Landmark Am. Ins. Co. v. Studio Imports, Ltd., 36 Fla. L. Weekly D2482 (Fla. 4th DCA Nov. 16, 2011).
The Insured alleged that Hurricane Wilma damaged its property, resulting in a loss of business income. The Insured made a claim to Landmark American Insurance Co. (Landmark) for the hurricane damage. The Insured claimed that Landmark delayed paying the claim, which caused additional damages.
The Insured sued Landmark alleging six counts, including breach of contract and bad faith under Section 624.155, Florida Statutes. Landmark moved to dismiss all six counts. The trial court dismissed all counts except for the breach of contract and the statutory bad faith. Landmark petitioned the Fourth District Court of Appeal for a writ of certiorari.
The appellate court considered whether an insured may litigate a beach of contract claim and a bad faith claim simultaneously.
The appellate court ruled that an insured cannot pursue a statutory bad faith claim before the extent of coverage had been determined in an action for breach of contract.
The appellate court explained that a cause of action for statutory bad faith “can never ripen” unless a determination of liability is made. For this reason, the trial court departed from the essential requirements of the law when it allowed the Insured to litigate the breach of contract and statutory bad faith claims simultaneously. The trial court had to abate or dismiss the bad faith action until coverage and damages were determined.
This decision clearly reinforces the Florida Supreme Court’s ruling in Blanchard v. State Farm Mutual Automobile Ins. Co., 575 So. 2d 1289 (Fla. 1991), that an insured’s breach of contract claim must be resolved favorably to the insured before a statutory bad faith claim ripens. An insured cannot sue for breach of contract and statutory bad faith simultaneously. Further, a statutory bad faith claim should be abated or dismissed unless the insured succeeds in the underlying breach of contract claim.