Residents of Florida understand that insurance provides a safety net when our homes and businesses are damaged. Floridians are very much aware of the significant premiums paid every year for the insurance to protect against the risk of sudden and unexpected damage. Unfortunately, many insurance companies place their own profits over their premium-paying customers when it is time to pay valid and necessary claims.
In Florida, there are two different types of legal protections for policyholders dealing with an improperly handled claim. The first pertains to the penalties and fees that you are owed when claims are not paid timely. The second provides much stiffer penalties when the insurer has acted in bad faith. As a policyholder dealing with your claim, it is important for you to understand your rights and what you are entitled to with your claim.
Understanding the Terminology
As a first step, it is important to understand the critical terminology and phrases used with an insurance claim.
First-Party Insurance Claim: This is a claim that you make against your insurance company.
Third-Party Insurance Claim: This is a claim you make against another person or business’s insurance company.
Proof of Loss: This is a form you provide to the insurance company that states the amount of money you believe you are owed.
Homeowners Bill of Rights
Florida has a mandatory Bill of Rights that insurance carriers must follow. These requirements include the following 7 guidelines:
- Receive an acknowledgment of your claim from the insurance company within 14 days of your initial communication with them.
- Receive from the insurance company upon written request confirmation that your claim is covered in full, partially covered, denied, or that it is being investigated within 30 days of submitting a complete proof-of-loss statement.
- Receive full or partial payment for your claim or a denial of your claim within 90 days of filing the claim.
- Receive payment of interest on your claim if the insurance company does not pay or deny your claim within 90 days of filing.
- Receive free mediation of a disputed claim by the Florida Department of Financial Services.
- Receive neutral evaluation of a disputed claim that involves sinkhole damage covered by your policy.
- Receive free assistance from the Florida Department of Financial Services for any questions you may have about your claim.
Many insurers require you to submit claim documents and proof of loss with certain forms. Insurance companies must provide you with correct forms along with clear instructions.
Proof of loss is an important item in the insurance claim process. Once you provide a proof of loss to your insurer, it must start its investigation within 10 days.
Entitlement to Attorney’s Fees
Florida Statutes 627.428 and 627.70152 provide a procedure for recovering attorney’s fees when an insurance claim is improperly delayed, denied, or underpaid insurance claims. To recover attorney’s fees, the insured needs to obtain a judgment or settlement of additional money after filing a lawsuit.
Attorney Fee Requirements for Property Claims
There have been some significant changes in how attorney’s fees are awarded in property insurance claims. In 2021, the Florida Legislature passed Florida Statute 627.70152 which created an additional requirement for recovering attorney’s fees in property damage claims. To recover attorney fees and costs, the policyholder is required to file a formal notice with Florida’s Chief Financial Officer 10-days before filing suit. The notice must include the following information:
- The alleged acts or omissions of the insurer giving rise to the suit. This may include the reason a claim was denied, underpaid, or simply delayed.
- If the claim has been denied, the insured must provide an estimate of damages if known.
- If the notice is provided because the insurer has underpaid the claim or failed to timely accept or deny coverage, the notice needs to state the amount of money that is in dispute as well as itemized damages, attorney fees, and costs.
Once the insurance company receive the pre-suit notice, it must act on it within 10 business days. For denied claims, the law requires the insurance company to state in writing one of three thing: (1) accept coverage; (2) deny coverage; or (3) assert the right to re-inspect the property. If the insurance company asserts the right to reinspect the property, it must complete the reinspection within 14-days.
In underpaid or delayed claims, the insurance company must respond to the pre-suit notice within 10 business days by either making a settlement offer or asserting the right to appraisal.
The new law also includes limitations on the attorney’s fees that may be recovered. These limitations can be boiled down to the following three scenarios:
- If the policyholder recovers a judgment or settlement that is less than 20% above the insurance company’s offer, no attorney’s fees may be recovered. For example, let’s say you make a pre-suit demand of $100,000.00 and the insurance company responds with a $50,000.00 offer. If you only recover $55,000.00 at trial, you would not be entitled to attorney fees and costs because you only recovered 10% more than the insurance company’s offer.
- The second scenario is when the policyholder recovers between 20% and 50% of the insurance company’s offer. In that scenario, you can recover the percentage of attorney’s fees above the insurance company’s offer. For example, the policyholder offers $100,000.00 and the insurance company responds with a $50,000.00 offer. If the policyholder recovers $75,000.00 at trial, that would be 50% of the insurance company’s pre-suit offer. In that case, the policyholder could only recover one-half of its fees and costs.
- Finally, if the policyholder recovers more than 50% of the insurance company’s offer, he or she can collect all attorney fees and costs.
Florida Statute 627.70152 has significantly reduced a policyholder’s ability to be made completely whole. Sadly, it is the insurance company’s refusal to provide the coverage owed that forces the policyholder to hire an attorney in the first place. The new law requires the insurance company to offer less than half of what is owed for the policyholder to recover fair value on the claim. Still, from our experience, insurers often significantly underpay claims, and it is worth fighting back to recover fair value on your loss.
Attorney Fees in Non-Property Cases
Florida Statute 627.70152 only applies to property insurance claims. The longstanding attorney fee laws still apply to all other types of claims including business income loss, liability, E&O, life insurance, disability insurance, and much more. In these cases, a policyholder may recover all attorney fees and costs if the claim was improperly denied, underpaid, or delayed.
Statutory Bad Faith – First-Party Claims
Florida Statute 624.155 creates a legal claim that a policyholder can bring against its insurance company for bad faith. The law also comprehensively defines what may be considered bad faith in Florida. Bad faith conduct by an insurance company may include:
- Making a misrepresentation of fact to the claimant with the intent of offering a less favorable settlement.
- Failure to investigate claims in a timely manner, or denying a claim without appropriate investigation.
- Failure to communicate with the claimant in a timely manner.
- Failure to notify the claimant of additional information needed to investigate a claim, or to explain why this information is required.
- Failure to offer a reasonable explanation, in writing, of why a claim has been denied or only partially paid.
- Attempting to settle or pay out a claim based on an application that has been altered without the knowledge of the claimant.
The legal duties stated in Florida Statute 624.155 have been interpreted by Courts in hundreds of cases. Importantly, an insurance company owes an obligation to place the interests of its policyholder above its own interests. It must constantly treat a claimant fairly and not cause any unnecessary harm. An insurance company that acts deceptively, makes misrepresentations, or is dishonest, is susceptible to being penalized for acting in bad faith.
Courts have held that an insurance company acts in bad faith when it fails to initiate settlement negotiations once liability becomes clear. In other words, an insurance company cannot sit idly by forcing its customers to prosecute their claims. The insurance company must actively investigate the claim to seek coverage. Once liability becomes clear, the insurance company must timely settle the undisputed portions of the claim.
Florida courts use a totality of the circumstances test to determine if an insurance company acted in bad faith. In assessing the insurance company’s conduct, courts may consider:
- Did the insurance company act in a prompt or reasonable manner.
- Did the insurance company cause any harm to the policyholder.
- Did the insurance company ignore legal authority that supported coverage.
- Did the insurance company diligently investigate the facts related to insurance coverage.
Damages for First-Party Bad Faith
Insurance companies that act in bad faith may owe significantly more in damages. Insurance claims that do not involve bad faith pay the insured the amount owed under the policy plus attorney’s fees. Florida law permits an insured to seek significantly more including the following categories of damages:
- Policy Damages: You are entitled to recover the money that was initially owed to you under your insurance policy.
- Consequential Property Damages: Property policies include limits on the amount that you may recover for various coverages including dwelling, personal property, and loss of use. However, these limits do not apply if the insurance company has acted in bad faith. Instead, the insurance company may be forced to pay above the policy limits to cover items that were damaged or to pay extended additional living expenses.
- Consequential Damages: A policyholder that has been a victim of bad faith may also recover any consequential damages that are related to the insurance company’s conduct. For example, if the delay in resolving your claim caused economic loss or damage to a business, these damages may be recovered because they are directly related to the insurance company’s bad acts.
- General Damages for Emotional Distress: The Florida Supreme Court has acknowledged that a policyholder can recover general damages for emotional distress caused by the insurance company’s bad faith. General damages for emotional distress are left to the discretion of the jury.
- Punitive Damages: The Florida Insurance Code permits a policyholder to recover punitive damages when the insurance company’s conduct was reckless, willful, or malicious. Punitive damages can also be recovered when there is evidence that the insurance company’s bad conduct is found to be frequent enough to be a general business practice. The concept of punitive damages is to financially punish the insurance company for its bad conduct to provide an incentive to improve its business practices. Florida Statute 768.73 limits punitive damages to the lesser of three times the amount of actual damages owed or $500,000.00.
- Attorney’s Fees and Costs: Insurance companies that act in bad faith are liable for the attorney’s fees and costs incurred by the plaintiff.
Third-Party Bad Faith
Insurance companies also owe legal duties in what is referred to as a third-party insurance claim. A third-party insurance claim arises when a person or business is sued, most often under a liability insurance policy. The defendant in these cases may have a liability insurance policy that will cover any potential damages. In these situations, the defendant is seeking the cost of defenses and insurance coverage against the plaintiff’s claim. While the insurance company does not owe a duty of good faith to the plaintiff in these cases, it may be susceptible to additional damages if it does not adequately protect its insured.
The third-party bad faith claim normally arises when the defendant’s insurance company refuses to settle a claim within policy limits or refuses to defend its policyholder. For example, let’s say the defendant has $300,000.00 in liability coverage. The plaintiff seeks to settle the claim within policy limits, but the insurance company refuses. At trial, the plaintiff obtains a verdict for $500,000.00. Because the insurance company refused to settle the claim within policy limits, the defendant now must pay $200,000.00 of its own pocket. Importantly, an insurance company’s failure to settle a valid claim within limits is a basis for seeking bad faith damages. Instead of paying the $200,000.00 excess judgment, the defendant will often assign to the plaintiff its right to pursue its insurance company for bad faith. The assignment of the bad faith claim allows the defendant to escape personal liability and permits the third-party plaintiff to bring a bad faith lawsuit directly against the defendant’s insurance company.
The idea behind third-party bad faith claims is to provide an incentive for insurance companies to resolve claims within policy limits so policyholders are not stuck with avoidable excess judgments. Insurance companies that refuse to settle claims within policy limits often place their own financial interests above protecting policyholders from terrible outcomes and risk.
Statute of Limitations and Other Important Deadlines
In Florida, there are several important deadlines that pertain to insurance claims. It is important to keep these deadlines in mind when making an insurance claim or filing a lawsuit.
Most importantly, a notice of claim must be made within two years of the date of loss including “reopened claims.” A supplemental claim must be made within three years of the date of loss. There are differences between a reopened claim and supplemental claim. A policyholder reopens a claim when there are additional costs for loss or damage. This differs from a supplemental claim, which is a claim for additional damage stemming from a previously reported peril. For example, you may reopen a claim when the cost to repair damaged flooring is greater than the insurance company’s initial payment. An example of a supplemental claim would be damage to your walls from a roof claim that you had previously made.
The time to file a lawsuit in Florida for a underpaid, delayed, or denied insurance claim is 5 years of the incident forming the basis for the claim.
The attorneys at MyInsuranceCase assist Florida policyholders in resolving insurance disputes. We handle property damage, life insurance, commercial, and other types of insurance matters. Our goal is to maximize your recovery so you obtain the insurance benefits you are entitled to. Please contact us at the form below or call (866) 970-0977 to schedule a free consultation.