Nearly seven years have passed since Hurricane Wilma made landfall. And six years have passed since one particularly dissatisfied insured sued its insurer. The Florida Supreme Court recently barred that insured (as well as future Florida claimants) from bringing certain claims, including a claim for violation of Section 627.701(4)(a), Florida Statutes, relating to policies containing a separate hurricane deductible. See QBE Insurance Corp. v. Chalfonte Condominium Apartment Ass’n, No. SC 09-441 (May 31, 2012) (“Chalfonte”).
The insured filed its action in the Southern District of Florida, where the jury trial resulted in a $8,140,099.68 verdict for the insured. The trial court reduced the verdict to $7,237,223.88 – subtracting the amount of the hurricane deductible, as requested by the insurer, and adding prejudgment interest, as requested by the insured.
Both sides appealed. The insurer argued that it should have received a new trial because, inter alia, Florida law does not recognize a common law claim by an insured against an insurer for breach of the implied warranty of good faith and fair dealing based on the insurer’s failure to timely investigate an insured’s claim. The insured, on the other hand, argued the hurricane deductible should not apply because of the insurer’s failure to comply with the language and font size requirements of Section 627.701(4)(a). However, because of ambiguities in the case law, the Eleventh Circuit could not conclusively resolve the determinative issues on appeal. It thus certified five questions to the Florida Supreme Court.
The Supreme Court answered four of the five questions in the negative, which rendered moot the remaining question. The first two certified questions dealt with the claim for breach of the implied warranty of good faith and fair dealing by an insured against an insurer.
First, the Court found that Florida law does not “recognize a claim for breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer’s failure to investigate and assess the insured’s claim within a reasonable period of time.” Chalfonte at 4. Instead, “the only remedy available is the statutory bad-faith action created by section 624.155.” Id. at 5.
The Court rejected one of the insured’s primary arguments – that a claim for “breach of the implied warranty of good faith and fair dealing” is somehow distinct from a claim for “bad faith.” The Court’s foray into the legislative intent and history – not to mention the sheer length of analysis (nearly half of the “analysis” section) and breadth and number of string cites –evidence the Court’s awareness of the impact this decision will have.
The answer to the first question rendered moot the second certified question (“If Florida law recognizes a claim for breach of the implied warranty of good faith and fair dealing based on an insurer’s failure to investigate and assess its insured’s claim within a reasonable period of time, is the good faith and fair dealing claim subject to the same bifurcation requirement applicable to a bad faith claim under Fla. Stat. § 624.155?”).
Questions 3 and 4 arose out of Section 627.701(4)(a) of the Florida Statutes. This section, which relates to a policy containing a separate hurricane deductible, requires insurers to display specific language in a specific font type notifying the insured of the higher deductible for hurricane losses. The Court found that this section provided no express or implied private right of action (question 3) and that a noncompliant provision could not render a policy void and unenforceable (question 4). This conclusion comported with the trial court’s findings.
Finally, the Court found that “the language in an insurance policy mandating payments of benefits upon ‘entry of a final judgment’” did not require an insurer to pay its insured upon entry of judgment at the trial level. Even if a policy contains such a mandate, the insurer has not waived its right to obtain an automatic stay of execution pending review by posting a supersedeas bond, under Rule 9.310(b) of the Florida Rules of Appellate Procedure (which is the counterpart to Rule 62(d) of the Federal Rules of Civil Procedure).
In Chalfonte, the Florida Supreme Court rejected both the insured’s avoidance of Florida’s bad-faith statute (Section 624.155) as well as an attempt to infer a private right of action (Section 627.701(a)(4)). With respect to the hurricane deductible, the opinion will assist insurers in their enforcement of insurance contracts by holding the parties to the terms of the contract.