Landers v. State Farm

• Court: District Court of Appeal of Florida
• Decided: January 15, 2018
• Docket: 5D15-4032
• Status: Published

Opinion

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

PHILLIP LANDERS,

Appellant,

v. Case No. 5D15-4032

STATE FARM FLORIDA INSURANCE COMPANY,

Appellee. ________________________________/

Opinion filed January 19, 2018

Appeal from the Circuit Court for Seminole County, Jessica J. Recksiedler, Judge.

George A. Vaka and Nancy A. Lauten, of Vaka Law Group, PL, Tampa, and Kelly L. Kubiak, of Merlin Law Group, Tampa, for Appellant.

Matthew J. Lavisky, Anthony J. Russo and Lee Craig, of Butler Weihmuller Katz Craig LLP, for Appellee.

ON MOTION FOR REHEARING

COHEN, C.J.

Upon consideration of Appellee State Farm Florida Insurance Company’s Motion

for Rehearing, we grant the motion, withdraw our prior opinion, and substitute this one in

its place. In this appeal, we consider whether, when an insurance contract provides for an

appraisal process, an insured must wait until that process is completed before filing a civil

remedy notice pursuant to section 624.155, Florida Statutes (2008). Because we find no

such limitation in the statute or relevant case law, we reverse.

In 2009, Phillip Landers’s home sustained a loss from suspected sinkhole activity.

He submitted a claim to his insurer, State Farm Florida Insurance Company (“State

Farm”). 1 State Farm hired SDII Global Corporation (“SDII”) to conduct a subsidence

investigation. SDII verified that sinkhole activity was the cause of the damage, and State

Farm admitted coverage. SDll initially concluded that 975 cubic yards of grout needed to

be injected into forty-nine holes around the home’s perimeter. SDII did not recommend

underpinning. After considering the report of a neutral evaluator from the Department of

Financial Services pursuant to section 627.7074, Florida Statutes (2008), SDII amended

its report to require an additional fifteen grout injection points.

Landers obtained an independent opinion from Biller Reinhart Structural Group

(“Reinhart”). In Reinhart’s opinion, proper stabilization required underpinning. 2 State

Farm provided Reinhart’s report for review by the neutral evaluator. The neutral evaluator

concluded that underpinning was unwarranted. While State Farm demanded appraisal

under the policy to resolve the parties’ disagreement over the amount of the loss, 3

1 Landers’s policy provided coverage in excess of $1,000,000. 2 The neutral evaluator’s cost of remediation was estimated at approximately $350,000. Reinhart’s cost of remediation was closer to $1,000,000. 3 The appraisal clause of the insurance policy stated:

If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal.

2 Landers agreed, pursuant to the terms of the insurance contract, to proceed with SDll’s

recommended repair plan, despite his belief that the repairs were inadequate. State Farm

placed its appraisal demand on hold while the stabilization repairs were made. Further

appraisal would be required to address cosmetic repairs to the home.

After the repairs were completed in September 2011, State Farm reiterated its

request for appraisal of the cosmetic damage to the home. The home continued to

experience damage after repairs were completed. As a result, Landers hired Sonny

Gulati, a geotechnical engineer, to examine the property. In January 2012, while Gulati’s

report was pending, Landers filed a civil remedy notice (“CRN”), alleging, among other

things, claim delay, failure to promptly and properly investigate the claim, failure to adjust

the loss, and the failure to tender policy limits. Landers contended that the repairs were

completed pursuant to State Farm’s expert’s recommendation, yet his home remained

unlivable. Landers demanded the immediate tender of “the policy limits for dwelling . . .

of $1,026,500.00 minus any prior payments that have been made to the insured . . . so

that [Landers] may adequately complete the repairs [he] has started to [his] home.” In

response, State Farm requested that all issues be submitted to appraisal.

In March 2012, Landers brought suit against State Farm for breach of contract. In

that suit, State Farm sought to compel appraisal, which Landers opposed. The circuit

If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. . . . The appraisers shall then set the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss.

3 CASE No. 5D15-4032

NICHOLS, D., Associate Judge, concurring specially, with opinion.

I concur with the opinion of the Court and write to specifically address the “Loss

Payment” provision of the insurance contract.

It is undisputed that there is a provision in the insurance contract that provides in

the event of a disagreement:

[l]oss will be payable: . . . 60 days after [insurer] receive[s] [insured’s] proof of loss and:

(1) there is an entry of a final judgment; or

(2) there is a filing on an appraisal award with us.

As stated by the majority, bad-faith claims are governed by section 624.155,

Florida Statutes. Although State Farm paid the claim within sixty days of the appraisal

award, section 624.155(b)(1) specifically provides:

(1) Any person may bring a civil action against an insurer when such person is damaged:

....

(b) By the commission of any of the following acts by the insurer:

1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests . . . .

§ 624.155(1)(b)1., Fla. Stat. (2008).

State Farm argues that because it paid the claim within sixty days of the completion

of the appraisal process as set forth in the insurance contract, it is immune from the

9 application of section 624.155. No language in the statute or the contract prohibited

Landers from filing a civil remedy notice under the circumstances of this case.

State Farm’s position implies that an insurer could cause delays, or otherwise act

in bad faith, so long as payment was made within the sixty-day time period of the appraisal

award with impunity. State Farm’s position would render the bad-faith statute

meaningless.

No opinion is expressed on the merits of Lander’s bad-faith cause of action. As the

majority aptly concludes, “[w]hether State Farm actually acted in bad faith in resolving the

claim presents a question of fact that remains to be resolved.”

10 remedy authorized by the statute. Id. § 624.155(3)(b). During the sixty-day period, the

insurer has an opportunity to cure the alleged violation—no action will lie if, within those

sixty days, “the damages are paid or the circumstances giving rise to the violation are

corrected.”6 See id. § 624.155(3)(d).

There are three prerequisites to filing a statutory bad-faith claim: (1) determination

of the insurer’s liability for coverage; (2) determination of the extent of the insured’s

damages; and (3) the required notice must be filed under section 624.155(3)(a). See

Cammarata v. State Farm Fla. Ins. Co., 152 So. 3d 606, 612 (Fla. 4th DCA 2014). The

settlement of a sinkhole claim via the appraisal process is sufficient to satisfy the first two

requirements. See id. (finding that appraisal award was “‘favorable resolution’ of an action

for insurance benefits, so that [the insured] . . . satisfied the necessary prerequisite to

6 In Talat Enterprises, Inc. v. Aetna Casualty & Surety Co., 753 So. 2d 1278, 1284 (Fla. 2000), the Florida Supreme Court explained that, “in creating this statutory remedy for bad-faith actions, the Legislature provided this sixty day window as a last opportunity for insurers to comply with their claim-handling obligations when a good-faith decision by the insurer would indicate that contractual benefits are owed.” Furthermore, “[t]he purpose of the civil remedy notice is to give the insurer one last chance to settle a claim with its insured and avoid unnecessary bad faith litigation—not to give the insured a right of action to proceed against the insurer even after the insured’s claim has been paid or resolved.” Lane v. Westfield Ins. Co., 862 So. 2d 774, 779 (Fla. 5th DCA 2003).

In Talat, the insured obtained an appraisal award that was paid in full before the insured ever filed a CRN. 753 So. 2d at 1283. Accordingly, the insured did not have a statutory bad-faith claim in that case because the insurer remedied the claim before the expiration of the sixty-day period following the CRN. Talat did not address and does not stand for the proposition that a CRN filed after appraisal has been demanded is a legal nullity as State Farm argues.

6 filing a bad faith claim” (alteration in original) (quoting Trafalgar at Greenacres, Ltd. v.

Zurich Am. Ins. Co., 100 So. 3d 1155, 1158 (Fla. 4th DCA 2012))). 7

State Farm argues that the CRN is not effective until all of the contractual

preconditions to suit are met and there has been a final determination of coverage and

the amount owed. The plain language of section 624.155(3)(d) provides no time limitation

for when a CRN may be filed and does not require a final determination of coverage and

damages before it is filed. The statute simply states that “no action shall lie” if the bad-

faith allegation is corrected or the damages are paid within sixty days of the insurer

receiving the notice.

This case is controlled by Vest v. Travelers Insurance Co., 753 So. 2d 1270, 1272

(Fla. 2000). In Vest, the Florida Supreme Court expressly noted that under section

624.155, “there is no statutory requirement which prevents the insured from sending the

statutory notice before there is a determination of liability or damages. Nor is the insurer’s

appropriate response to that notice dependant on such a determination.” 753 So. 2d at

1275. Vest clarifies that the purpose of the CRN is to facilitate and encourage good-faith

efforts to timely settle claims before litigation, not to vindicate continuing efforts to delay.

Filing a CRN before the appraisal process is complete and damages are determined does

not render the CRN a legal nullity, precluding Landers’s bad-faith claim. 8

7 The trial court correctly relied on Cammarata for the proposition that a bad-faith claim is not ripe until the appraisal process is complete. However, a finding that an action is not ripe does not mean that the CRN was not appropriately filed. 8Federal courts that have addressed this issue likewise have reached the merits of bad-faith claims, even when the CRN was filed after the invocation of appraisal. See Fox Haven of Foxfire Condo. IV Ass’n v. Nationwide Mut. Fire Ins. Co., No. 2:13-CV-399- FTM-29CM, 2015 WL 667935, at *1 (M.D. Fla. Feb. 17, 2015) (denying insurer’s motion for summary judgment as facts did not demonstrate that insurer acted in good faith as a

7 Preventing an insured from filing a CRN before coverage and liability have been

conclusively established would frustrate the purpose of the statute by further delaying the

time necessary to assess and pay out claims and discouraging insurers from taking

timely, independent action on claims. Accordingly, we find that pursuant to the plain

language of section 624.155(1)(d), the fact that the appraisal process is ongoing does not

render a CRN filed during that process a legal nullity. Once the appraisal process is

complete, and a legally sufficient CRN had previously been provided, the conditions

precedent to filing a statutory bad-faith claim are met. Cf. Cammarata, 152 So. 3d at 612.

In this case, Landers filed his CRN before the appraisal process was complete.

State Farm did not cure the alleged violation within the sixty-day window in section

624.155(3)(d). Landers’s position is that had State Farm properly investigated his claim,

it would have known that the subsurface repair plan was inadequate. Whether State Farm

actually acted in bad faith in resolving his claim presents a question of fact that remains

to be resolved. Yet, nothing in the statute or case law precludes the filing of a CRN while

a demand for appraisal is outstanding. We reverse the order granting summary judgment

and remand for further proceedings.

REVERSED and REMANDED.

NICHOLS, D., Associate Judge, concurs, and concurs specially with opinion. BERGER, J., concurs in part and dissents in part, with opinion.

matter of law; insured demanded appraisal and then filed CRN while the appraisal process was ongoing); see also 316, Inc. v. Maryland Cas. Co., 625 F. Supp. 2d 1187, 1193 (N.D. Fla. 2008).

8 CASE No. 5D15-4032

NICHOLS, D., Associate Judge, concurring specially, with opinion.

I concur with the opinion of the Court and write to specifically address the “Loss

It is undisputed that there is a provision in the insurance contract that provides in

[l]oss will be payable: . . . 60 days after [insurer] receive[s] [insured’s] proof of loss and:

As stated by the majority, bad-faith claims are governed by section 624.155,

Florida Statutes. Although State Farm paid the claim within sixty days of the appraisal

(1) Any person may bring a civil action against an insurer when such person is damaged:

(b) By the commission of any of the following acts by the insurer:

1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests . . . .

State Farm argues that because it paid the claim within sixty days of the completion

of the appraisal process as set forth in the insurance contract, it is immune from the

9 application of section 624.155. No language in the statute or the contract prohibited

Landers from filing a civil remedy notice under the circumstances of this case.

State Farm’s position implies that an insurer could cause delays, or otherwise act

in bad faith, so long as payment was made within the sixty-day time period of the appraisal

award with impunity. State Farm’s position would render the bad-faith statute

No opinion is expressed on the merits of Lander’s bad-faith cause of action. As the

majority aptly concludes, “[w]hether State Farm actually acted in bad faith in resolving the

claim presents a question of fact that remains to be resolved.”

10 CASE NO. 5D15-4032

BERGER, J., concurring in part and dissenting in part, with opinion.

I agree with the majority that nothing precludes the filing of a CRN while a demand

for appraisal is outstanding. However, because I also agree with the trial court that no

bad faith claim can be maintained under the facts of this case, I would affirm the order

granting summary judgment. Accordingly, in all other respects, I dissent.