Florida’s Middle District Holds that an Appraisal Award is not an Adverse Adjudication, a Prerequisite to Bringing a Bad Faith Claim

By Douglas M. Cohen

In Isaacson v. Qbe Specialty Ins. Co., No. 2:24-cv-715-SPC-NPM, 2024 U.S. Dist. LEXIS 191418 (M.D. Fla. Oct. 22, 2024), Defendant moved to dismiss a bad faith action as premature because there had been no adverse adjudication that it breached the policy after paying an appraisal award. Plaintiffs entered into a policy with Defendant effective from December 14, 2021 to December 14, 2022. On September 28, 2022, Hurricane Ian damaged Plaintiffs’ residential property and they filed a claim. On April 28, 2023, Plaintiffs served their Civil Remedy Notice. On May 31, 2023, Plaintiffs demanded appraisal due to the significant disparity between Plaintiffs’ and Defendant’s estimates. On September 1, 2023, an appraisal award was entered. Eighteen days later, Defendant paid the appraisal award.

Plaintiffs brought an action for bad faith under Fla. Stat. §§624.1551 and 626.9541. Defendant, among other grounds, moved to dismiss the bad faith case as premature as there had been no adverse adjudication that it breached the policy. The court recognized that, as of December 16, 2022, Fla. Stat. §624.1551, in its amended form, provides that a bad faith action “shall not lie” until the insured “has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract, and a final judgment or decree has been rendered against the insurer.” The statute explains that “the payment of an appraisal award does not constitute an adverse action under this section.” Relying on this section, Defendant argued the bad faith action must be dismissed because there had not been an adverse adjudication against it, and as the statute makes clear, the fact that Defendant paid out the appraisal award is insufficient. The court agreed with Defendant’s position.

Plaintiffs argued that the statute as amended is inapplicable because it was not enacted until December 16, 2022, which is after the subject insurance policy was issued, and therefore §624.1551 cannot be applied retroactively. The court rejected this argument, noting that under Florida law, when addressing whether a statutory amendment applies to a statutory remedy, courts look to the statute in effect on the date the cause of action accrued. Here, Plaintiffs’ claim could not have accrued until after the appraisal award, which the panel issued on September 1, 2023, well after §624.1551 became effective in its current form. Thus, a prerequisite to Plaintiffs’ bad-faith claim is a final adverse adjudication against Defendant that it breached the policy. Because Plaintiffs had not obtained such a judgment, the court found the case premature and dismissed it without prejudice. In summary, Fla. Stat. §624.1551 barred Plaintiffs’ bad faith claim because they had not obtained a final adverse judgment against Defendant that it breached the insurance policy, as required by the amended statute effective when the claim accrued.