Florida Southern District Dismisses Counts Against Insurer and Rules Coverage Issues Must Be Determined Prior to Bad Faith Issues
On February 26, 2024, in Serabian v. HDI Glob. Specialty Se., No. 23-62137, the U.S. District Court for the Southern District of Florida dismissed counts against an insurer for bad faith and breach of contract (the latter of which essentially mirrored the bad faith count), as Florida law states that coverage issues must be determined before a bad faith cause of action can be prosecuted.
According to the original complaint, HDI Global Specialty SE (“HGS”) issued a commercial property and casualty insurance policy to a contractor hired by the insured. During the relevant policy period, the insured hired the contractor to renovate a building, but the building was demolished under the contractor’s direction, resulting in damage to the insured. As a result, the insured commenced arbitration proceedings against the contractor and obtained an arbitration award.
The insured then filed the complaint against HGS arising out of the insurer’s alleged wrongful refusal to participate in the defense of the contractor and denial of coverage to the contractor for the subject damage.
In Count II for Breach of Contract, the insured alleged that HGS breached the policy between HGS and the contractor, while in Count III, the insured alleged a statutory bad faith claim pursuant to Fla. Stat. § 624.155(1)(B)(1).
HGS sought to dismiss or abate Counts II and III. The court granted the motion to dismiss both counts: Count III, because Florida law clearly indicates that a claim for bad faith against an insurer does not accrue until coverage issues under the policy have been determined; and Count II, because the insured’s breach of contract claim was virtually the same as the insured’s unripe third-party bad faith claim.
Kelly M. Vogt