Regina Keenan

On October 7, the Florida Supreme Court heard oral argument in Citizens Property Ins., Corp., Etc. v. Perdido Sun Condominium Assoc., Inc., Etc. (SC14-185), a civil action against Citizens for bad faith.

The trial court’s dismissal of the lawsuit on immunity grounds was reversed by the First District Court of Appeal, which held Citizens is not immune from a bad faith claim because Citizens’ statutory immunity has an exception for “willful torts.” Perdido Sun Condo. Ass’n v. Citizens Prop. Ins. Corp., 129 So. 3d 1210 (Fla. 1st DCA 2014); see section 627.351(6)(s)1., Fla. Stat. The First DCA certified the case to the Florida Supreme Court for both a direct conflict with Citizens Property Insurance Corp. v. Garfinkel, 25 So.3d 62 (Fla. 5th DCA 2009) and as presenting a question of great public importance.

The first question before the Court is whether the claim of bad faith constitutes a tort. A tort, as defined by the DCA below, is “[a] civil wrong, other than a breach of contract, for which a remedy may be obtained, usu[ally] in the form of damages[, or] a breach of duty that the law imposes on persons who stand in a particular relation to one another.” Perdido Sun Condo. Ass’n v. Citizens Prop. Ins. Corp., 129 So. at 1212. Justice Canady questioned the presence of a tort based on a lack of duty. He pointed out that, unlike the plainly worded good faith duty in s. 624.155(1)(b)1., Fla. Stat., Citizens’ duty of good faith in s. 627.351(6)(s)2., Fla. Stat., has ambiguous qualifying language. Citizens’ duty is limited to “manage its claim employees, independent adjusters, and others who handle claims to ensure they carry out [Citizens’] duty to its policyholders to handle claims carefully, timely, diligently, and in good faith, balanced against the corporation’s duty to the state to manage its assets responsibly to minimize its assessment potential.”

The second question before the Court is whether the claim constitutes a “willful tort.” See section 627.351(6)(s)1., Fla. Stat. The Court seemed to agree that there can be torts that might constitute willful torts, such as fraud, intentional interference with a contract, and intentional infliction of emotional distress. Justice Pariente stated that it made sense to compensate an insured if they do not have a roof over their head for two years due to actions by an insurer, but quickly qualified that this was a policy decision made by the Legislature. Justice Pariente asked if the complaint could be amended to show elements of willfulness and not mere negligence. Perdido stated that it could amend the complaint accordingly.

The final question is the extent of Citizens’ immunity. This is important because it impacts the standard of review. All parties and the Court seemed to agree that this question is subject to “strict scrutiny.” However, if Citizens has “sovereign immunity,” any ambiguity in the law would be resolved in its favor. Both Citizens and the State of Florida as amicus argue that Citizens has absolute sovereign immunity because, “Citizens Property Insurance Corporation, [is] a government entity that is an integral part of the state, and that [Citizens] is not a private insurance company.” s. 627.351(6)(a)1., Fla. Stat. Perdido argues that Citizens only has “statutory immunity” in order to exempt it from tax liability. Perdido Answer Brief.

Justice Pariente and Justice Lewis also alleged that under s. 624.155, Fla. Stat., a third party bad faith claim against an insurer can only be brought if the liability exceeds the policy coverage (absent a showing of punitive damages). However, the alternative of using Citizens’ good faith duty in s. 627.351(6)(s)2., Fla. Stat., may give a plaintiff in a third party willful bad faith case a chance recover damages even if the alleged damages do not exceed the policy coverage. This opens a public policy argument since it places a monetary liability on Citizens that is not borne by other insurers and that Citizens was specifically created to “…reduce or avoid the negative effects otherwise resulting to the public health, safety, and welfare, to the economy of the state, and to the revenues of the state and local governments which are needed to provide for the public welfare.” s. 627.351(6)(a)1., Fla. Stat. In addition to the public policy component of this argument, it may also circle back to Justice Canady’s point that Citizens’ duty of good faith must be “balanced against [Citizens’] duty to the state to manage its assets responsibly to minimize its assessment potential.” s. 627.351(6)(s)2., Fla. Stat.

With this analysis facing the Court, it may remand for Perdido to amend its complaint to allege “willfulness.” The Court may also reverse the 1st DCA because the immunity language is ambiguous under “strict scrutiny,” or the Court may broadly state that sovereign immunity entitles Citizens to have this ambiguity resolved in its favor.

Can Citizens Property Insurance be Liable for Bad Faith?
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