Is there an Honest Disagreement or is My Insurer Acting in Bad Faith?
Under the Florida Insurance Code, insurers have a legal duty to handle all property insurance claims using fair settlement practices. If they fail to live up to that legal obligation, the affected policyholder may have the right to bring a bad faith insurance claim. This is a powerful claim, because when it is successful, a policyholder can collect compensation for the full extent of their property damage, compensation for consequential damages, and in some cases, punitive damages. Of course, prevailing in this type of claim is not always easy. Insurance companies often attempt to defend bad faith claims by asserting that there was an “honest disagreement” over the value of the claim or whether there was coverage. Florida courts have developed a test to determine what constitutes an honest disagreement and what rises to the level of bad faith.
How Florida Courts Assess Bad Faith Claims
Under Florida’s settlement requirements, insurance companies are not legally permitted to deny claims that they know are valid. Obviously, this does not mean that all wrongfully denied claims were necessarily done in bad faith. In some cases, honest disagreements do arise. To distinguish between a genuine, good faith disagreement and bad faith settlement practices, the Supreme Court of Florida devised a totality-of-the-circumstances test.
The Totality-of-the-Circumstances Test Explained
This test requires Florida courts to assess each bad faith claim on its own merits. Each case will require an in-depth fact specific review to determine if, on balance, the insurance company used bad faith practices or simply had an honest disagreement regarding the merits of the claim. More specifically, the Florida Supreme Court, in the 1995 case State Farm Mut. Auto. Ins. Co. v. LaForet, outlined several different factors that should be used to review whether a claim was handled in bad faith. Five of the most important questions that will need to be answered when assessing a bad faith claim are as follows:
- How thorough was the investigation conducted by the insurance company?
- How vigorous was the insurer in its attempts to reach a settlement?
- Did the insurance company ever make a reasonable settlement offer?
- Would a reasonable person have settled the claim earlier if they were in the company’s position?
- What efforts did the policyholder make to reach a settlement?
While the final question puts some onus on the policyholder to move the process towards a reasonable settlement, the main focus in on the insurance company’s actions. Contreras v. U.S. Sec. Ins. Co., 927 So. 2d 16, 22 (Fla. 4th DCA 2006).
Contact Our Office Today
At Geyer Fuxa Tyler, our bad faith insurance claims lawyers have extensive experience protecting the rights of policyholders. If you feel that you have been the victim of bad faith settlement practices, please call our Sunrise office today at (954) 990-5251 to request a free review of your claim. We serve policyholders throughout Broward County, including in Fort Lauderdale, Pembroke Pines, Hollywood and Miramar.