A Florida federal district court recently held that an appraiser’s finding that an insurer’s settlement of a property claim was too low cannot, by itself, sustain a cause of action for statutory bad faith. 316 Inc. v. Maryland Cas. Co., Case No. 07cv528 (N.D.Fl., August 21, 2008).
Hurricane Ivan damaged commercial property owned by the insured, which submitted a claim to its insurer. The insurer acknowledged coverage and paid $3.8 million for the loss, but disagreed with the insured over the total amount of the loss, and sought an appraisal as provided in the policy. The appraisal resulted in an award of $6.8 million to the insured, and the insurer paid the balance. Subsequently, the insured sued the insurer for bad faith claims handling based on Florida Statutes Section 624.55, which allows a person to institute a civil action against an insurer when that person is damaged by the insurer’s failure to settle claims in good faith. The insurer moved for summary judgment.
In granting the insurer’s motion for summary judgment, the court held that the appraiser’s finding that the insurer owed additional policy benefits to the insured does not, by itself, indicate bad faith. The court also found that there was no undue delay on the part of the insurer in processing the claim or seeking an appraisal. The court further explained that, because the ultimate award was less than seventy-five percent of the policy’s $10 million aggregate limit, the insurer was not faced with a situation where it had a clear obligation to tender the policy limits. Therefore, the court concluded, if the insurer was unable to agree with its insured as to the total value of the loss, it had no alternative to seeking the appraisal.
The decision is currently on appeal to the Eleventh Circuit.
For an earlier discussion of the 316 case in which the court ruled that the insured had not stated a proper claim for punitive damages, click here.