Should Citizens be Immune from First Party Bad Faith Claims?

In May of 2015 the Florida Supreme Court ruled, in the case of Citizens Property Insurance Corp. v. Perdido Sun Condominium Association, Inc., 164 So. 3d 663 (2015), that Citizens Property Insurance Corporation (“Citizens”) is immune from statutory liability for bad faith actions.

As discussed on our site’s More Information page, Florida’s bad faith statute (Fla. Stat. 624.155) allows insureds to seek extra-contractual damages if it can be shown that an insurer acted in bad faith by, for example, failing to act reasonably, failing to undertake a prompt investigation of the loss, or improperly denying or underpaying on valid claims. The Statute is intended to force insurers to thoroughly and properly investigate all claims and to punish those who don’t.

If you don’t know, Citizens was created by the legislature in 2002 as a non-profit tax exempt government entity. Citizens’ purpose is to provide property insurance to high-risk areas where the private insurers wont write policies (such as coastal areas with a high hurricane risk). If you have property insurance in Florida, even if not with Citizens, then chances are you help pay for it through your insurance premiums. Take a look at your last bill; you will see it on there.

In the Perdido case, the Court looked at the language of Florida Statute 627.351(6)(s)1., which created Citizens, to decide whether the legislature intended for Citizens to be immune from bad faith litigation. The Court noted that there was no explicit provision in the Statute stating that Citizens is not immune from statutory bad faith claims and found this to be crucial, because the legislature did explicitly list other exemptions to Citizens’ statutory immunity, such as making it liable for attorneys’ fees under Fla. Stat. 627.428. Perdido, at 666. The Court summed up its opinion by stating that, “where the Legislature articulates clear exceptions to a statute, no other exceptions may be implied.” Id. [internal citations omitted] Essentially, the Court ruled that it is up to the legislature to pass a law holding Citizens responsible for bad faith actions.

Whether or not you agree with the Court’s final ruling, it is now the law of the land in Florida. If you have an insurance policy with Citizens and you feel that they have acted in bad faith while investigating your claim, you have no recourse under the Statute. It is important to understand that the Court did not rule on whether this outcome is right; it merely applied the law as it stands today to the facts presented to it. Critics of the decision say that Citizens now has an advantage over other insurers; it has no incentive to act quickly and thoroughly to investigate and adjust claims made by its policy-holders. On the other hand, supporters of the decision point out that Citizens will not be burdened by costly and time-consuming litigation brought on by excessive bad faith claims. Since Citizens is funded by the tax payers of Florida, they claim this will help save everybody money.

Which side is right has yet to be decided. Citizens normally processes the majority of its claims after a major weather event. Hurricane Wilma, for instance, cost the insurer approximately $1.7 billion dollars in claims. In fact, Citizens is still dealing with litigation arising from Wilma. Luckily, Florida has not suffered such a devastating event since Wilma hit in 2005. The 2015 hurricane season was no exception. However, it is very possible that our luck could run out in the next few years. If that happens, Citizens will see another spike in claims. How Citizens responds to the next disaster will be a major factor in determining whether the legislature decides to make it responsible for statutory bad faith actions. If there is enough public outcry, then we could see a new amendment to the statute. Only time will tell.


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