Citizens Property Insurance and bad faith

At Citizens Property Insurance it’s ok to be bad to their policyholders

Citizens Property Insurance Company is immune from Bad Faith liability. What this means for the residents of Florida who have their homeowners insurance policy with Citizens is that there is no true recourse if they do not honor the insurance contract. If they improperly deny, delay, misrepresent, withhold payment, ignore, mishandle, or otherwise act in “bad faith” towards the policyholder, you may sue and win the breach of contract issue to receive what you are owed, but there will be no extra contractual bad faith damages available to you. This mechanism and the threat of damages up to several times the actual amount of the loss is what keeps normal insurance companies from misbehaving regularly. The fact that homeowners who are forced to use Citizens as their carrier must simply accept bad behavior when it occurs is a travesty. This is a perfect example of legal loopholes created by the Legislature to protect the state’s and their defacto insurance carrier’s interests and not the residents and customers who actually pay the bills.

In Citizen’s Property Ins. Corp. v. Perdido Sun Condominium Ass’n, Inc., 164 So.3d 663 (Fla. 2015), the Florida Supreme Court held that Citizens Property Insurance Corporation, a state-created entity that provided property insurance, was immune from liability for statutory first-party bad faith claims as an exception to its statutory immunity from suit.

In this case, the insured alleged a statutory first-party bad faith claim against Citizens Property Insurance Corporation (Citizens) under Section 624.155(1), Fla. Stat. (2009), which provided in relevant part that any party could bring a civil action against an insurer when that person was damaged by the insurer’s failure to attempt in good faith settle claims when, under all of the circumstances, the insurer could or should have done so, had it acted fairly and honestly toward its insured and with due regard to the insured’s interest.

The insured claimed that Citizens: (1) had refused to pay the full amount owed to the insured under the insurance policy; (2) had refused to take part in the appraisal process required by the policy and instead used the process to attempt to delay litigation; (3) delayed payment of the appraisal award and improperly attempted to condition payment upon the execution of a broad and universal release; and (4) engaged in a pattern and practice seeking to avoid or delay full settlement of claims. Citizens moved to dismiss the Complaint citing immunity from suit under Section 627.351(6)(s), Fla. Stat. (2009). The immunity statute had a “willful tort” exception, however. The insured attempted to argue that the conduct of Citizens fell within the “any willful tort” exception to the statute.

Construing the statute, the Florida Supreme Court found no support that the Florida Legislature intended for Citizens to be liable for a breach of the duty to act in good faith by allowing its policyholders to bring a statutory first-party bad faith cause of action. The fact that the Legislature knew how to accomplish an exception to immunity was demonstrated by the Legislature’s specific exemption to the immunity for attorney’s fees contained within Section 627.428 of Fla. Stat. Therefore, because the Legislature made one exception clearly, the Court found that if the Legislature had intended to establish other exceptions it would have done so clearly and unequivocally. There was no specific exception for statutory causes of action in the statute. Under Florida law, first party bad faith actions were purely a creature of statute that did not previously exist at the common law. Thus, first-party bad faith actions were different than common law causes of action for third-party bad faith under Florida law. The Florida Supreme Court held that a first-party bad faith claim could not be wedged into the statutory exception for willful torts because it was not a tort of any variety. It was a statutory-based bad faith cause of action.