Sweeping Changes To “Bad Faith” In Florida

After twelve (12) years of effort, and in what now seems like a blink of an eye during this legislative session, Governor DeSantis signed HB 837/SB 236 into law. This new legislation makes sweeping changes to “bad faith” law in Florida. This blog will summarize these changes and the issues that the bill addresses.

The first significant change is a safe harbor from a bad faith claim where an insurer tenders the lesser of the policy limits or the amount demanded by the claimant within ninety (90) days after receiving actual notice of a liability insurance claim with sufficient evidence to support the amount of the claim. The Legislature included this language to allow an insurer sufficient time to investigate a claim and respond to a time demand without the fear of a “bad faith” action. Even if the insurer does not tender the policy limits or the amount sought by the claimant within the ninety (90) day period, this “failure” is inadmissible in subsequent bad faith litigation. The statute of limitations is also extended an additional ninety (90) days.

In addition, the legislation codifies existing case law that mere negligence by an insurer is not enough to demonstrate “bad faith.” Additionally, this new legislation places duties on the insured, claimant, and their representatives to act in good faith in furnishing information related to the claim, setting deadlines, and attempting to settle the claim. In any “bad faith” action, the trier of fact may consider whether the insured or claimant acted in good faith and may reduce the amount of damage found against the insurer for their lack of good faith. It also prevents a claimant from making a time demand without providing the necessary information, medical records, and medical bills to evaluate the claim.

Additionally, if two or more third-party claimants present competing claims arising out of a single occurrence, which when totaled may exceed the available policy limits of one or more of the insured parties, an insurer is not liable beyond payment of the available policy limits if the insurer, within ninety (90) days of receiving the claims, files an interpleader action and provides the policy limits to the court. The trier of fact then determines the amount of the policy limits to distribute to each claimant. In addition, the insurer is not liable if the insurer and the third-party claimants agree to binding arbitration paid for by the insurer, the insurer tenders the entire policy limits, and the arbitrator decides how much to provide to each claimant. The claimants must execute and deliver a general release to the insured when the arbitrator resolves the claims.

Time will tell how this new legislation will affect “bad faith” actions in Florida. It is clear that the statute presents a significant change to Florida’s “bad faith” law.