Florida Courts continue to analyze the legal landscape of First Party Property disputes in light of the significant legislative changes in recent years. The First District Court has weighed in on one of the multiple changes that took place in 2022 relating to statutory Bad Faith claims, including whether an Insured must establish an “adverse adjudication by a court of law” prior to commencing a Bad Faith lawsuit. In Vo v. Scottsdale Ins. Co., the Court addressed whether the statutory amendment that introduced section 624.1551, Fla Stat., could apply retroactively to a “vested” right to commence the Bad Faith action. Ultimately, the reach of the opinion is narrow, but is also critical to understanding the current legal landscape.
In 2020, the Insured Vo filed a claim with Scottsdale for hurricane damage. Scottsdale originally assessed the covered loss as being below deductible, which was responded to with the Insured’s civil remedy notice. After the rejection of the civil remedy notice, the dispute was resolved in 2021 through the policy’s contractual appraisal process, which found the claim to be above deductible and quite close to the public adjuster’s assessment of the loss. Of note, the matter never entered into a Breach of Contract lawsuit.
As previously noted, the relevant Bad Faith statute was amended to introduce section 624.1551, Fla. Stat., in May 2022, which was then amended in December of 2022. This amendment requires as a condition precedent to a Bad Faith suit that:
“[I]n any claim for extracontractual damages under s. 624.155(1)(b), no action shall lie until a named or omnibus insured or a named beneficiary has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract and a final judgment or decree has been rendered against the insurer. Acceptance of an offer of judgment [proposal for settlement] under s. 768.79 or the payment of an appraisal award does not constitute an adverse adjudication under this section. The difference between an insurer's appraiser's final estimate and the appraisal award may be evidence of Bad Faith under s. 624.155(1)(b),but is not deemed an adverse adjudication under this section and does not, on its own, give rise to a cause of action.” Id. (emphasis added).
The Insured’s Bad Faith suit commenced in 2023. Scottsdale took the position that because there had been no underlying breach of contract, Vo could not establish a necessary condition precedent to the action. The trial court agreed and dismissed the action with prejudice, which resulted in the appeal and opinion.
In reversing the dismissal of the Bad Faith action, the First District Court focused on the fact that Vo’s right to commence a Bad Faith action “vested” in 2021, upon Scottsdale’s payment of the appraisal award. As such, the Bad Faith action accrued prior to the amendment. Simply because Vo did not commence the Bad Faith action until 2023 was not relevant to the analysis as the Court found that applying 624.1551 to a vested right to commence the action was an impermissible retroactive application of section 624.1551.
As previously noted, the scope of the opinion will be narrowed as time progresses and pre-2022 claims pass the five-year statute of limitations to commence Bad Faith actions.
Most importantly, and consistent with the arguments that we have previously pursued, claims that are resolved or which the Bad Faith does not accrue until after the 2022 amendments, this opinion strongly supports the position that an Insured would have to obtain a final judgment on an underlying breach of contract lawsuit prior to commencing a Bad Faith action. If these same facts arose today as it relates to a Hurricane Helene or Milton claim—or any claim that arose after the 2022 amendments—then pursuant to this recent First District Court opinion and the statutory requirements, an Insured would have to obtain a final judgment in an underlying breach of contract lawsuit prior to commencing any Bad Faith action.
At CSK, we have recently prevailed on this issue and have successfully obtained Dismissals with Prejudice on Bad Faith actions in which the “vested” right (accrual) to the action arose after the 2022 amendment.
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