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Common-Law First-Party Bad Faith Claims Against Insurers Disallowed

State Farm's corporate headquarters

State Farm's corporate headquarters

An Orlando federal magistrate affirmed state law does not recognize common-law first-party bad faith claims against insurance companies.

The Case

After a mistrial was granted in Alison Swanson’s lawsuit against her insurer, State Farm Mutual Automobile Insurance Co., claiming an improper denial of benefits, she filed another action against State Farm, asserting a single claim for what she described as “the willful tort of bad faith.”

State Farm moved to dismiss, contending Florida does not recognize such a tort in the context of a first-party insurance case.

The District Court’s Decision

The court granted State Farm’s motion.

In its decision, the district court explained Florida law recognizes two types of actions for bad faith against insurance companies: first party and third party. The court said a first-party action is one brought directly by an insured against the insured’s own insurance company for failing to promptly pay benefits due under the policy, and a third-party action is brought by a uninsured party against the insurer of another, often a tortfeasor.

Florida law, the court continued, has long recognized common-law claims for bad faith in third-party actions. In the first-party context, plaintiffs may assert a statutory bad faith claim against their insurers under Florida Statute §624.155, the court noted.

The court then pointed out that Swanson was attempting to assert a common-law bad-faith claim rather than proceeding under the statute, and it agreed with State Farm that Florida law does not recognize such claims in a first-party case.

The court was not persuaded by Swanson’s contention that Florida law recognizes such a claim where the insurer’s actions were “so egregious and so outrageous” that it elevated what ordinarily was a simple bad faith action under Section 624.155 “into an independent, willful tort action.”

Setting aside the issue of whether State Farm’s alleged conduct rose to this level, the court said Swanson was “incorrect.” The Florida Supreme Court “has repeatedly held that the state has never recognized such a cause of action,” the court added.

U.S. Magistrate Judge Daniel Irick concluded Swanson had no response to the Florida Supreme Court’s pronouncements that “no common law first-party bad faith claims” were permitted in the state and had not cited a single case in which a court permitted an insured to proceed with a such a claim under Florida law.

The case is Swanson v. State Farm Mutual Automobile Insurance, No: 6:19-cv-422-Orl-31DCI (M.D. Fla. April 22).

Attorneys involved include: For Alison Swanson: Eric H. Faddis, Tiffany M. Faddis, W. Riley Allen, lead attorneys, Faddis & Faddis, Orlando; Lawrence H. Hornsby Jr., lead attorney, Hornsby Law Group, Winter Park. For State Farm: John W Weihmuller, lead attorne, James Michael Shaw Jr., Butler Weihmuller Katz Craig, Tampa

This story is reprinted with permission from the Insurance Coverage Law Center, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. Contact him at smeyerowitz@meyerowitzcommunications.com.