Bad Faith
In the February, 2011 edition of the Florida Bar Journal, Gwynne A. Young and Johanna W. Clark argue that Florida’s bad faith statute should require that all parties – insurer, insured, and claimant – all act in good faith to settle a claim. Florida Statute 624.155 states that a person may bring civil action against an insurer when that insurer does not “[attempt] 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.” But the statute does not address the situation when an insured or claimant actively works against settlement.
The authors of the article describe a “bad faith setup” where a plaintiff (whether claimant or insured) makes a settlement offer with unreasonable deadlines or other technicalities that are difficult to meet. Even though the insurer and insured agree to the settlement, the plaintiff withdraws the offer when the deadline or technicality is unmet. Then, the plaintiff brings action against the insurer claiming bad faith, possibly turning a low limit policy into “limitless, court-ordered insurance.”
The authors propose a revision to Florida statute requiring that the claimant make a timely & specific settlement demand, allow reasonable time for acceptance, identify the type of release it is willing to provide, and cooperate fully in submission of any supporting documents relevant to the case. The claimant would also have to provide a reasonable showing by evidence establishing that it made a good faith effort to settle.
In the March, 2011 edition, Rutledge R. Liles argues that insurers can protect themselves from bad faith claims simply by doing what the statute compels them to do – act “reasonably in the discharge of the fiduciary duty they owe their policy holders.” And, he argues, the proposed statutory revisions would eliminate the common law duty of good faith that insurers owe their insureds. He cites Florida cases where courts ruled that failure to meet unreasonable deadlines or technicalities did not, in fact, constitute bad faith.
What do you think? Is Florida, and the P&C industry in general, in the midst of a “bad faith crisis?” Particularly given Florida’s climate of sinkholes, public adjusters, PIP abuse, and ever-changing regulation, do insurers need legislative protection from the “bad faith setup?” Let us know.