PER CURIAM.
The insureds appeal a final summary judgment finding that their bad faith action was not ripe. They argue that because the insurer's liability for coverage and the extent of their damages has been determined, their bad faith action was ripe. The insurer argues that because the insurer's liability for breach of contract has not been determined, the insureds' bad faith action was not ripe. Based on Florida Supreme Court case law, we are compelled to agree with the insureds' argument. We hold that an insurer's liability for coverage and the extent of damages, and not necessarily an insurer's liability for breach of contract, must be determined before a bad faith action becomes ripe. Thus, we reverse and remand for reinstatement of the insureds' bad faith action in this case.
In this opinion, we first present the policy claim's chronology. Second, we present the bad faith action's history, including discussion of our case law. Third, we examine Florida Supreme Court precedent which compels our reversal and our need to recede from one of our recent opinions.
October 2005 — The insureds sustained damages to their home as a result of Hurricane Wilma.
September 2007 — The insureds filed a claim for benefits under their homeowners' policy.
October 2007 — The insurer notified the insureds that it had inspected their home, estimated the amount of their damages to be lower than the policy deductible, and owed no payment to them as a result.
April 2008 — The insureds requested the insurer to participate in the policy's appraisal process. The insureds' request identified their appraiser.
May 2008 — The insurer identified its appraiser and requested the insureds' appraiser's damage estimate.
June 2008 — The insureds' appraiser submitted a damage estimate which was higher than the policy deductible.
July 2008 — The insurer's appraiser submitted a damage estimate which was lower than the policy deductible.
August 5, 2008 — The insurer filed a petition requesting the circuit court to appoint a neutral umpire pursuant to the policy.
August 15, 2008 — The insureds filed a petition requesting the circuit court to appoint a neutral umpire pursuant to the policy.
October 2008 — The circuit court appointed a neutral umpire.
October 16, 2009 — The umpire issued a damage estimate in an amount lower than the insureds' appraiser's estimate but higher than the insurer's appraiser's estimate. The estimate was higher than the policy deductible.
October 27, 2009 — The insurer's appraiser agreed to the umpire's damage estimate.
December 2009 — The insurer paid the insureds the umpire's damage estimate minus the policy deductible.
April 2010 — The circuit court entered an agreed order dismissing with prejudice the parties' petitions to appoint a neutral umpire.
After the circuit court entered the agreed order dismissing with prejudice the parties' petitions to appoint a neutral umpire, the insureds filed their action against the insurer for not attempting in good faith to settle their claim. See § 624.155(1)(b)1., Fla. Stat. (2011) ("Any person may bring a civil action against an
The insurer filed a motion for summary judgment, and the insureds responded. In support of their positions, the insurer and the insureds each cited a different opinion from this court. We will discuss the motion, the response, and the cited opinions in detail because of the apparent discrepancy between our opinions' holdings.
The insurer's motion argued, among other things, that because the insurer's liability for breach of contract had not been determined, the insureds' bad faith action was not ripe. In support, the insurer relied on this court's opinion in Lime Bay Condominium, Inc. v. State Farm Florida Insurance Co., 94 So.3d 698 (Fla. 4th DCA 2012).
In Lime Bay, a dispute arose between the insured and the insurer over the amount of a claim for property damage suffered during Hurricane Wilma. The insured filed a complaint for breach of contract against the insurer. The breach of contract action later was abated when the parties engaged in the appraisal process. The appraisal process resulted in an award closer to the amount of the insured's damage claim. The insurer paid the appraisal award to the insured. The insured then filed an action against the insurer for not attempting in good faith to settle the claim. The insurer filed a motion to dismiss the bad faith action, arguing that there had not been a final determination of liability and maintaining that it intended to dispute liability in the breach of contract action. The circuit court agreed with the insurer and dismissed the bad faith action as prematurely filed.
We affirmed. Id. at 699. We reasoned that the insured "did not, and could not, allege that there had been a final determination of liability since the [insured's] breach of contract case was still pending." Id. (citation omitted). We directed the circuit court to "first resolve the issue of [the insurer's] liability for breach of contract, as well as the significance, if any, of the appraisal award." Id. (citation omitted).
In response to the insurer's reliance on Lime Bay in this case, the insureds argued that only an insurer's liability for coverage and the extent of damages, and not for breach of contract, must be determined before a bad faith action becomes ripe. In support, the insureds relied on this court's more recent opinion in Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 100 So.3d 1155 (Fla. 4th DCA 2012).
In Trafalgar, a dispute arose between the insured and the insurer over the amount of a claim for property damage suffered during Hurricane Wilma. The insured filed a complaint for breach of contract against the insurer. The insurer invoked the appraisal provision of the contract. The appraisal process resulted in
We reversed. Id. at 1157-58. We held that an appraisal award which occurred after the insured filed suit for breach of contract, "constitute[d] a `favorable resolution' of an action for insurance benefits, so that [the insured] ... satisfied the necessary prerequisite to filing a bad faith claim." Id. at 1158. We reasoned that the circuit court's summary judgment in the insurer's favor on the breach of contract action was based on the insurer's compliance with the contract after the appraisal process. Id. at 1157. Thus, we concluded that "the appraisal award was tantamount to a `favorable resolution' necessary to proceed with a bad faith action." Id. at 1157-58 (citation omitted). We rejected the insurer's argument that the summary judgment in its favor on the breach of contract action precluded the insured's ability to pursue the bad faith action. Id. at 1158. Citing our supreme court's precedent, we reasoned that "[a] judgment on a breach of contract action is not the only way of obtaining a favorable resolution" necessary to proceed with a bad faith action. Id. (citing Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So.2d 1216 (Fla.2006) (an arbitration award establishing the validity of an insured's claim satisfies the condition precedent required to bring a bad faith action)). However, our opinion in Trafalgar did not mention its apparent discrepancy with Lime Bay.
After considering the parties' arguments in this case, the circuit court granted the insurer's motion for summary judgment. In support of its decision, the circuit court relied on Lime Bay.
After the circuit court entered a final judgment, this appeal followed. As in the circuit court, the insureds argue that because the insurer's liability for coverage and the extent of their damages has been determined, their bad faith action was ripe. The insurer again argues that because the insurer's liability for breach of contract has not been determined, the insureds' bad faith action was not ripe.
Our review is de novo. See Major League Baseball v. Morsani, 790 So.2d 1071, 1074 (Fla.2001) ("The standard of review governing a trial court's ruling on a motion for summary judgment posing a pure question of law is de novo.") (footnote omitted).
Based on our supreme court's precedent, we are compelled to agree with the
In Blanchard, the insureds filed a breach of contract action against their insurer in state court. The insureds won a verdict against the insurer. The insureds then filed an action against the insurer in federal court for bad faith failure to settle. The insurer moved to dismiss the bad faith action. The insurer argued that the insureds had to assert their bad faith action along with the breach of contract action in state court. The federal district court granted the motion to dismiss.
On review, the Eleventh Circuit Court of Appeals certified to our supreme court the following question: "Does an insured's claim ... under section 624.155(1)(b)1., Florida Statutes, for allegedly failing to settle the ... claim in good faith accrue before the conclusion of the underlying litigation for the contractual ... benefits?" Blanchard v. State Farm Mut. Auto. Ins. Co., 903 F.2d 1398, 1400 (11th Cir.1990).
In response, our supreme court answered:
Blanchard, 575 So.2d at 1291.
Reading Blanchard's certified question and answer in a vacuum, without the knowledge of the procedural context in which it arose — the pre-existence of a breach of contract action — the reader logically might assume that an insured must have filed a breach of contract action, and then obtained a favorable resolution of the breach of contract action, before a bad faith action accrues. However, no language in Blanchard expressly states that an insured must have filed any breach of contract action before a bad faith claim accrues. Rather, another interpretation of Blanchard is that: (1) the insured need only obtain a "determination of the existence of liability ... and the extent of the [insured's] damages" on the underlying claim "before the cause of action for bad faith in settlement negotiations can accrue"; and (2) Blanchard's references to the "underlying first-party action for insurance benefits" and "underlying litigation for the contractual ... benefits" being "resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue" related only to the procedural context under which Blanchard arose.
The latter interpretation of Blanchard appears to have been articulated by our supreme court's later opinion in Vest. In Vest, the insured demanded her insurer to pay its policy limits on her claim. After the insurer did not pay its policy limits, the insured filed an action claiming that the insurer refused to settle and acted in bad faith in failing to pay its policy limits. The insurer later paid its policy limits to the insured. The insurer then filed a motion for summary judgment on the bad faith
However, our supreme court quashed the district court's decision with direction that the insured's bad faith action be allowed to proceed. Vest, 753 So.2d at 1276. The supreme court reasoned:
Id. at 1275-76 (emphasis added).
In reaching the foregoing holding in Vest, the supreme court cited with approval
Vest, 753 So.2d at 1273-74 (quoting Brookins, 640 So.2d at 112-13) (emphasis added).
Based on Vest's clarification of Blanchard and reliance on Brookins, we are compelled to hold that an insurer's liability for coverage and the extent of damages, and not an insurer's liability for breach of contract, must be determined before a bad faith action becomes ripe. To paraphrase Vest, the determination of the existence of liability and the extent of the insured's damages are the conditions precedent to a bad faith action, along with the notice requirement of section 624.155(3)(a), Florida Statutes (2011). Those first two conditions may be established when a settlement determines the existence of liability and the extent of the insured's damages. As stated in Brookins, and as approved in Vest, that settlement does not require the damages to be determined by litigation.
Applying the foregoing principles here, the parties' settlement via the appraisal process, which determined the existence of liability and the extent of the insured's damages, established the first two conditions precedent of a bad faith action. Put another way, the appraisal award "constitute[d] a `favorable resolution' of an action for insurance benefits, so that [the insured] ... satisfied the necessary prerequisite to filing a bad faith claim." Trafalgar, 100 So.3d at 1158. Thus, the circuit court erred in finding that, because the insurer's liability for breach of contract had not been determined, the insureds' bad faith action was not ripe.
We have considered the insurer's arguments for affirmance. We conclude, without
Based on the foregoing, we reverse and remand for reinstatement of the insureds' bad faith action. We take no position on whether the bad faith action has merit.
Because of the conflict between this court's opinion in Lime Bay versus (1) the supreme court's opinion in Vest, (2) this court's opinion in Trafalgar, and (3) today's opinion, we are compelled to recede from Lime Bay to the extent it held that an insurer's liability for breach of contract must be determined before a bad faith action becomes ripe, even though the insurer's liability for coverage and the extent of the insured's damages already have been determined by an appraisal award favoring the insured.
However, we stand by our numerous prior opinions holding that, where the insurer's liability for coverage and the extent of damages have not been determined in any form, an insurer's liability for the underlying claim and the extent of damages must be determined before a bad faith action becomes ripe. See, e.g., State Farm Mut. Auto. Ins. Co. v. Tranchese, 49 So.3d 809, 810 (Fla. 4th DCA 2010) (quashing order denying motion to abate bad faith action "because the final determination of coverage and damages for the underlying claim has not been made, which must precede a statutory bad faith action").
Reversed and remanded.
DAMOORGIAN, C.J., STEVENSON, GROSS, TAYLOR, MAY, CIKLIN, GERBER, LEVINE, CONNER, FORST, and KLINGENSMITH, JJ., concur.
WARNER, J., recused.
GERBER, J., concurs specially with an opinion, in which CONNER, FORST, and KLINGENSMITH, JJ., concur.
GERBER, J., concurring specially.
Based on Vest's controlling nature, I am compelled to concur in the majority opinion. I write separately to express my concern regarding the possible effect of the majority opinion.
In theory, the majority opinion would open the door to allow an insured to sue an insurer for bad faith any time the insurer dares to dispute a claim, but then pays the insured just a penny more than the insurer's initial offer to settle, without a determination that the insurer breached the contract. Such a slippery slope would appear to conflict with the supreme court's own warning in Vest:
753 So.2d at 1275 (emphasis added).
This slippery slope may be avoided if an insured was required either to: (1) establish an insurer's liability for breach of contract as a condition precedent to suing an insurer for bad faith; or (2) obtain a settlement amount which is at least a certain percentage above the insurer's initial offer to settle. However, any such requirement is one which the legislature must impose through an amendment to section 624.155, Florida Statutes (2011). This court is unable to impose any such requirement because of Vest's controlling nature. But see State Farm Mut. Auto. Ins. Co. v. Brewer, 940 So.2d 1284, 1286 n. 3 (Fla. 5th DCA 2006) ("To obtain a determination regarding liability and the extent of damages owed on the insurance contract [to allow a statutory bad faith claim to proceed],
The policy claim history in this case provides a good example of why the legislature may wish to require an insured to establish an insurer's liability for breach of contract, or to obtain a settlement amount which is at least a certain percentage above the insurer's initial offer to settle, as a condition precedent to suing an insurer for bad faith. Here, after the insureds took two years to file their Hurricane Wilma claim, the insurer took only one month to inspect their home and estimate the amount of their damages. Then, after the insureds took six more months to request the insurer to participate in the policy's appraisal process, the insurer took only one month to agree to the appraisal process. When the parties' appraisers did not agree on a damage estimate, it was the insurer, and not the insureds, which first filed a petition requesting the circuit court to appoint a neutral umpire. Within two months of the neutral umpire issuing its own damage estimate, the insurer paid the insureds the neutral umpire's damage estimate minus the policy deductible.
In sum, the record here provides no basis indicating that the insurer breached the contract, much less failed to act in good faith to settle the claim. On the contrary, the record here indicates that the insurer merely exercised its rights under the contract's agreed-upon dispute resolution process of appraisal. The insurer's exposure should be at an end. As our sister court stated in Hill v. State Farm Florida Insurance Co., 35 So.3d 956 (Fla. 2d DCA 2010):
Id. at 961 (emphasis added). See also Nationwide Prop. & Cas. Ins. v. Bobinski, 776 So.2d 1047, 1049 (Fla. 5th DCA 2001) ("[I]t maintains the better policy of this state to encourage insurance companies to resolve conflicts and claims quickly and efficiently without judicial intervention. Arbitration and appraisal are alternative methods of dispute resolution that provide quick and less expensive resolution of conflicts."). Cf. State Farm Fla. Ins. Co. v. Silber, 72 So.3d 286, 289-90 (Fla. 4th DCA 2011) (after insurer paid appraisal award, insureds had no cause of action against insurer to recover attorney's fees under section 627.428, Florida Statutes, because the purpose of the appraisal process is to resolve disputes without litigation).
