Talat Enterprises, Inc. v. Aetna Cas. & Sur. Co.Talat Enterprises, Inc. v. Aetna Cas. & Sur. Co.
Philip E. Beck of Smith, Currie & Hancock LLP, Atlanta, Georgia, for Appellee.
Jeffrey M. Liggio, West Palm Beach, Florida, and P. Scott Russell, IV, of Dunlap & Russell, P.A., Jacksonville, Florida, for Academy of Florida Trial Lawyers, Amicus Curiae.
Anthony J. Russo of Butler, Burnette & Pappas, Tampa, Florida, for Nationwide Mutual Fire Insurance Company and United Services Automobile Association, Amicus Curiae.
We have for consideration Talat Enterprises, Inc. v. Aetna Casualty & Surety Co., No. 97-2327 (11th Cir. June 23, 1998) (unpublished opinion), a case in which the United States Court of Appeals for the Eleventh Circuit certified a question of Florida law to this Court. We have jurisdiction pursuant to article V, section 3(b)(6) of the Florida Constitution.
I. Background
This case stems from an April 15, 1994, fire which caused substantial damage to Billy the Kid‘s Buffet, a restaurant owned by Talat Enterprises, Inc. (Talat) and insured by Aetna Casualty and Surety Company (Aetna). The federal magistrate below set forth the relevant facts:
There is no genuine issue as to any material fact. On April 15, 1994, there was a fire at Billy the Kid‘s Buffet, a restaurant owned by Talat. After repairs, the restaurant reopened for dinner on either April 19, 1994 or April 20, 1994. At the same time, Aetna paid Talat $10,000. On April 27, 1994, the Department of Health shut down the restaurant for about thirteen days for code violations. On June 9, 1994, Talat demanded an appraisal, and appointed Ron Livingstone & Associates as its
public adjuster. On July 29, 1994, Livingstone submitted Talat‘s proof of loss for $141,704 for damage to personal property. On August 10, 1994, Livingstone submitted Talat‘s proof of loss for $291,111 for loss of business income. On September 7, 1994, Talat filed for bankruptcy under Chaрter 11 [Case No. 94-4638-BKC-6B1]. On October 21, 1994, Talat sued Aetna in Bankruptcy Court for business property and income loss, but did not join Talat‘s bad faith claim. See Fed.R.Civ.P. 18(a). On December 29, 1994, the Bankruptcy Court granted a motion to dismiss Talat‘s breach of contract suit, and required arbitration pursuant to the arbitration clause in the appraisal provision.
On February 3, 1995, the arbitrators returned an appraisal award in favor of Talat for $331,930.47—$119,007.47 for personal property and $212,923.00 for business interruption loss. On or about March 3, 1995, Aetna paid Talat $331,930.47—the total value of the appraisal award. On March 15, 1995, Talat issued statutory notification of intent to pursue a bad faith claim against Aetna pursuant to § Fla. Stat. Ann. 624.155. Sixty days after Talat‘s filing of the notice of its bad faith claim is May 16, 1995. No action lies if the “damages are paid” or “the circumstances giving rise to the violation are corrected” by May 16, 1995. See § Fla. Stat. § 624.155(2)(d). On May 23, 1995, Talat filed suit in state court for breach of a covenant of good faith and fair dealing to promptly negotiate and settle Talat‘s claim. On July 24, 1995, Aetna removed the state action to the district court. On July 27, 1995, Talat converted its Chapter 11 bankruptcy case into a Chapter 7 liquidation.
Talat Enterprises, Inc. v. Aetna Cas. & Sur. Co., 952 F.Supp. 773, 777-78 (M.D.Fla.1996) (footnotes omitted).
After removing the case to federal court, Aetna moved for summary judgment, arguing it was entitled to judgment as a matter of law under
The court granted Aetna‘s motion for summary judgment, ruling that Aetna “has timely paid ‘the damages’ and has corrected ‘the circumstancеs giving rise to the violation‘” within the meaning of
On appeal, the circuit court, finding no controlling precedent from this Court, certified the following question of state law:
If an insured suffered extra-contractual damages prior to giving its insurer written notice of a bad faith violation and the insurer paid all contractual damagеs, but none of the extra-contractual damages, within sixty days after the written notice was filed, has the insurer paid “the damages” or corrected “the circumstances giving rise to the violation,” as those terms are contemplated by
Florida Statute § 624.155(2)(d) , thereby precluding the insured‘s first-party bad faith action to reсover the extra-contractual damages?
II. Discussion
This case concerns a first-party action by an insured against its insurer for damages caused by the insurer‘s alleged bad faith in settling a fire-damage claim made under a commercial рroperty insurance policy. Although the Florida common law recognized third-party bad-faith claims, see Auto Mut. Indem. Co. v. Shaw, 134 Fla. 815, 184 So. 852 (1938), it did not recognize claims made by an insured against its own insurer for failing to act in good faith when settling a claim. See Baxter v. Royal Indem. Co., 285 So.2d 652 (Fla. 1st DCA 1973), cert. discharged, 317 So.2d 725 (Fla. 1975). If an insurer acted in bad faith in settling a claim filed by its insured, the only remedy available to the insured, in thе absence of an independent tort committed by the insurer such as fraud, was to file a breach of contract claim against its insurer and recover only those damages contemplated by the parties to the policy. See id. at 657.
In 1982, the Legislature adopted
Talat filed this action against Aetna under
Aetna argues that this provision is a cure period during which an insurer may avoid bad-faith litigаtion by paying the contractual damages owed within the sixty-day window. Thus, Aetna reasons that, because it paid the arbitration award before Talat even filed its bad-faith notice, it has paid the damages or corrected the circumstances giving rise to the violation, thereby precluding the instаnt action. Talat, on the other hand, argues that this provision is a confession period during which an insurer must pay all the extra-contractual damages caused by the alleged bad faith to avoid an action under this statute. Talat contends that Aetna‘s interpretation of the statute turns what was intеnded to be a consumer protection law into an amnesty program for bad-faith insurers.
We find United States Magistrate Judge Glazebrook‘s analysis of this issue to be correct. In granting Aetna‘s motion for summary judgment, Judge Glazebrook stated:
Aetna has timely paid “the damages” and has corrected “the сircumstances giving rise to the violation” within the meaning of Fla. Stat. Ann. § 624.155(2)(d). As a matter of law, therefore, “no action shall lie” for not attempting in good faith to settle claims. First, Talat‘s cause of action for bad
faith did not arise until February 3, 1995 when the arbitrators returned an appraisal award in favor of Talat for $331,930.47. Although § 624.155(2)(d) gave Aetna until May 16, 1995—sixty days after the filing of the statutory notice of the bad faith claim—to pay the damages or to otherwise correct the circumstances, Aetna paid Talat the full award on or about March 3, 1995. The Court rejects as unsupported Talat‘s contention that thе insurer must not only pay the claim within the sixty-day window, but must also pay all compensatory damages that flow from any delay in settling the claim. Section 624.155 does not impose on an insurer the obligation to pay whatever the insured demands.[Note 6] 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. Surely an insurer need not immediately pay 100% of the damages claimed to flow from bad faith conduct in order to avoid the chance that the insured will succeed on a bad faith cause of action. If the insurer may avoid a bad faith action only by paying in advance every penny of the damages that it faces if it loses at trial, the insurer would have no reason to pay. Furthermore, few insureds would restrict their demands to compensatory damages. There is no reason why insureds would not demand also the advаnce payment of punitive damages and attorney‘s fees. Section 624.155(2)(d) would have no effect or purpose under such an interpretation. The law does not support such an expansive and illogical reading of Fla. Stat. Ann. § 624.155(2)(d).
Aetna‘s interpretation is sound. To cure an alleged violаtion and to avoid a civil action, an insurer must pay the claim (sometimes in excess of policy limits in the third-party context) before the sixty days expire. Aetna has done so, and Fla. Stat. Ann. § 624.155(2)(d) states that no action lies. Aetna is entitled to judgment as a matter of law.
[Note 6]. Although an insurer may have a gоod reason for not wanting to settle within the sixty-day period “for the amount demanded” in order to avoid a bad faith suit, the insurer nevertheless must respond within sixty days. Imhof v. Nationwide Mutual Ins. Co., 643 So.2d 617, 619 (Fla.1994). Aetna has done far more than just respond. It has paid the full claim of $331,930.47, which included business interruption insurance for delays in repairs. Talat is not entitlеd to a double recovery.
Talat Enterprises, Inc. v. Aetna Cas. & Sur. Co., 952 F.Supp. 773, 778 (M.D.Fla. 1996).
The majority of cases that have examined the civil remedy statute support Judge Glazebrook‘s analysis. See Rodante v. Fidelity Nat. Ins. Co., 725 So.2d 1151 (Fla. 2d DCA 1998); Clauss v. Fortune Insurance Co., 523 So.2d 1177 (Fla. 5th DCA 1988). Judge Glazebrook‘s construction of
A proper construction of
1.
Section 626.9541(9), (15), or (24) ;2.
Section 626.9551 ;3.
Section 626.9705 ;4.
Section 626.9706 ; or5.
Section 626.9707 ;....
Further, the statute provided a civil remedy for any person damaged by an insurer‘s commission of any of the following:
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 honеstly toward its insured and with due regard for 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; or
3. Except as to liability coverages, failing to promptly settle claims, when the obligatiоn 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....
As we earlier noted, the civil remedy provided in subdivision (1)(b)1 wаs not in existence for first-party insureds before the adoption of the civil remedy statute. See Baxter, 285 So.2d 652. Because this statute is in derogation of the common law, it must be strictly construed. See Time Ins. Co., 712 So.2d at 393.
We find that the requirements of written notice to the Department of Insurance and the insurer are conditions precedent to bringing an action under subdivision (1)(a) or (b). Subdivision (2)(d) provides that “[n]o action shall lie if, within 60 days thereafter, the damages are paid or the circumstances giving rise to the violation are corrected.” When one reads the civil remedy statute in context and with the understanding that it is in derogation of the common law, it is plain that the Legislature intended the notice to the Department to serve as a basis for the Department to assist in the settling of claims and to monitor the insurance industry. It also is plain that the sixty-day period was a time in which the insurer could act to “cure” a violation of subdivision (1)(a) or (b) about which it had been served notice.
It naturally follows that for there to be a “cure,” what had to be “cured” is the nonpayment of the contractual amount due the insured. In the context of a first-party insurance claim, the contractual amount due the insured is the amount owed pursuant to the express terms and conditions of the policy after all of the conditions precedent of the insurance policy in respect to payment are fulfilled.
The Legislature was less than precise in its use of the word “damages” for multiple purposes throughout the legislative scheme. However,
Finally, it must be recognized that what
III. Conclusion
Accordingly, we answer the certified question in the affirmative and return the record to the United States Court of Appeals for the Eleventh Circuit.
It is so ordered.
HARDING, C.J., and SHAW, ANSTEAD, PARIENTE and LEWIS, JJ., concur.
QUINCE, J., concurs in result only.
Notes
Second, we expressly state that Blanchard is properly read to mean that the “determination of the existence of liаbility on the part of the uninsured tortfeasor and the extent of the [insured‘s] damages” are elements of a cause of action for bad faith. 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 the violation.