As if Hurricanes Weren’t Bad Enough — Florida’s Supreme Court Tackles Bad Faith.

A case that may influence future hurricane claims in Florida — and perhaps bad faith claims in general — was recently before the Florida Supreme Court on certification from the 11th Circuit Court of Appeals.

In Chalfonte Condominium Apartment Ass’n, Inc. v. QBE Ins. Corp., S.D. Fl., No. 06-81046-CV-DMM, a Florida condominium association won an $8.1 million jury verdict against its insurer for its claim after Hurricane Wilma in 2005. In its lawsuit, the condo association set forth two claims against its insurer: breach of contract and breach of implied obligation to act in good faith. The trial court allowed the insured to present evidence at trial — before the jury had assessed the amount of the insured’s damages — that it took the insurer about 18 months to assess damages. On appeal, the insurer argued that the evidence “tainted” the damages portion of the trial and thus the jury increased the insured’s damages award after learning about the insurer’s alleged delay tactics.

When confronted with the appeal, the 11th Circuit asked the Florida Supreme Court to opine on whether an insured’s claim of breach of good faith should be treated as a claim of bad faith. This is important because generally, evidence supporting a bad faith claim is presented only after the jury has assessed the amount of damages under a breach of contract claim to avoid prejudice against the insurer. QBE argued that claims of bad faith and lack of good faith are equivalent in this respect and the trial court erred in allowing the evidence to go before the jury.

At oral argument, the Florida justices seemed receptive to the argument that the insured’s presentation of the claim as lack of good faith rather than as bad faith “is a distinction without a difference.” Some justices also stressed that potential prejudice to the insurer is one of the reasons that bad faith claims should not be brought together with breach of contract claims.

We now shall have to wait and see if sympathy at oral argument translates into good law.

If you have any questions about this post, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.

Specials thanks to Mendel Simon for his contributions to this post.

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