It has been more than eight months since Hurricane Irma visited our area and many homeowners are still fighting their insurance company for payment. In some cases, the insurer claims the property was not damaged. In others, the insurer claims repairs can be done a lot cheaper than the proposals obtained by the homeowner. For those homeowners who have not settled with their insurance carriers, it is time to review action of the insurance carrier to determine if the carrier is acting in bad faith.
Florida’s legislatures recognize the bargaining imbalance between a homeowner and an insurance company. The legislature has empowered homeowners with a one two punch of statutes.
Section 627.7142 Florida Statutes established the Homeowner Claims Bill of Rights. Insurance companies issuing residential property insurance policies in Florida must provide a Homeowner Claims Bill of Rights to a policy holder within 14 days after receiving initial communication with respect to a claim, unless the claim follows an event for which the Governor has declared a state of emergency. The Homeowner Claims Bill of Rights does not represent all of the policy holder’s rights under Florida law, but it is an effort to balance the bargaining between homeowner and insurer.
The Homeowner Claims Bill of Rights informs the homeowner that the homeowner has the right to:
- Receive acknowledgment of a reported claim within 14 days.
- Upon written request, receive from the insurance company within 30 days after submitting a complete proof-of-loss statement that the claim is covered in full, partially covered, or denied, or receive a written statement that the claim is being investigated.
- Within 90 days, receive full settlement payment of the undisputed portion of the claim, or a denial of the claim.
- Free mediation by the Florida Department of Financial Services.
- Neutral evaluation of the disputed claim if the claim is for damage caused by a sinkhole and is covered by the policy.
- The homeowner can contact the Florida Department of Financial Services, Division of Consumer Services’ toll-free helpline for assistance with any insurance claim.
The Homeowner Claims Bill of Rights also recommends the homeowner:
- Contact the insurance company before entering any contract for repairs.
- Make and document emergency repairs necessary to prevent further damage.
- Carefully read any contract that requires the homeowner to pay out-of-pocket expenses or a fee based on a percentage of the insurance proceeds obtained.
- Confirm that the contractor is licensed.
- Require all contractors provide proof of insurance before beginning repairs.
- Take precautions if the damage requires leaving the home, including securing the property and turning off gas, water, and electricity, and contacting the insurance company with a phone number where the homeowner can be reached.
The Homeowner Claims Bill of Rights informs the homeowner of important statutory rights and summarizes some of the important requirements of the standard form residential insurance policy in Florida. It can help get a homeowner off to a good start, but does not force the carrier to make payment or to even act reasonably.
Insurance carriers generally have far deeper pockets and much more experience than a homeowner. That puts the homeowner at a distinct disadvantage. Not only is the homeowner dealing with the loss and emotional trauma accompanying property damage, but the homeowner also lacks experience. In some cases, the homeowner lacks funds to make repairs without insurance proceeds and cannot afford temporary living quarters.
The Homeowner Claims Bill of Rights is information, but is not enough to make sure the insurer acts fairly. It tells homeowners they have rights and that there are deadlines for insurance companies to act, but does not offer any teeth to enforce. In fact, the Bill of Rights specifically includes the following language, “This document does not create a civil cause of action … against an insurer or insurers…” Fortunately, the legislature has a special statute to level the playing field when an insurance company acts in bad faith.
Section 624.155 Florida Statutes creates a statutory bad faith cause of action against an insurance company under which the homeowner will recover attorney’s fees and costs if the homeowner prevails. The statute is intended to level the playing field allowing homeowners to recover attorney’s fees, even in smaller cases. There are conditions the homeowner must meet.
The most important condition requires the homeowner to file a notice with the Florida Department of Financial Services that the insurance carrier is acting in bad faith, commonly referred to as the “Civil Remedy Notice.” The Civil Remedy Notice not only tells the Department of Financial Services that there is a problem with the insurance company but also places the insurance company on notice and a last chance to act in good faith. No lawsuit can be filed until 60 days after filing the Civil Remedy Notice. The Civil Remedy Notice often results in a prompt response from the insurance carrier. It does not always result in settlement, but if the case does not settle the homeowner can sue the insurance carrier for bad faith with the prospect of recovering attorney’s fees to boot.
A bad faith action effectively seeks to enforce the contract between the insurance company and homeowner. It is not truly a breach of contract action, because the insurance policy usually prohibits a direct breach of contract lawsuit and, instead, forces parties into appraisal (arbitration) or mediation. Bad faith is not stuck with the policy restrictions.
What is bad faith? Examples of insurer bad faith are the following circumstances:
- Failing to make a good faith effort to settle claims, when it should have done so under the pertinent circumstance and the insurer was acting fairly toward the insured. Bad faith in this area can include failure to agree that damage was caused by an insured event, scope of damage that requires repair or reasonable cost for repair.
- Failing to properly settle claims when the obligation has become reasonably clear.
- Misrepresenting pertinent facts or policy coverage.
- Failure to acknowledge and promptly act upon communications.
- Failure to conduct a reasonable investigation prior to denying a claim.
- Failure to provide a written acknowledgement within 14 days.
- Failure to confirm a claim is covered or not covered within 30 days after a complete proof of loss statement is submitted.
- Failure to settle in full the undisputed portion of a claim within 90 days or failure to promptly provide a reasonable explanation of facts or law pertinent to denial of a claim or an offer of compromise or otherwise failing to explain the nature of information needed and why it is needed to process a claim.
This list is not exclusive and the facts of each case determine if bad faith exists. The court decides whether the insurance carrier has acted in bad faith under the “totality of the circumstances.” That means the manner in which a claim is handled and the amount of time involved are both factors. If a court agrees that the carrier has acted in bad faith, the homeowner is awarded damages equal to what the insurance carrier should have paid, attorney’s fees, costs and even prejudgment interest. The statute is intended to place the homeowner where the homeowner would have been if the insurance carrier had acted in good faith.
Eight months post Irma and many homeowners are still begging with their hand out. It might be time for those homeowners to consider setting the stage for a bad faith lawsuit by consultation with counsel, rather than continuing the unsuccessful path of request, delay and denial.
William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.