Insurance Services – Coverage & Bad Faith Litigation

Key Points: 

• Shifting the focus on bad faith claims.
• The procedural impacts of the Tort Reform Act.
• Complexities and caution when filing interpleader claims.

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On March 24, 2023, Florida Governor Ron DeSantis signed House Bill 837, also known as the Tort Reform Act, into law. Predominantly, the Tort Reform Act changed Florida’s comparative fault scheme. The reform was an effort to reshape Florida’s bad faith laws, with the intention of making Florida more business and insurer friendly. However, the Act made other significant changes that impact insurance claims in Florida. One notable change affects bad faith claims and the ability to make interpleader claims.

Prior to H.B. 837, Florida law required that an insurer act with good faith when addressing claims. A failure to do so resulted in statutory and common law ramifications detrimental to insurers. “Good faith” and “bad faith” had no statutory definitions, often causing insurers to be subject to bad faith claims and Civil Remedy Notices for perceived bad faith in the handling of insurance claims. The Tort Reform Act now clarifies what “bad faith” means and gives insurers a roadmap to ensure they do not subject themselves to bad faith claims. 

The Act states, in part:

An action for bad faith involving a liability insurance claim, including any such action brought under the common law, shall not lie if the insurer tenders the lesser of the policy limits or the amount demanded by the claimant within 90 days after receiving actual notice of a claim which is accompanied by sufficient evidence to support the amount of the claim.

Actual notice is “a notice that is given directly to a party or is personally received by a party informing them of a case that could affect their interests.”

This 90-day deadline also impacts insurers’ ability to make interpleader claims. Florida Rule of Civil Procedure 1.240 provides background as to the nature of interpleader claims. “Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability.” 

The Tort Reform Act gives insurers another avenue for tendering the policy limits when an interpleader action is present. Picture a motor vehicle accident involving four vehicles and multiple claimants. The driver who caused the accident is insured by Florida’s Best Insurance Company. Due to the number of parties involved, Florida’s Best may be concerned that there could be four separate lawsuits against their insured and policy limits. To avoid this, Florida’s Best asks their defense attorney to draft an interpleader complaint. Filing such a complaint will act as a shield for Florida’s Best against repeated exposure. It will also require Florida’s Best to deposit its policy limits covering an insured driver with the court in order to preserve these funds and ensure all the involved parties can be paid from these funds. 

A word of warning when relying on the ability to make an interpleader claim following the passage of H.B. 837. The Tort Reform Act absolves insurers of bad faith claims only if, within 90 days of receiving notice of competing claims in excess of available policy limits, the insurer files an interpleader action under the Florida Rules of Civil Procedure. The Act emphasizes that an insurer’s interpleader action does not alter or amend the insurer’s obligation to defend its insured. It further specifies: “The insured, claimant, and representative of the insured or claimant have a duty to act in good faith in furnishing information regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim.”

While an interpleader action may sound like a slam dunk for insurance companies and defense attorneys, there are some cons of which to be aware. Interpleader actions can be procedurally complex. Further, the 90-day deadline imposed by the Tort Reform Act is not a suggestion, it is a requirement. Insurers must act promptly in requesting their defense attorneys file an interpleader claim after receiving actual notice of a claim. When insurers request their defense attorneys file an interpleader action, the attorneys must act quickly to get the action filed ahead of the 90-day deadline. Insurers must respond to their defense attorneys promptly regarding review and edits of a draft interpleader action, and defense attorneys must be responsive and timely with their edits and filings. Failure to do so can expose the attorneys to claims for frivolous lawsuits. The 90-day deadline is considered by critics to be “overly generous,” and neither insurers nor attorneys should wait until the last minute to file, lest they miss the deadline and open themselves up to a true “bad faith” claim. Interpleader actions can be costly and inevitably delay resolution of claims, especially when many claimants and complex claims are involved. 

Insurers and defense attorneys must be aware of Florida’s changing laws and the pros and cons of such claims. They must act diligently to identify and file such claims as requested within the 90-day requirement laid out by the Tort Reform Act. Florida’s Tort Reform Act has provided insurers and defense attorneys the benefit of protecting themselves against exposure from multiple claims, but it is up to the insurers and defense attorneys to determine the cost-benefit analysis of doing so and to ensure that all parties are acting in good faith, at all times.

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_{Defense Digest, Vol. 30, No. 4, December 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}