Matthew Lavisky Panelist at Florida Law Con
By Matthew Lavisky | Events
March 21, 2023
This article is originally a publication of the Southern Loss Association’s Newsletter, June 2018. Legal opinions may vary when based on subtle factual differences. All rights reserved.
This article is a continuation of the “Good-Faith Claim Handling in Florida” article that appeared in the Southern Loss Association Newsletter in February 2018. That article discussed the history and background of Florida Statute § 624.155, which is commonly referred to as Florida’s bad-faith statute. The statute provides the exclusive remedy for people who believe they have been damaged by bad-faith claim handling practices in the first-party insurance context in Florida.
In this article, we will continue the discussion about good-faith claim handling by identifying common allegations of so-called bad-faith claim handling and discussing the best ways to avoid those common allegations during the claim-handling process.
The most common allegations of bad-faith claim handling often fall into one of three categories: claim delay, “low-balling”, or the use of bias experts. The allegation of claim delay can take many forms. Sometimes, the insured will argue that the insurer has dribbled out payments over a protracted period of time, thus making the claim process unnecessarily complicated or time consuming. Other times, the insured will argue that the insurer has engaged in claim delay by refusing to pay undisputed amounts of money. In still other instances, the insured will argue that the insurer has engaged in claim delay by failing to respond to communications or requests for updates by the insured on the status of the claim.
The best way to avoid allegations of claim delay is by taking a proactive approach to the claim process. Insurers should endeavor to undertake a comprehensive and complete claim investigation at the first opportunity. Insurers should make all claim payments as promptly as possible with a succinct explanation of the coverage determination and all payments. Insurers should keep clear lines of communication open with insureds, seek additional information from the insured as soon as the need for such is known, and concisely explain the need for additional information to the insured. These actions will show that the claim process is moving forward to a resolution.
The second common allegation of bad-faith claim handling is “low-balling.” The term low-balling usually refers to a situation where an insurer makes a payment to an insured only to have a later event (for example, an appraisal, arbitration, or trial) show that much more money was owed on the claim. There is no hard-and-fast rule as to what constitutes low-balling. It is case-by-case determination based on the facts of the claim. In the few cases that have addressed the issue, one court found that since the insurer paid 60% of the ultimate appraisal award prior to the appraisal, the insurer was not low-balling. Instead, the insurer was working to uphold its obligations under the insurance policy despite the fact the parties disagreed on the amount owed prior to the appraisal. In another case, though, the court found that a jury could conclude the insurer was low-balling based on the fact that the insurer only paid 20% of the ultimate appraisal award prior to the appraisal.
The best way to avoid allegations of low-balling is by using all means available to ascertain the correct scope and value of the loss. That will put the insurer in the best possible position to make an accurate claim determination and a correct claim payment. That starts by making sure the insurer has received all possible information from the insured as to what they are claiming the damages are. From there, the insurer should endeavor to use the most up-to-date pricing information for the particular risk taking into account the particular economic factors of the locality. From there, the insurer should work to present its claim determination and payment to the insured in a clear and concise format that allows the insured to understand the information and also have a discussion about the payment if the insured disagrees either on the scope or pricing. If the insured does disagree, the insurer should invite and request the insured to present additional information showing a different scope or different pricing information. If there is a significant disagreement on the scope and price of the loss, the insurer may want to consider retaining a bona fide contractor in the local area to give a bid/estimate to add an additional layer of information to help resolve the claim.
The third common allegation of bad-faith claim handling is the use of bias experts. The classic example of the allegation of the use of bias experts is when an insured alleges that an insurer only uses one expert or firm of experts, pays that expert or firm a large sum of money, and uses that expert or firm for a long period of time. The implication is that the expert or firm wants to keep receiving work from the insurer and thus is incentivized to produce results or opinions that “help” the insurer. In first-party property claims, the independent adjusters, estimators, and engineers who routinely or exclusively do work for insurers have been the targets of bias-expert claims.
The best way to avoid allegations of using of bias experts is to have all experts produce results and opinions that are fact-based, well-documented, and – when possible – peer-reviewed or tested. In that way, the expert can demonstrate how they arrived at their results and opinions and show that the results and opinions are based on the facts of the claim and nothing else. Insurers can also guard against claims of using biased experts by relying on a stable of different experts within the same area of expertise so that no one expert or firm receives a disproportionally large amount of assignments. Insurers can also guard against claims of using bias experts by choosing experts or firms who do both insurance work and non-insurance work.