Note on Bad Faith Insurance Claims

The recent opinion in Braddy v. Infinity Assurance Ins. Co., 2016 WL 1446202 (M.D.Fla. 2016) discusses two important concepts when it comes to bad faith insurance claims.

First, the determination of insurance coverage MUST be decided before a party can proceed with a bad faith action against an insurance carrier. Braddy, supra, at *2. “A plaintiff must allege that there has been a determination not only of the amount of damages, but also that the insurance contract actually covered those damages.” Id. quoting Cabrera v. MGA Ins. Co., 2014 WL 868991 (M.D.Fla. 2014).

Second, there are two types of third-party bad faith claims. A statutory bad faith claim brought under Florida Statute s. 624.155 and a common law bad faith claim. While a plaintiff can plead both types of bad faith claims they cannot recover under both remedies. Braddy, supra, at *1.   A third-party bad faith claim arises when the liability insurer exposes its insured to an excess judgment when the insurer should have and could have resolved the third-party claim within policy limits. See Kelly v. Williams, 411 So.2d 902, 904 (Fla. 5th DCA 1982) (“The essence of a ‘bad faith’ insurance suit (whether it is brought by the insured or by the injured party standing in his place), is that the insurer breached its duty to its insured by failing to properly or promptly defend the claim (which may encompass its failure to make a good faith offer of settlement within the policy limits)-all of which results in the insured being exposed to an excess judgment.”).

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