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Florida Supreme Court rules in Citizens bad faith case

Mon May 18th, 2015 on     Bad Faith Insurance,    

The Florida Supreme Court handed down a ruling on May 14, 2015, that has shaken up the state’s insurance industry. The court has found that state law bars policyholders from suing Citizens Property Insurance Corp. for bad faith.

We have often discussed how insurance bad faith claims work in Florida — see our Nov. 15, 2014, post for an example. An insurance company acts in bad faith when it refuses to provide coverage and that refusal is both unreasonable and unfounded. Bad faith is not fraud; there is no conscious misrepresentation of facts. Rather, the insurer has placed its own self-interest ahead of meeting its duty to indemnify or duty to defend a policyholder.

That’s how it works for private insurance companies, though, not for Citizens. Citizens is a creature of statute, an insurance company authorized by the Legislature and backed by tax revenue. Remember, if Citizens cannot meet its claim obligations, the Legislature can authorize an assessment against all homeowners insurance policyholders in the state. In order to protect the taxpayers’ money, then, the Legislature has granted Citizens limited sovereign immunity.

Sovereign immunity is the legal doctrine that shields a government from litigation in its own courts. The Federal Tort Claims Act and state tort claims acts allow for exceptions for certain claims, generally claims that could be filed against a private citizen. Say a pedestrian is hit by a delivery van that runs a red light. Strict sovereign immunity would bar litigation if the van belonged to a government agency and not a private company. A tort claims act, however, could lift that ban; the driver and the government owe the same duty of care to pedestrians that private citizens and companies do.

The exemptions for actions against Citizens are much more specific, though. We’ll get into more detail and explain the ramifications in our next post.

Sources:

Daily Business Review, “Florida Supreme Court Shields Citizens Property From ‘Bad Faith’ Lawsuit,” May 15, 2015

Citizens Property Insurance Corp. v. Perdido Sun Condominium Association, Inc., No. SC14-185, 2015 WL 2236719 (Fla. May 14, 2015), via WestlawNext

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