How much do you know about insurance bad faith? – III

Over the course of the last week, we’ve been exploring the complex issue of insurance bad faith in the hopes of providing people with some much-needed understanding regarding the obligations owed to them by their insurers and their legal options should they fail to meet these obligations.

In today’s post, the final in this series, we’ll take a closer look at how aggrieved parties with insurance bad faith claims can seek redress under state law.

How does state law actually define insurance bad faith?

Florida defines insurance bad faith as “not attempting in good faith to settle claims when, under all the circumstances, [the insurer] could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.”

This definition covers those with both first-party bad faith and third-party bad faith claims.

Does any special procedure need to be followed when filing a claim under the statute?

Yes. As a condition to filing a claim alleging insurance bad faith, the insured/plaintiff must first provide the insurer with 60 days’ written notice of the alleged violation, meaning it will have exactly that amount of time to take the necessary remedial measures.

What happens if the insurer fails to take action within 60 days?

In the event the insurer fails to take corrective action — make payments, remedy the circumstances giving rise to the notice, etc. — the insured/plaintiff may proceed with a lawsuit.

How does the fact that third-party bad faith claims exist both via the common law and by statute come into play then?

As we touched on last time, Florida courts have long recognized the right of an insured to bring a third-party bad faith claim under the common law, but have held that this recognition does not extend to a first-party bad faith claim.

What this means is that a first-party bad faith claim can only be brought under the statute. As such, no claim actually exists unless and until the 60-day period passes with no remedial action being taken by the insurer.

Since a third-party bad faith claim can be brought via the common law and by statute, however, an insurer can’t automatically dodge a potential claim simply by acting with the 60-day timeframe, as no such restriction exists in the common law.

As illustrated by the foregoing analysis, insurance bad faith is an incredibly complex topic. As such, those with any questions or concerns should seriously meeting with a experienced legal professional as soon as possible.