard nor more recently in Imhof does the supreme court suggest that the required resolution of the insured‘s underlying claim must be by
trial or arbitration . . . . However, as noted in Blanchard, a resolution of some kind in favor of the insured is a prerequisite. There was a favorable resolution here.
Vest, 753 So. 2d at 1273-74 (quoting Brookins, 640 So. 2d at 112-13) (emphasis added). Based on Vest‘s clarification of Blanchard and its reliance on Brookins, the fourth district court in Cammarata 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 bad faith action becomes ripe. To paraphrase Vest, the determination of the existence of liability and the extent of the insured‘s damages are the conditions precedent to a bad faith action, along with the notice requirement of
section 624.155(3)(a), Florida Statutes (2011) . Those first two conditions may be established when a settlement determines the existence of liability and the extent of the insured‘s damages. As stated in Brookins, and as approved in Vest, that settlement does not require the damages to be determined by litigation.
Hence, litigation is not the only means for an insured to obtain the determination of liability and the full extent of his or her damages.2 See, e.g., Trafalgar at Greenacres, Ltd. v. Zurich Am. Ins. Co., 100 So. 3d 1155, 1158 (Fla. 4th DCA 2012) (“A judgment on a breach of contract action is not the only way of obtaining a favorable resolution.“); see also Cammarata, 152 So. 3d at 613 (en banc) (“[W]e stand by our numerous prior opinions holding that, where the insurer‘s liability for coverage and the extent of damages have not been determined in any form, an insurer‘s liability for the underlying claim and the extent of damages must be determined before a bad faith action becomes ripe.“) (second emphasis added); Hunt v. State Farm Fla. Ins. Co., 112 So. 3d 547, 549 (Fla. 2d DCA 2013) (reiterating that judgment on breach of contract action is not only way of obtaining favorable resolution).
An insured may obtain a determination of the insurer‘s liability and the extent of their damages by litigation, arbitration, settlement, stipulation, or the payment of full policy limits. Accord Fridman, 185 So. 3d at 1224 (“Certainly, the insured is not obligated to
obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration, or stipulation before initiating a bad faith cause of action.“); Vest, 753 So. 2d at 1274 (implicitly adopting Brookins court‘s reasoning that payment of policy limits by insurer is evidence of validity of bad faith claim); see Plante v. USF&G Specialty Ins. Co., No. 03-23157CIVGOLD, 2004 WL 741382, at *4 (S.D. Fla. Mar. 2, 2004) (stating that fact that supreme court in Vest reaffirmed fourth district‘s decision in Brookins suggested
We read Blanchard, as clarified by Vest, to require only a determination of liability and a determination of damages before suing for bad faith. See Fox v. Starr Indem. & Liab. Co., No. 8:16-CV-3254-T-23MAP, 2017 WL 1541294, at *5 (M.D. Fla. Apr. 28, 2017) (“Under Trafalgar, Hunt, and Cammarata, a plaintiff insured need not allege success on a breach-of-contract claim to sue the defendant insurer for bad faith.“); Brookins, 640 So. 2d at 113 (“The bad faith statute imposes no requirement of a prior judgment as a condition precedent to a bad faith claim.“). As happened here, the payment of the full policy limits after the sixty-day cure period provided in
favorable resolution for insureds even though amount was less than policy limits and amount that insureds initially demanded).
For these reasons, we conclude the Demases’ amended complaint adequately states a cause of action. The order of
REVERSED and REMANDED.
WALLIS, J. and PERKINS, T., Associate Judge, concur.