As a Plaintiffs' personal injury law firm, we deal with insurance companies every day. Thanks to current Florida law, insurance companies are duty bound to act in the best interests of their insureds, the individuals and companies who pay for insurance coverage. Acting in the best interests of an insured sometimes means that an insurance company should tender its insured's policy limits to the injured party. If done timely, the tender will keep the insured from being exposed to a court judgment in excess of his/her or its policy limits.
When an insurance company fails to tender the policy limits at a time when it could have and should have based on the information at hand, it exposes its insured to an excess judgment. This is considered bad faith. When an insurance company has been found to have acted in bad faith, a determination made by a jury based on evidence, it, rather than its insured, will be required to satisfy the excess judgment. Given that its bad faith created the exposure, this outcome is fair.
Insurance companies do not like being told how to behave, including towards their own customers.
The insurance industry has tried for years to eliminate through legislation and court decisions the duty to act in good faith towards their own customers. However, because the duty is so solidly grounded on reasonableness and good sense, their efforts to date have proved unsuccessful. Unfortunately, they do not give up.
With Governor Scott and a solid majority of right-wing Republicans, in the Florida House and Senate, in control of lawmaking in Florida, during the upcoming legislative session, scheduled to begin in January, 2012, the insurance industry will be proposing legislation to end their duty to act in good faith. In fact, one bill, HB 427 has already been proposed, by Rep. Kathleen Passidomo (R-Naples).
This is a serious topic, about which I have and will continue to blog at length, with far reaching ramifications. Ironically, those who are the most at risk by the proposed legislation are the very same constitutents who generally support right-wing policies, wealthy individuals and corporations.
Reproduced here is a well written article on the subject by Steven Marino, a prominent South Florida "bad faith" attorney, which was published in the Sunday (10/23/11) Miami Herald.
By Stephen A. Marino Jr.
Special to The Miami Herald
You're in good hands. Your insurer is on your side, because it's like a good neighbor. Some companies live up to their slogans, but some use promises to induce Floridians to entrust their livelihoods and businesses to companies offering liability insurance.
When the paperwork is signed and the premiums are paid, it's all smiles and handshakes. But if the small business owner is a few days late on a premium payment, or makes a mistake on the policy application, coverage is terminated. But what happens if the insurance company makes a mistake?
Florida law has long recognized an insurance company's fiduciary obligation to protect its policyholder from a judgment exceeding the limits of the policy. Since at least 1938, Florida courts have clearly expressed that an insurer must act honestly and in good faith toward the insured. The reasoning is simple: An insurance company writes a contract that gives it complete control over the defense and settlement of a claim against the policyholder, and must therefore use "the same degree of diligence as a person of ordinary care and prudence should exercise in the management of his own business."
The insurance company insists that it make the decisions, so Florida law requires that it do so while acting in the best interest of its insured. If the insurance company makes a mistake, and the result is a liability judgment against the policyholder, the law places the responsibility for the judgment on the insurance company, not the small business.
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