One area of insurance coverage that we receive questions about is the issue of when a bad faith action can be filed. The Florida Supreme Court has held that a bad faith lawsuit is not ripe until there has been a determination that the insured is liable and the extent of the plaintiff’s damages. In Blanchard v. State Farm Mut. Auto Ins. Co., 575 So.2d 1289, 1291 (Fla. 1991) the Court held:
If an uninsured motorist is not liable to the insured for damages arising from an accident, then the insurer has not acted in bad faith in refusing to settle the claim. Thus, an insured’s underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. It follows that an insured’s claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.
The takeaway is the following rule: “Absent a determination of the existence of liability … and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.” The Florida Supreme Court later clarified:
Blanchard is properly read to mean that the “determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the [insured’s] damages” are elements of a cause of action for bad faith. Once those elements exist, there is no impediment as a matter of law to a recovery of damages for violation of section 624.155(1)(b)1 dating from the date of a proven violation
Vest v. Travelers Ins. Co., 753 So. 2d 1270, 1275 (Fla. 2000). This rule has been dubbed the “Favorable Resolution Requirement.”
This rule undoubtedly makes sense. An insurance company cannot be found to act in bad faith to settle on behalf of its insured until the insured is found liable. For this reason, the Florida Supreme Court has made liability and damages an element of bad faith. See Vest, 753 So. 2d at 1275.
Since Blanchard, other cases have debated what constitutes this “Favorable Resolution Requirement” and, for example, have found that resolutions such as a settlement, see Brookins v. Goodson, 640 So. 2d 110 (Fla. 4th DCA 1994), and appraisal awards in uninsured motorist cases (UM), see Hunt v. State Farm Fla. Ins. Co., Case No. 2D11-6484 (Fla. 2d DCA April 5, 2013), suffice.
Florida Insurance Coverage Law 