What is a “Bad Faith” Claim?

Our Jacksonville personal injury attorneys frequently explain to our clients how bad faith claims work. There are two principal types of bad faith claims for personal injury cases in Florida. The first, called “third party bad faith,” involves claims against the insurance companies for persons and businesses responsible for causing injuries. The second, referred to as “first party bad faith,” involves claims against the injured person’s own insurance company.

The easiest way to understand third party bad faith claims is to put yourself in the position of someone who caused serious injuries in an accident. Imagine if you made a driving error and, as a result, someone lost a leg. Now, let’s say that you had $100,000.00 of bodily injury coverage to protect you in case of such an incident.

If the injured person offers to provide you a complete release of all liability in exchange for payment of your $100,000.00 in coverage, you would be greatly relieved. This is because, even though you have insurance, you are personally responsible for any damages you cause in excess of your insurance coverage. In our hypothetical, the full value of the claim for the person that lost a leg would likely be in excess of $2,000.000.00 and possible much, much more. The prospect of having a judgment against you for $1,900,000.00 or more is daunting, to say the least.

Now imagine your insurer decides against paying the $100,000.00 to resolve the claim. Perhaps, the insurer thinks there is some chance a jury might find that the car accident was not your fault. If $100,000.00 is its worse day, why should the insurer voluntary pay that amount? For you, this decision is a disaster as the most likely outcome is that a huge judgment gets entered against you that will haunt you for years. Your insurer is supposed to make “good faith” efforts to put your financial interest ahead of its own when making claims decisions. If it does not do so, it is acting in “bad faith.”

In order to deter this type of behavior, Florida courts have developed case law allowing the injured person to pursue the at-fault person’s insurance company for the full value of his or her injuries, instead of just the amount of the coverage at issue, if the insurer fails to settle the claim when it could and should have done so. This body of law provides financial incentive to the insurance company to settle claims, when in fairness to its insured, it should do so.

As lawyers handling personal injuries cases in Jacksonville, the first party bad faith claims we see typically arise with uninsured motorist coverage. Uninsured motorist coverage applies to cover you in the event you are injured in an auto accident and the at-fault driver has no insurance, leaves the scene of the crash, or has too little coverage to fully pay for your injuries.

For example, if an at-fault driver has $25,000.00 in bodily injury coverage and you purchased $100,000.00 of uninsured motorist coverage, you now have a total of $125,000.00 to reimburse you for injuries. If your claim is worth $50,000.00, the at-fault driver’s insurer would pay you $25,000.00 and your insurance company would pay an additional $25,000.00.

However, sometimes an injured person’s own insurer unreasonably refuses to pay a fair amount to that person. Again, if the insurer’s worst day is the limit of uninsured motorist coverage, why should it ever voluntarily pay that amount? Instead it could roll the dice and hope that jury values the claim much lower than what would normally be expected.

In response to this problem, the Florida legislature enacted Florida Statute § 624.155, to create first party bad faith claims. Pursuant to this statute, if a person believes his or her insurer is not offering fair value for an uninsured motorist claim, that person’s attorney can file a Civil Remedy Notice, which gives the insurer an additional 60 days to resolve the claim. If the insurer fails to do so, the injured person can proceed to a jury trial to determine the full value of the injuries at issue.

If that amount exceeds the uninsured motorist insurance coverage, then the person can bring a bad faith claim against the insurer. To win the bad faith claim, the injured person has to prove the insurer was unreasonable in failing to settle the claim for the amount specified in the Civil Remedy Notice.

Bad faith claims can be very complicated. If you have any question about how insurance bad faith claims operate in Florida, please contact our Jacksonville personal injury attorneys for a consultation.