Florida Appellate Court Holds That Appraisal Award Constitutes A 'Favorable Resolution' And Permits Insured To Pursue Bad Faith Claim

The Florida District Court of Appeal, Fourth District, recently held that an appraisal award in favor of an insured constitutes the "favorable resolution" of an action for insurance benefits necessary to proceed with a statutory first-party bad faith action under Florida law. Trafalgar v. Zurich Ins. Co., 2012 WL 3822215 (Fla. App. 4 Dist. Sept. 5, 2012).

Underlying Facts

Trafalgar, the plaintiff/insured, submitted a claim to Zurich Ins. Co., the defendant/insurer, for damage sustained to its shopping center during Hurricane Wilma. After beginning its investigation, the insurer issued two payments to Trafalgar totaling $580,856.40. Subsequently, in June 2006, the plaintiff submitted a sworn statement in proof of its loss, claiming $1,826,938.54 in damages. After the insurer responded to the proof by advising that it was continuing to investigate the claim, the plaintiff filed suit, alleging that the insurer breached the policy by failing to pay all proceeds claimed and due. One month after the complaint was filed, the insurer informed the plaintiff that it had completed its investigation and tendered an additional payment, bringing its total payments to $641,730.32. The insurer then invoked the policy's appraisal provision. The appraisal award, which was more than double the payments previously made by the insurer, was timely paid within the requisite 30 days.

Following payment of the appraisal award, the insurer moved for and obtained summary judgment on the breach of contract claim. However, the trial court also granted Trafalgar's motion to amend its complaint to state a cause of action for statutory bad faith based on the insurer's alleged pattern of delay and denial of the claim asserted, before and after litigation was filed. The insurer countered that the statutory bad faith action was barred because the court granted its motion for summary judgment, and therefore, the plaintiff had failed to obtain a "favorable resolution" of the underlying breach of contract claim. The trial court again granted summary judgment in the insurer's favor and the plaintiff appealed.

Appraisal Award Equals "Favorable Resolution"

Under Florida law, a statutory first-party bad faith action is premature until two conditions have been satisfied: "(1) the insurer raises no defense which would defeat coverage, or any such defense has been adjudicated adversely to the insurer; and, (2) the actual extent of the insured's loss must have been determined." Vest v...