18 Fla. L. Weekly Supp. 1142a
Online Reference: FLWSUPP 1811WILD
Insurance — Bad faith — Appraisal award merely quantifies amount of loss and does not determine insurer’s liability and, therefore, is not determination of damages and liability satisfying condition precedent to insured’s bad faith claim against insurer — Civil remedy notice — Insured’s demand for appraisal waived claim under civil remedy notice — Where issue of whether there is cause of action for common law bad faith as to first party claims is before state supreme court as certified question, insurer’s motion for summary judgment on claim for breach of implied covenant of good faith and fair dealing is denied without prejudice pending supreme court decision
WILD ENTERPRISES, INC., d/b/a Kingsley Jewelry, Plaintiff, vs. ASSURANCE COMPANY OF AMERICA, Defendant. Circuit Court, 4th Judicial Circuit in and for Clay County. Case No. 2010-CA-1843, Division A. June 13, 2011. Don Lester, Judge. Counsel: Michael Higer & Valorie Chavin, Higer, Lichter & Givner, LLP, Aventura, for Plaintiff. Lee Craig & Matthew J. Lavisky, Butler, Pappas, Weihmuller, Katz, Craig, LLP, Tampa, for Defendant.
ORDER ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This cause came before the Court on May 3, 2011, on the defendant’s motion for summary judgment (the “Motion”). The Court has reviewed the parties’ written submissions, the case law authority provided and argued by the parties, and the pertinent evidence in the record. The Court has also conducted independent legal research.
FACTUAL AND PROCEDURAL HISTORY
The plaintiff, Wild Enterprises, Inc. (“Wild”), is engaged in the jewelry business. In April 2009, the defendant, Assurance Company of America (“Assurance”) issued that certain Precision Jewelers Block Policy (the “Policy”) naming Wild as the first named insured. The Policy insured Wild for covered losses for property located at Wild’s business premises, with a limit of $478,657.
On June 26, 2009, Wild reported to Assurance a loss due to a burglary. On July 1, 2009, Wild retained Joseph Zevuloni (“Zevuloni”) as its public adjuster with authority to represent Wild with respect to its property loss claim.
On February 1, 2010, attorneys acting on behalf of Wild filed a civil remedy notice of insurer violations (the “Civil Remedy Notice”) with the Florida Department of Financial Services. On February 11, 2010, Zevuloni, acting on behalf of Wild, made a written demand on Assurance invoking the Policy’s appraisal provision.
On August 6, 2010, the appraisal panel chosen pursuant to the Policy’s appraisal provision issued an award. On August 18, 2010, Assurance paid the appraisal award, less amounts previously paid to Wild.
Shortly after the appraisal award was paid, the plaintiff instituted this action by filing a four-count complaint asserting causes of action for breach of Sections 624.155 and 626.9541, Florida Statutes (“statutory bad faith”), breach of the implied covenant of good faith and fair dealing, breach of contract and a claim to appoint an umpire and compel an appraisal.
Assurance filed a motion to dismiss the complaint. After the hearing on the motion to dismiss, this Court entered an order dismissing with prejudice counts three (breach of contract) and four (request for an appraisal), leaving only the statutory bad faith and breach of implied covenant of good faith and fair dealing claims pending.
Assurance then filed the Motion with respect to the two remaining counts. As to count one for statutory bad faith, Assurance contends that summary judgment should be entered in its favor because the breach of contract claim in this action was not resolved in Wild’s favor. Assurance further asserts that it cured the Civil Remedy Notice, and in any event the Civil Remedy Notice is defective and therefore null. Finally, Assurance claims that Florida has not recognized a common law claim for bad faith, and summary judgment should be entered in its favor on count two for breach of the implied covenant of good faith and fair dealing.
Wild counters that there has in fact been a determination in its favor on its claim for breach of contract. Wild’s position is that the appraisal and subsequent award satisfy the condition precedent under Florida law that there be a determination of liability and damages in the insured’s favor before an action for bad faith may be maintained. As to the common law claim, Wild points to recent developments in the federal courts applying Florida law suggesting that a first-party claim for common law bad faith does exist.
LEGAL ANALYSIS
A. Satisfaction of Condition Precedent
Florida law is well settled that an insured’s claim for bad faith against an insurer cannot be maintained until there has been a determination of liability and damages. Blanchard v. State Farm Mutual Automobile Ins. Co., 575 So.2d 1289 (Fla. 1991); Imhof v. Nationwide Mutual Ins. Co., 643 So.2d 617 (Fla, 1994); Vest v. Travelers Ins. Co., 753 So.2d 1270 (Fla. 2000) [25 Fla. L. Weekly S242b]. While the earlier cases seem to focus on issues of judicial economy or potential undue prejudice to the insurer when a breach of contract claim is tried along with a bad faith claim, later cases appear to treat this requirement as a condition precedent to a bad faith action. North Pointe Ins. Co. v. Tomas, 999 So.2d 728 (Fla. 3rd DCA 2008) [34 Fla. L. Weekly D54c]; State Farm Mutual Automobile Ins. Co. v. O’Hearn, 975 So.2d 633 (Fla. 2nd DCA 2008) [33 Fla. L. Weekly D708a]; Hartford Ins. Co. v. Mainstream Construction Group, 864 So.2d 1270 (Fla. 5th DCA 2004) [29 Fla. L. Weekly D363a].
The question then naturally turned to what constitutes a “determination.” It has been held that paying policy limits after institution of litigation on a breach of contract claim satisfies the requirement, on the ground that this is tantamount to a confession of judgment. Brookins v. Goodson, 640 So.2d 110 (Fla. 4th DCA 1994). Also, an arbitration which determines that the insurer breached the insurance contract will suffice. Dadeland Depot, Inc. v. St. Paul Fire and Marine Ins. Co., 945 So.2d 1216 (Fla. 2006) [31 Fla. L. Weekly S882a].
As stated above, a determination in the insured’s favor on its breach of contract claim against the insurer is a condition precedent to the bad faith action. It is axiomatic that to prevail on a claim for breach of contract, a party must prove both liability and damages. It is clear, therefore, why the courts in Brookins and Dadeland concluded as they did, because confessing judgment after litigation has been filed constitutes an admission of both liability and damages, and in Dadeland, the arbitration award at issue determined both liability and damages.
The narrow question presented herein is whether, as a matter of law, an appraisal award rendered pursuant to the Policy has the attributes of a confession of judgment or an arbitration award that determines both liability and damages. The Court concludes that it does not.
As pointed out by Assurance, an appraisal is not legal work arising from an insurance company’s denial of coverage or breach of contract. It is simply work done within the terms of the contract to resolve the claim. Hill v. State Farm Florida Ins. Co., 35 So.3rd 956 (Fla. 2nd DCA 2010) [35 Fla. L. Weekly D1041a]. Other decisions support the proposition that appraisals performed pursuant to an insurance policy merely quantify the amount of an insured’s claim and do not determine liability of the insurer therefor. Hanover Fire Ins. Co. v. Lewis, 10 So. 297 (Fla. 1891); Paradise Plaza Condominium Association, Inc. v. The Reinsurance Corp. of New York, 685 So.2d 937 (Fla. 3rd DCA 1996) [22 Fla. L. Weekly D73a]; American Reliance Ins. Co. v. Kiet Investments, Inc. 703 So.2d 1190 (Fla. 3rd DCA 1998) [23 Fla. L. Weekly D69a].
The reason for this is straightforward. Whether an arbitration or an appraisal, the arbitrator or panel can only decide what is submitted for determination. Romano v. Goodlette Office Park, Ltd., 700 So.2d 62 (Fla. 2nd DCA 1997) [22 Fla. L. Weekly D2240a]. As stated by the Supreme Court in Hanover:
The fact that the amount thus fixed by the arbitrators was not paid or tendered has nothing to do with the question whatever. Both in the policy and in the subsequent submission to the appraisers the liability of the insurers was expressly excepted and reserved from the consideration of said arbitrators. The naked question submitted to them was: What is the amount of the damage here? Whether the insurers were legally liable, or obligated to pay that loss, was not submitted to them and did not enter into their sphere of inquiry, nor into their award, and depended upon the settlement and conditions growing out of the contract between the parties.
Hanover, at 303. The appraisal award issued in this matter clearly does not decide the issue of whether Assurance breached the Policy, but rather, as in Hanover, merely quantifies the amount of Wild’s loss.
Assurance also contends, without citation of authority, that participating in the appraisal, which was demanded after filing of the Civil Remedy Notice, and paying the appraisal award after expiration of the sixty-day cure period, constitutes a cure of the civil remedy notice. While the Court has exhaustively researched this issue and found no cases presenting this precise factual scenario, it is not necessary to the Court’s decision herein.
However, the Court does believe that presenting a demand for appraisal after serving a civil remedy notice likely constitutes a waiver, since a demand for appraisal, with its different time frames, is inconsistent with a civil remedy notice. Certainly, demand for an appraisal can act as a waiver of rights previously held. See, for example, Scottsdale Ins. Co. v. Desalvo, 666 So.2d 944 (Fla. 1st DCA 1995) [21 Fla. L. Weekly D129a] (insurer’s demand for appraisal constituted waiver of coverage defenses); Paradise Plaza Condominium Assn., Inc. v. The Reinsurance Corp. of New York, 685 So.2d 937 (Fla. 3rd DCA 1996)(insurer demand for appraisal does not constitute waiver of other defenses due to specific non-waiver provision in the policy). The demand for appraisal herein did not reserve the plaintiff’s rights under the Civil Remedy Notice.
Since there has been no determination that Assurance breached the insurance contract, and since the plaintiff’s breach of contract claim is no longer before the Court, summary judgment should be granted as to Wild’s statutory bad faith claim.1
B. Breach of the Implied Covenant of Good Faith and Fair Dealing
As to this claim, the Court agrees with Assurance that the Florida courts have consistently held that there is no cause of action for common law bad faith as to first-party claims. However, there have been recent developments in the federal courts applying Florida law which suggest that such a claim can be pursued, and this precise issue is currently before the Florida Supreme Court as a certified question from the Eleventh Circuit. Chalfonte Condominium Assn., Inc. v. QBE Insurance Corp., 561 F.3d 1267 (11th Cir. 2009) [21 Fla. L. Weekly Fed. C1627a]. The Court believes that the more prudent course would be to deny the Motion without prejudice pending further guidance from the Supreme Court.
Based on the foregoing, it is therefore
ORDERED as follows:
1. The defendant’s motion for summary judgment as to Count One is granted.
2. The defendant’s motion for summary judgment as to Count Two is denied without prejudice.
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1The Court declines to address Assurance’s claim that the Civil Remedy Notice was defective.
