Cammarata v. State Farm Florida Insurance Company, No. 4D13-185 (Fla. Dist. Ct. App. Sept. 3, 2014) (en banc).

Clarifying recent conflicting precedents, the Florida District Court of Appeal for the Fourth District held that an insured was not required to prevail on a breach of contract claim against the insurer before proceeding on a bad faith claim.  Instead, the insured need only show that liability for the underlying damages and the extent of those damages were determined, which could be done through other means such as an appraisal.

Resolving a conflict between two lines of case law, the Florida District Court of Appeal for the Fourth District, sitting en banc, held that while an insurer’s liability for coverage and the extent of damages must be determined before a bad faith claim becomes ripe, the insured need not also show that the insurer is liable for breach of contract before proceeding on the bad faith claim.

After sustaining damage to their home caused by Hurricane Wilma in late 2005, Joseph and Judy Cammarata filed a claim for benefits under their homeowners’ policy with their insurer, State Farm Florida Insurance Company (“State Farm”) in 2007.  After inspecting the property, State Farm concluded that the amount of damages was lower than the insurance policy’s deductible and notified the Cammaratas that it owed them no payments.  In spring 2008, the Cammaratas requested that State Farm participate in the appraisal process. 

After the Cammaratas’ appraiser submitted a damage estimate higher than the deductible and State Farm’s appraiser submitted one lower than the deductible, the parties filed motions asking the circuit court to appoint a neutral umpire per the terms of the policy.  Once appointed, the umpire, in October 2009, issued a damage estimate that fell between the estimates of the two appraisers but was higher than the policy’s deductible.  In December 2009, State Farm paid to the Cammaratas the amount of damages determined by the umpire, minus the deductible.

The Cammaratas subsequently brought suit in circuit court against State Farm, alleging a bad faith failure to settle before the appointment of the umpire.  State Farm moved for summary judgment, arguing that Florida law required a finding of liability on a breach of contract claim before a bad faith action was ripe.  The circuit court granted the motion, and the Cammaratas appealed.

On appeal, the district court of appeal noted that two of its own recent precedents gave contrary indications about whether the insured was required to prevail on a claim for breach of contract before going forward with a bad faith claim.  After reviewing the Florida Supreme Court’s evolving rulings on the matter, it concluded that while the insured must obtain a determination of the existence of liability under the policy and show the extent of its damages, a ruling on a breach of contract claim was not the only way the insured could make those showings.  For instance, a settlement pursuant to a policy’s appraisal process would satisfy both of those conditions precedent to the bad faith claim. 

Therefore, the district court of appeal reversed the grant of summary judgment for State Farm, holding that because liability and the Cammaratas’ damages had been established by the appraisal, their bad faith claim was ripe.  The court cautioned, however, that although a successful breach of contract claim was not necessary, the insurer’s liability for the underlying damages and the extent of those damages would still have to be determined in some fashion before a bad faith claim could go forward.