Insurers in Florida are facing a new landscape following the passage of House Bill 837 in 2023. This law brings significant changes to how insurance companies handle claims and settlements, aiming to reduce the risks associated with bad faith litigation. While the law offers clearer guidelines for insurers, the fundamental requirement to act in good faith remains unchanged and is more important than ever.
Bad faith litigation has long been a concern for insurers in Florida, as it can lead to both legal troubles and damage to their reputations. The new law provides a framework that helps insurers better understand their responsibilities and how to manage claims effectively.
The origins of good faith obligations in Florida date back to common law, focusing initially on third-party liability claims. One landmark case, Boston Old Colony Ins. Co. v. Gutierrez, established key duties for insurers, such as advising insured individuals about settlement options and fully investigating claims. Over time, these principles were codified in Florida Statutes, which expanded the scope of bad faith liability to include both first- and third-party claims.
To protect themselves from potential bad faith claims, insurance professionals are encouraged to adopt best practices in claims handling. This includes thoroughly documenting all actions taken on a claim, communicating clearly and promptly with policyholders, and responding quickly to settlement demands. These steps help insurers demonstrate their good faith efforts and can be crucial if a claim leads to litigation.
House Bill 837 introduces several key reforms that insurers need to incorporate into their claims processes. One major change is the implementation of a 90-day safe harbor period. After receiving a claim with sufficient evidence, insurers now have 90 days to pay either the policy limits or the amount demanded. If they meet this deadline, they cannot be held liable for bad faith regarding that claim. However, it’s important to note that the clock does not start until the insurer receives adequate evidence to support the claim.
Another significant aspect of the new law clarifies that negligence alone does not equate to bad faith. This distinction, while recognized in the past, was sometimes blurred in court cases. The law now makes it clear that bad faith requires more than just simple errors or delays.
Additionally, the law allows courts to consider the actions of claimants and their attorneys when assessing whether an insurer acted in bad faith. This is a shift from past practices where only the insurer’s conduct was examined. Now, if claimants engage in tactics that could be seen as trying to create a bad faith situation, such as vague demands or withholding important documents, those actions can be taken into account.
The bill also addresses situations where multiple claimants are involved, such as in major accidents or mass torts. Insurers can now interplead policy limits without the fear of bad faith liability, providing a clearer path for resolving claims when resources are limited.
While these reforms provide clarity, they are still new, and how they will be interpreted by the courts remains to be seen. Insurers are advised to stay updated on these changes and continue following best practices in claims handling to minimize their risk of bad faith exposure.
As the insurance landscape evolves in Florida, the emphasis on good faith remains a crucial part of the claims process. Insurers must adapt to these changes while maintaining their commitment to fair and honest dealings with policyholders.