What Is a Bad Faith Insurance Claim?
When a property owner purchases insurance (such as homeowner's, commercial property, or title insurance), the insurance company is legally bound by an implied covenant of good faith and fair dealing. A bad faith claim arises when the insurer breaches this duty. In Florida, bad faith is not simply a disagreement over the value of a claim; it involves the insurer actively acting unreasonably, deceptively, or negligently in handling the claim.
First-Party vs. Third-Party Bad Faith
Florida law recognizes two distinct types of bad faith claims:
- First-Party Bad Faith — This occurs when an insurance company refuses to settle a claim directly with its own policyholder. Common examples include a homeowner's insurance company unreasonably denying coverage for hurricane damage, failing to promptly investigate a legitimate water leak, or offering a severely lowball settlement without justification (governed by Section 624.155, Florida Statutes).
- Third-Party Bad Faith — This occurs when a liability insurer fails to protect its policyholder from a lawsuit by a third party. If a tenant sues a landlord for a severe injury, and the landlord's insurance company unreasonably refuses to settle the claim within the policy limits, resulting in a massive court judgment against the landlord, the insurer can be sued for third-party bad faith.
The Civil Remedy Notice (CRN) Requirement
Before a property owner can file a first-party bad faith lawsuit in Florida, they must file a Civil Remedy Notice (CRN) with the Florida Department of Financial Services. The CRN gives the insurance company a 60-day "cure period." If the insurer pays the disputed amount or corrects the bad faith behavior within those 60 days, no bad faith lawsuit can be filed.
Damages in Bad Faith Lawsuits
If an insurer is found guilty of bad faith, they may be forced to pay much more than the original claim value. The court can award the full claim amount, attorney's fees, court costs, and in extreme cases involving intentional malice, punitive damages to punish the insurer.
Related Terms
- Title Insurance — Title insurers can be sued for bad faith if they fail to defend a title defect
- Liability Insurance — Protects property owners from third-party lawsuits
- Abatement Action — Sometimes necessary when insurance fails to cover hazard removal
Barnes Walker Insurance Litigation
Barnes Walker's litigation attorneys represent Florida property owners and HOAs in complex insurance disputes and bad faith litigation against major carriers. Request a legal inquiry for assistance.
Florida Law Reference
Fla. Stat. Ch. 627
Regulates property and casualty insurance in Florida, including coverage requirements, claims handling, and the Citizens Property Insurance Corporation for high-risk properties.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC