Citizens Property Insurance Corporation Immune to Statutory Bad Faith Claims
The Florida Supreme Court has decided unanimously that the Florida legislature did not intend for Citizens Property Insurance Corporation (a state-created entity that provides property insurance) to be liable for statutory, first-party bad faith claims in Citizens Property Insurance Corp. v. Perdido Sun Condominium Association, Inc., Case No. SC14-185 (Fla., May 14, 2015).
Citizens claimed immunity under Fla. Stat. 627.351(6)(s), which provides that:
There shall be no liability on the part of, and no cause of action of any nature shall arise against, any assessable insurer or its agents or employees, the corporation or its agents or employees, members of the board of governors or their respective designees at a board meeting, corporation committee members, or the office or its representatives, for any action taken by them in the performance of their duties or responsibilities under this subsection. Such immunity does not apply to:
(a) Any of the foregoing persons or entities for any willful tort … (Emphasis in opinion.)
Perdido argued that the “willful tort” statutory exception applied to first-party bad faith claims, and prevailed on that argument at the First District Court of Appeal. Perdido Sun Condominium Association, Inc., v. Citizens Property Insurance Corp., 129 So.3d 1210 (Fla. 1st DCA 2014). However, the First District Court of Appeal certified conflict with Citizens Property Insurance Corp. v. Garfinkel, 25 So.3d 62(Fla. 5th DCA 2009) (holding that Citizens is statutorily immune from bad faith claims), and also certified the following question to the Supreme Court, as one of great public importance:
WHETHER THE IMMUNITY OF CITIZENS PROPERTY INSURANCE CORPORATION, AS PROVIDED IN SECTION 627.351(6)(s), FLORIDA STATUTES, SHIELDS THE CORPORATION FROM SUIT UNDER THE CAUSE OF ACTION CREATED BY SECTION 624.155(1)(b), FLORIDA STATUTES[,] FOR NOT ATTEMPTING IN GOOD FAITH TO SETTLE CLAIMS? Perdido, 129 So.3d at 1213.
Perdido claimed that Citizens (1) refused to pay the full amount owed under the insurance policy; (2) refused to take part in the required appraisal process and instead used that process in an attempt to forestall litigation; (3) delayed payment of the appraisal award and improperly attempted to condition payment of the award upon the execution of a universal release; and (4) engaged in a pattern and practice of seeking to avoid or delay full settlement of claims.
Florida Supreme Court
The Supreme Court found that the legislature had not listed statutory first-party bad faith claims among the exceptions to immunity when it could easily have chosen to do so. On the other hand, the Supreme Court found it significant that the legislature did include language that gave immunity to Citizens for “any action taken by it in the performance of its duties or responsibilities under … subsection [627.351(6)(s)].”
Moreover, the Supreme Court did not agree with the First District Court of Appeal that the statutory cause of action for first-party bad faith is a tort or a “willful tort.” Instead, the Court cited the language of the Fifth District Court of Appeal opinion in Garfinkel, in holding that statutory first-party bad faith causes of action “now exist in Florida not because they are torts, but because they are a statutory cause of action. Accordingly, a first-party bad faith claim cannot be wedged into the statutory exception for willful torts because it is not a tort of any variety.” Citizens Property Insurance Corp. at page 3(citing Garfinkel, 25 So.3d, at 68-69).
The Supreme Court did not rule out the possibility that a “willful tort” could be alleged to avoid the exception to immunity, but noted that no additional allegations of willful misconduct outside the statutory bad faith claim had been alleged in Perdido’s complaint. Even though the complaint contained allegations that Citizens's conduct was “intentional, willful, wanton and malicious or done in a reckless disregard for Perdido Sun’s rights,” the Supreme Court found that those allegations were made to preserve Perdido’s right to claim punitive damages and not in an effort to plead a separate willful tort.
This decision confers an obvious benefit on Citizens that private insurers do not enjoy. Critics of the opinion say that Citizens has no incentive to handle claims quickly and correctly, and that, as a practical matter, this decision actually creates a disincentive for it to do so. Proponents of the decision counter that Citizens will not be burdened by abuse of bad faith litigation that drives up rates to policyholders.
Ultimately, the policy issues related to this decision will be made by the legislature. Only time will tell whether the plaintiff’s bar develops new strategies in pleading “willful torts” or whether any legislative changes to the list of exceptions to immunity for bad faith actions are on the horizon. Until then, we note that the Supreme Court’s decision is consistent with notions of sovereign immunity. That doctrine survives to protect the public treasury, reducing the remedies of some in favor of the benefit to the many.