Some Florida policyholders and their attorneys have long complained about real or perceived delays in the claims-handling process after a loss. A Florida appeals court ruled last week that telling a jury about those delays may be prejudicial and out of bounds in a claims dispute lawsuit. 2w6x16
“The essential question was whether the insured complied with the required document production. Yet throughout trial, the insured’s counsel suggested the insurer was slow or incompetent in processing the claim,” Florida’s 4th District Court of Appeals wrote in the June 4 opinion in Universal Property & Casualty Insurance vs. West Naze.
The decision overturned a Broward County Circuit Court judgment and remanded the case for a new trial. It also underscored previous court rulings that have held that an insurer’s claims behavior is not relevant in most claims disputes, said Matt Lavisky, an insurance defense lawyer and former president of the Florida Defense Lawyers Association.
“You can’t litigate claims disputes and bad faith at the same time,” he said.
The 4th DCA ruling stemmed from a Broward County lawsuit in which a jury in 2023 awarded $47,000 to Naze, the homeowner, finding that the policyholder had shown that the property suffered a loss from a water leak. Universal appealed, arguing that the plaintiff’s attorney had skewed the jury’s opinion by repeatedly bringing up allegations that Universal had not assigned an adjuster to the case, had asked for the same documentation more than once, and had dragged its feet throughout – all of which implied bad faith by the insurer.
A bad faith claim was not part of the complaint and should not have been allowed under Florida law until after the claims dispute was resolved.
The Naze lawyers argued that the claims handling response by Universal was essentially inseparable from its breach-of-contract actions.
“You [the jury] get to determine believability,” the Naze attorney, Maria Corvaia O’Donell said at the trial. “Now, we learned, during this case, that they (Universal) didn’t even have an adjuster assigned at the time they were making these document requests. They didn’t assign an adjuster until April. So who was it that was looking at these documents and making a determination? When we begged for a determination in April, correspondence with them, did they say, ‘No problem, we’ll get you a determination, we’re missing these documents?’ No, they said nothing.”
The appeals court judges relied heavily on the 4th District Court’s 2018 opinion in Citizens Property Insurance vs. Mendoza. In that case, like the Naze dispute, one of the main questions was whether insurance coverage was barred by a policy exclusion. Naze had not provided receipts or invoices from a plumber or documentation on whether the dishwasher had been replaced, Universal argued.
“Instead of providing us the checks, the documentation before filing a lawsuit, he (the insured) stayed quiet. He filed a lawsuit, and instead, that resulted in prejudice to [the insurer],” the Universal attorney said at the trial.
The appeals court agreed with Universal’s lawyers.
“As we stated in Mendoza, the jury could have decided the insured prevailed “solely because the [insurer] did not ‘do a good job’ regardless of whether the incident fell within the policy exclusion,” 4th DCA Judge Melanie May wrote. The court also declined to award attorney fees for the policyholder.
The outcome could be seen as a victory for Florida insurance carriers, on top of legal-system reforms in recent years. The Florida Legislature in 2022 raised the bar on filing bad-faith claims, requiring a court ruling that the insurer had breached the insurance contract by failing to pay a claim – before a bad-faith claim can be pursued. Still, some plaintiffs lawyers have stepped closer and closer to making claims litigation about other issues, such as foot-dragging by insurers as an improper way to subdue claims, attorneys have said.
“I think this puts the line back to where it was in case law years ago,” Lavisky said. “I hope it carries over to discovery, as well, because the plaintiff’s bar is starting to get into claims handling in discovery in breach-of-contract cases. This is a good reminder that the issues are separate.”
The Broward County Circuit judge in the Naze case, Martin Bidwell, stressed that he did not suggest to the jurors that they consider bad faith.
“The distinction I’m drawing in this particular case is the difference between bad faith on the one hand and, on the other hand, omission and negligence, okay?” Judge Bidwell noted in response to Universal’s request for a new trial. “I didn’t give a bad faith instruction on this particular case.”
The appellate judges disagreed, noting that Bidwell’s jury instructions and the plaintiff attorney’s arguments wrongly stressed the insurer’s “duty to adjust.” The verdict form asked the jury if Universal properly excluded the claim from coverage.
“The insured did not include any allegations of poor claims handling in his complaint,” the 4th DCA wrote. “The pretrial stipulations did not include allegations of poor claims handling. In short, the itted evidence was irrelevant to the issues pled. By itting this irrelevant evidence, the insured was able to paint the insurer in a bad light and suggest its bad faith in handling the claim.”
In a dissent, appeals court Judge Ed Artau said the Mendoza case was significantly different and did not apply here.
“Because the evidence presented here was relevant to counter the insurer’s second affirmative defense, which was that the insured failed to provide the insurer with all of the required documents, it was not unreasonable for the trial court to conclude that the evidence’s probative value was not substantially outweighed by the danger of unfair prejudice,” Artau wrote.
A Universal attorney could not be reached for comment this week.
Topics Claims
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