In a somewhat confusing opinion, the Florida Supreme Court ruled on May 15, 2015, that Citizens Property Insurance Corporation does not have to act in good faith with respect to settlement negotiations. In Citizens Property Ins. Corp. v. Perdido Sun Condominium Ass’n, Inc., 40 Fla. L. Weekly S265a (Fla. May 14, 2015), the Court held that deliberately failing to act in good faith to settle claims is not a “willful tort” and therefore does not place it on the list of statutory exceptions to the immunity given by Fla. Stat. § 627.351 (6)(s).1
This means that, in effect, Citizens can refuse to negotiate or settle a case, no matter how desperately the policyholder is deserving of a resolution, and there is no legal consequence to Citizens’ actions (other than an ordinary lawsuit, of course). Every other insurance company in the state of Florida is subject to what is known as “Bad Faith” if the insurance company refuses to negotiate reasonably. A company found to be acting in bad faith is subject to damages irrespective of, and potentially in excess of, the policy limits. This serves as a deterrent to misbehavior by insurance companies. Citizens, however, was given a pass by the Florida Supreme Court.
In its opinion, the Florida Supreme Court stated, “[T]he Legislature chose to immunize Citizens for ‘any action taken by [it] in the performance of [its] duties or responsibilities under…subsection [627.351(6)(s)],’ which necessarily includes a breach of the duty of good faith.” The Court was not persuaded that failing to act in good faith is a “willful tort” at least in the full context of the statute.
The Court did seem to carve out a possible exception, however. In extreme cases of egregious and outrageous actions, it appears that Citizens can still be subject to a bad faith lawsuit. The Court held that the instant case had no such allegations and therefore dismissal was appropriate. In this regard, the Court cited to prior precedent and stated, “As we have previously recognized, ‘where a plaintiff claims a defendant engaged in egregious and outrageous actions, bad faith can be elevated to a willful tort, an issue that could turn on the facts of the case.” Citizens Prop. Ins. Corp. v. San Perdido Ass’n, 104 So. 3d 344, 355 n. 7 (Fla. 2012).
Assuming the underlying facts support it, the plaintiff in Perdido Sun could simply amend its complaint to allege egregious and outrageous actions by Citizens and apparently survive a dismissal motion. In any event, it may be too soon to say the sky is falling. Citizens still has a statutory duty to act in good faith and if it acts in blatant disregard for its policyholders, it is still subject to a bad faith suit.
1 Fla. Stat. § 627.351 states in pertinent part: