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Federal Court Decision Clarifies Timing for Bringing Bad Faith Claims

Thu Feb 7th, 2019 on     Insurance Claims,    

The Eleventh Circuit Court of Appeals, which includes Florida, Georgia, and Alabama, has made clear that a five-year statute of limitations applies to bad faith claims in Florida. The case involved a policyholder’s bad faith claim against his automobile liability insurance provider for failing to settle a personal injury lawsuit. The insured had timely notified his carrier of a personal injury lawsuit brought against him involving an incident in which a passenger in his car suffered serious injuries after being ejected from the car. The insurer failed to settle the dispute and a jury returned a verdict well in excess of the insured’s coverage. 

Insured Brings Bad Faith Claim

Approximately four years and seven months after the $2.6 million judgment was entered against him, the insured filed a federal court claim against his insurer for failing to negotiate and settle the case in good faith. He also argued that the insurance company failed to advise him of settlement opportunities, warn him of the possibility of an excess judgment, adopt and implement standards for the proper investigation and handling of claims, and properly train its adjusters and claims personnel.

Trial Court Dismisses Action as Time Barred

The Florida trial court dismissed the case as time barred by the four-year statute of limitations for intentional torts (a category that includes assault, false imprisonment, slander). The court characterized the action as one for the breach of fiduciary duties, which is considered a tort. The insured appealed.    

Bad Faith Claim Against Insurance Company Involves Contract Law, Not Tort Law

The federal appeals court reversed the trial court’s decision, stating that under Florida law, a claim of bad faith is a contract matter, so the five-year statute of limitation applies. In other words, because the rights and obligations of the parties under an insurance policy arose out of an insurance contract, they are governed by contract law.

Bad Faith Claim Accrues When Final Excess Judgment Is Entered

Once the final excess judgment was entered against him, the policyholder had five years to bring a bad faith claim against his insurance company. Knowing when the clock starts ticking on a bad faith claim is critical. You do not want to be thrown out of court before you even get to argue the merits of your case.  In Florida, it is not until there has been a determination of liability against the policyholder and the extent of the damages that a cause of action for bad faith failure to settle exists or “accrues.” That is, you can’t bring a bad faith claim until the underlying case against you is over.

Florida’s Notice Provision

Florida also requires that the insurer be given 60 days’ notice of a bad faith violation, prior to an action being commenced. This gives the insurer time to “cure” the violation. Without this notice, a bad faith action may be dismissed. 

A Miami Insurance Claim Lawyer Can Help You Timely File a Bad Faith Claim

If you think you have a bad faith claim against your insurance company contact us. Our practice is dedicated solely to representing policyholders. Let a Miami insurance claim lawyer at our firm help you today.

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