Insurance Bad Faith

Bad faith in the context of an insurance company occurs when such company acts unreasonably in denying or delaying benefits owed to you or a loved one as expressed within the insurance policy.


  • An unreasonable claim denial
  • An unreasonable delay in payment or stall tactics
  • Failure to thoroughly investigate the claim
  • Failure to investigate a claim in a timely manner
  • Unreasonable interpretation of the language contained in the insurance policy

As Clearwater personal injury attorneys we often deal with insurance carrier conduct that is unreasonable and egregious in the context of claims evaluations. Insurance carriers via the Claims Adjuster often make decisions based on corporate policy and training and employ a cookie cutter process by which they evaluate claims as opposed to looking at each individual claim and examining the merits one at a time. All too often we deal with adjusters that make blanket statements that the property damage could not have caused the injury my client is complaining about despite their lack of formal medical training or certification as either a physician or a biomechanical engineer. Even more shocking is that we will produce evidence to the contrary and the Adjuster will simply ignore us and never retain an expert in either area (Physician or Bio-mechanical Engineer) much to the detriment of their insured.

A duty of good faith and fair dealing is imputed into every contract by Florida law. In the context of the personal automobile policy, the duty is particularly defined by Florida law because of the fiduciary relationship that is created when the insured surrenders to the insurer all control over the handling of the claim including all decisions regarding the evaluation of policyholder’s exposure to loss. Boston Old Colony Insurance vs. Guiterrez, 386 So.2d 783 (Fla. 1980.). In other words, the insured is relying upon his/her carrier to determine whether the value of the claim may exceed the policy limits and available coverage of the insured. Thus, the insured is relying on the insurance carrier to look out for its best interests. Unfortunately, the carrier generally looks out for its corporate bottom line much to the peril of the insured.

Pursuant to Florida Bad Faith Law, the insurer has a non-delegable duty to communicate with its insured concerning all settlement opportunities. Odom vs. Canal Ins. Co., 582 So.2d 1203, (Fla. 1st DCA 1991). I cannot tell you how often the insurance carriers we deal with, fail to alert their insured of the letters we send to their attention wherein we attempt to amicably settle the claim within the policy limits. In fact, the insured is often kept in the dark about such communications. In many instances, we learn at a later date (after lawsuit is filed) that had the insured known or been made aware that they could have avoided personal exposure had their insurance carrier paid out the policy limits that we demanded, they would have kindly asked their carrier to comply with our demand. However, the insured never learned about our demand until it was too late as their insurance carrier failed to communicate the offer and satisfy the fiduciary duty owed to its inusred.

The insurer must exercise control over the claim process in good faith and with due regard for its policyholder by placing the policyholder’s interest first. When the insurer fails to satisfy its fiduciary duties to its policyholder, the insurer shall be held liable for any resulting damages including the resulting judgment against the policyholder in excess of the policyholder’s underlying limits. Campbell vs. GEICO, 306 So.2d 525 (Fla. 1975.). This allows plaintiff attorneys to hold insurance carriers responsible for not resolving claims that it could have and should have had it acted in a reasonable manner and looked out for the best interests of the insured.

The insurer owes its insured the “utmost good faith” in evaluating and processing claims against its policyholder(s). Baxter vs. Royal indemnity Co., 285 So.2d 652, 655 (Fla. 1st DCA 1973.) The insurer possesses a non-delegable duty to completely and accurately investigate the claim in order to evaluate the claim on behalf of the policyholder. We often see insurance adjusters wait until they receive a demand letter from the attorney (often 3-5 months after the car wreck), before they begin actively investigating the claim and performing their due diligence. Does this sound like the insurance carrier is truly protecting their insured. The insurance carrier’s duty begins when it is first noticed of the claim not when they receive a demand from the plaintiff attorney. Many claimants are not represented by counsel. The insurance carrier should begin conducting its due diligence from the moment it learns about the claim.

The duty of good faith arises because the insurer is in a position to completely control the investigation and evaluation of the claim at the exclusion and omission of the input and/or control of the policyholder. This duty requires the insurer to assess facts and evaluate the law as applicable to those facts, so the insured can be apprised when and if the verdict might exceed policy limits. American Fidelity & Cas. Co. vs. Greyhound Corp., 258 F.2d 709, 710-711 (5th Cir. 1958.). This case law only further illustrates the proposition that the insurance carrier must look out for the best interests of their insured as the insurance carrier is placed in a position to investigate and evaluate the claim without the input of the inusred.

The insurer must advise the insured as to the probable outcome of litigation and warn against the possibility of any excess judgment. In the event there is a potential for excess judgment, the insurer must advise the insured of any reasonable steps that must be taken to avoid an outcome that exposes the insured to any personal loss. Powell vs. Prudential Property & Cas. Ins. Co., 584 So.2d 12, 14-15 (Fla. 3d DCA 1991.). Again, many individuals are never told of the consequences of their insurance carrier’s actions until it is too late and a lawsuit has been filed. At this point such individual may have personal exposure above and beyond the limits of coverage available.

The insurer must negotiate in good faith with counsel for the injured party. This duty is triggered when the insurer first receives and/or possesses a reasonable duty to inquire as to the insured’s exposure to loss. The insurer must seek offers and entertain all reasonable offers in making good faith attempts to settle as a function of its fiduciary relationship with the policyholder in order to protect the policyholder’s personal assets. Boston Old Colony, 386 So.2d at 785. This further exemplifies that the carrier’s duty to negotiate in good faith begins when it first learns of the insured’s exposure to loss.

Good faith duties are a by-product of the relationship between the insured and the insurer. Since good faith duties are included in the insurance contract, a bad faith action springs from the insurer’s breach of the implied terms of the policy. When the insured pays a premium, the insurer accepts the premium and makes certain promises to perform in the event of a specified loss arising from a loss. When the insurer has an opportunity to remove the uncertainty regarding the insured’s exposure to loss and settle the claim on behalf of its insured within policy limits but fails to do so, it assumes the risks of an irrational jury, a poor decision, or any other mishap that would increase the insured’s exposure to loss by taking the case to trial. Campbell, 306 S.2d at 530.

Not every claim denial is the result of bad faith. There are many forms of first and third party insurance claims. It is important to retain an attorney experienced in recognizing when an insurance adjuster or insurance company has deviated from the implied covenant of good faith and fair dealing. Many attorneys list bad faith as a practice area but fail to keep up with the current state of bad faith law or recent Court decisions that greatly affect this ever changing and dramatically fluid area of the law. A Florida bad faith attorney should be well versed in recent first and third-party coverage decisions in both County Courts and Federal Court. Further, a competent Florida bad faith attorney should have a strong grasp on how adjusters evaluate claims and work to ensure that the insurance carrier is provided all medical records so they may make an articulate decision as to the value of the claim. In contrast, many law firms will simply hide records and avoid sending pre-existing records evidencing an issue that may weaken the claim. However, such conduct is not only ethically frowned upon, it provides the insurance carrier an extremely strong and compelling reason for not paying the policy limits and will serve to undermine the bad faith portion of the case should the attorney be successful in obtaining a verdict well in excess of the policy limits.

An experienced Florida bad faith attorney will understand how and when to preserve bad faith insurance claims. As a Clearwater personal injury law firm, we make it a point to work with the insurance carriers and provide them with all pertinent records and cooperate as much as possible. The insurance carrier will often screw up without you forcing their hand. These are the strongest bad faith claims. If you have been victimized as a result of an insurance carrier’s misconduct, please call us for a free consultation.