Florida Court Permits Bad Faith Lawsuit Against Citizens to Proceed

A lawsuit alleging bad faith claims handling by Florida’s state-created insurer, Citizens, will proceed to trial over the objection of the insurer that it is protected against such suits by immunity granted government entities.

A three-judge panel in the First District Court of Appeals in Florida last week denied a bid by Citizens Property Insurance Corp. to have a bad faith claim lawsuit against it dismissed.

The original suit by San Perdido Association against the insurer alleging bad faith claims handling has not yet gone to trial but the lower court also refused to dismiss the suit on the basis of sovereign immunity. Citizens appealed the denial of its immunity claim. Now the two-judge majority on the appeals court has said that the case must be tried before their court can rule on whether Citizens enjoys immunity.

This case involves a claim by San Perdido under a windstorm insurance policy with Citizens after Hurricane Ivan caused substantial property damage in 2004. Citizens refused to fully pay its obligation under the terms of the insurance policy, requiring San Perdido to file a circuit court action to compel such payment, and then defend that award when Citizens appealed it. The circuit court ruling was upheld in 2009.

San Perdido then filed its bad faith action. Citizens responded with a motion to dismiss, asserting that the action is barred by the immunity conferred on Citizens in section 627.351(6), Florida Statutes.

In creating Citizens, the Legislature gave Citizens the status of a government entity and gave it a limited grant of immunity in connection with its performance of its duties or responsibilities. However, state law provides that such immunity does not apply to a willful tort or for a breach of contract pertaining to insurance coverage, according to the court.

San Perdido has alleged that Citizens engaged in a series of bad faith practices in its handling of its insurance claim, and that such conduct was both a breach of contract and a willful tort.

In denying Citizens’ motion to dismiss, the trial court reasoned that San Perdido’s lawsuit is within the exceptions to Citizens’ immunity. Although Citizens could challenge that ruling if San Perdido should win at trial, Citizens instead asked the appeals court to halt any further proceedings in the trial court

Citizens v San Perdido re: Immunity 10.06.2010