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Can an insurer be liable for bad faith under §625.155 F.S. after appraisal when there is no underlying breach of contract lawsuit? The 4th DCA, in Cammarata v State Farm allowed the insured to proceed with a bad faith suit although the insured never filed a breach of contract suit. The 4th DCA ruled that resolution of a breach of contract suit in favor of the insured is only one of several alternative prerequisites necessary to perfect a statutory cause of action for bad faith. The opinion determined that an appraisal award in an amount more than offered by the insured, was tantamount to a favorable resolution necessary to proceed with a bad faith action. 

The Cammaratas suffered damaged to their home from the 2005 storm, Hurricane Wilma. State Farm estimated the damage as below the policy deductible. The Cammaratas demanded appraisal. Both parties petitioned the court to appoint a neutral umpire. The umpire issued an award in an amount above the State Farm deducible, but less than the Cammarata’s estimate. State Farm paid the award and the court dismissed the underlying petition to appoint an umpire. The Camaratas then sued State Farm for bad faith.  A breach of contract suit was never filed.

In reaching its decision in Cammarata, the 4th DCA recognized two of its earlier decisions, Lime Bay v State Farm, 2012, and Trafalgar v Zurich, also issued in 2012, were in conflict. To resolve the conflict within it is district, the 4th DCA reviewed Florida Supreme Court decisions from Blanchard v State Farm in 1991 to Vest v Travelers in 2000. Based on this review, the 4th DCA receded from Lime Bay, and confirmed its decision in Trafalgar which held an appraisal award “constitute[d] a favorable resolution of an action for insurance benefits [and] satisfied the necessary prerequisite to filing a bad faith claim”.

Based on  Trafalgar, Cammarata, and the 4th DCA’s understanding of Vest, it is not necessary for an insurance company to breach the conditions of its insurance policy contract in order for an insured to move forward with a statutory bad faith action under §624.155. According to the 4th DCA, the three prerequisite elements necessary to bring a bad faith action are: 1) a determination of the insurer’s liability; 2) the amount of the damages; and 3) satisfaction of the notice requirement of 624.155(3)(a). The 4th DCA understands the Vest decision to mean that the first two conditions may be established when a settlement determines the existence of liability and the extent of the damage.

Eleven of the twelve 4th DCA judges concurred with the en banc Cammarata opinion, with one judge recused. Judge Gerber wrote a special concurring opinion to request the Florida legislature review the court’s decision. Judge Gerber is concerned that the majority opinion creates a slippery slope allowing an insured to seek bad faith damages subsequent to any settlement or alternative dispute resolution including appraisal, when the insurer pays more than its initial offer. He reminds litigators of the Vest decision in which the Supreme Court held that, “The insurer has the right to deny claims that in good faith it believes are not owed on a policy”. (Vest v Traveler’s Ins. Co, 753 So.2d 1289 (Fla. 1991).

The limits of the expansive nature of the Cammarata opinion will be determined by future bad faith litigation. The opinion raises potential issues applicable to any settlement agreement in which the insurer pays more than its initial offer. Whether, and how, the decision applies to negotiated settlements is unclear. Litigators and claims staff should consider the opinion in resolving claims and suits and in drafting releases.