In Bad-Faith Claims, Florida Appeals Court Scores One for Insurer, One Against
Remember George Costanza’s trick in “Seinfeld,” the 1990s TV sitcom? When he couldn’t (or didn’t want to) pay his rent or other expense he would conveniently “forget” to sign the check, buying himself a little more time.
In a South Florida assignment-of-benefits case that turned into a bad-faith claim, a restoration firm argued that the insurer employed a similar tactic when it made the check out to both the construction company and to the policyholder.
In Expert Inspections vs. United Property and Casualty, the dissenting opinion from a judge at Florida’s 4th District Court of Appeal pointed out that the insurer also sent the check to the wrong address.
“Although neither party disputes that the insurer ultimately mailed a check for the $1,995.00 amount, the insurer sent that payment to the wrong party,” Judge Alan Forst wrote in his dissent in the Jan. 5 decision. “Under Florida law, the assignee could not endorse the check mailed by the insurer without the signature of both the assignee and the insured.”
Nonetheless, the majority of the court’s three-judge panel sided with United, affirming the trial court’s decision that the insurer had followed the language of the policy and did not owe plaintiff’s attorneys’ fees in the case.
“It was not unreasonable for the insurance company to make the check payable to both the insured and the assignee, particularly since the AOB agreement did not assign all of the insured’s interest in the insurance policy to the assignee,” Judge Edward Artau wrote for the majority.
Some insurance attorneys have said this type of case exemplifies Florida’s overly litigious environment, in which some restoration companies and their attorneys are too quick to file bad-faith actions, over small amounts and even when a claim has been paid. On many claims, insurers have less than two weeks to respond or inspect the property, which is often not enough time to make a clear determination. Yet plaintiffs’ attorneys often use that as a trigger for bad faith claims – simply to gain fees, insurance firms have complained.
“The law, as it is now, benefits lawyers at the expense of consumers in Florida,” said Julie Nevins, who handles bad faith matters for the Stroock & Stroock & Lavan law firm in Miami.
The United Property dispute stemmed from water damage caused by Hurricane Irma in 2017. The homeowner assigned benefits to Expert, a mold remediation company. The company, also known as MoldExpert.com, made the repairs and submitted an invoice to United, along with a copy of the AOB agreement.
United apparently did not pay the invoice immediately. But three months later, after a second email from the restoration company, the insurer wrote the $1,995 check, the court explained. A year later, Expert Inspection filed suit against United for breach of contract, arguing that the AOB agreement directed the insurer to pay the assignee, not the insured and not both parties.
United then asked the Broward County clerk of court to deposit the check and told the restoration company that it would re-issue the check to Expert if the company would drop its lawsuit. United also argued that Expert was not entitled to attorneys’ fees because the firm was never forced to litigate, and that it never notified the insurer of any disagreement prior to filing the breach-of-contract suit.
The circuit court granted summary judgment in favor of United, noting that the check was mailed well before the lawsuit was filed. The majority of the appeals court panel agreed.
“The assignee alleges a breach of the insurance contract because the insurer did not abide by the instructions listed in the AOB agreement,” the majority noted. “However, the insurer cannot breach an agreement to which it has no privity.”
An AOB agreement may give the assignee the right to enforce an insurance policy, but it does not give the contractor the right to enforce terms of the agreement that are extraneous to the policy, the court said. The majority also held that the Uniform Commercial Code, which generally provides that debtors cannot discharge their obligations by paying the assignor, does not apply to insurance claims.
In addition, the AOB agreement was a limited assignment, keeping the insured in the loop on benefits. It also granted the restoration company limited power of attorney, so that Expert Inspections could have cashed the check simply by having the homeowner endorse it, the court said. The agreement also obligated the insured to cooperate to ensure that payment was received from the insurance company.
In another bad-faith claim decision handed down the same day, the 4th District Court of Appeal sided against USAA Casualty Insurance.
In Wendy Firtell and Brian Firtell vs. USAA, the court reversed the Broward County Circuit Court, finding that the trial court should not have granted judgment for the insurer.
After the Firtell’s Pembroke Pines home was damaged in Hurricane Irma, they filed a claim. USAA inspected but did not pay the full amount the homeowners had asked for. Following an appraisal process, the Firtells filed a bad-faith claim. The trial court dismissed that and granted summary judgment for the insurer.
The family appealed and the 4th DCA agreed with them, noting that summary judgment is proper only if no issues of material fact exist.
“The entry of summary judgment is … erroneous if different inferences can be drawn reasonably from those facts,” the per curiam opinion said, citing previous court rulings. The court remanded the case, noting that the issue of bad faith should be resolved by a jury.
In the USAA case, it was Judge Artau who dissented.
“The undisputed evidence shows that the insurer complied with the policy terms, reasonably investigated the claim, promptly participated in the appraisal process, and timely paid the appraisal award which was less than the amount its insured had claimed,” he wrote. “Under these circumstances—with no genuine disputed issues of fact—the trial court correctly concluded that no reasonable jury could find the insurer had engaged in bad faith.”