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QBE Ins. Corp. v. Chalfonte Condo. Apartment Assoc., Inc., No. SC09—441, 2012 WL 1947863 (Fla. May 31, 2012).
First-party claims for breach of the “implied covenant of good faith and fair dealing” are actually bad-faith claims and, therefore, may be brought only under section 624.155, not the common law.
QBE Insurance Corp. insured property owned by Chalfonte Condominium Apartment Association, Inc., in Boca Raton, Florida. On October 24, 2005, Hurricane Wilma struck, causing significant damage to Chalfonte’s property. Chalfonte filed a claim with QBE, seeking property damage benefits under the policy. Dissatisfied with the QBE investigation and processing of its claim, Chalfonte filed a suit in the United States District Court for the Southern District of Florida, seeking damages for breach of contract (failure to provide coverage), breach of the implied warranty of good faith and fair dealing, and violation of section 627.701(4)(a) (regarding type-size requirements for separate hurricane deductibles). The District Court dismissed the claim under section 627.701, holding the section does not provide a private right of action. The jury found for Chalfonte and awarded $7,868,211.00 on the breach of contract claim and $271,888.68 for breach of the implied warranty of good faith and fair dealing.
On appeal, the Eleventh Circuit deemed it necessary to certify several questions to the Florida Supreme Court. Most notable was the issue of whether Florida law recognizes a common law claim for “breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer’s failure to investigate and assess the insurer’s claim within a reasonable period of time.” The Florida Supreme Court answered the question in the negative.
The Florida Supreme Court held that first-party common law claims for breach of the “implied covenant of good faith and fair dealing” are actually bad-faith claims that may be brought only under section 624.155, Florida Statutes, and may not be brought under the common law.
In reaching its decision, the Court noted that the Florida legislature enacted the so-called “bad faith statute” (section 624.155) in 1982. This statute allows any person to bring a civil action against an insurer when such person is damaged by the insurer’s “[n]ot attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.” Section 624.155(1)(b)1. Before the enactment of this statute, no first-party bad-faith action existed under Florida law.
The Court rejected Chalfonte’s argument that its claim for violating the implied contractual warranty of good faith and fair dealing is not the same as a bad-faith claim. The Court acknowledged that there exists a split between several federal trial courts regarding whether to recognize a separate common law claim for breach of the implied warranty of good faith and fair dealing. The Court stated most courts that have dismissed the breach of the implied warranty of good faith claims have concluded no such cause of action exists. On the other hand, those courts that have not dismissed the implied warranty claims have relied on the general principle that the covenant of good faith is implied in every contract. The Court stated, however, that those courts have not explained why the covenant (which is intended to protect “the reasonable expectations of the contracting parties in light of their express agreement”) should be applied in the context of insurance contracts (which the Court has previously held are not interpreted based on the reasonable expectations of the parties).
In addition to its holding that there exists no first-party common law claim for breach of the duty of good faith, the Court held that an insurer’s failure to comply with the language and type-size requirements established in section 627.701(4)(a) does not render a noncompliant hurricane deductible provision in an insurance policy void and unenforceable as the Legislature has not provide for this penalty. In addition, the Court held that a contractual provision mandating payment of benefits upon “entry of a final judgment” does not waive the insurer’s procedural right to post a bond and stay the execution of a money judgment pending resolution of appeal.