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Defense Digest

To Plead or Not to Plead: Understanding the Tool of Interpleader Claims in a Post-Tort Reform Florida

Defense Digest, Vol. 30, No. 4, December 2024

December 1, 2024

Key Points: 

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

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.

 

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.

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In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

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Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed. 

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The Tolling Trap: Filing Alone Will Not Toll the Statute Without Good-Faith Service

The Eastern District of Pennsylvania recently reinforced a critical limitation on bad faith claims, holding that a timely filing alone will not preserve a cause of action absent a good-faith effort to serve the original process. The plaintiff had presented a claim for underinsured motorist benefits to his auto insurer. The insurer evaluated the claim and determined that the plaintiff’s accident-related damages did not exceed the bodily injury liability insurance limits of the at-fault driver and denied his claim. Among other claims, the plaintiff sought to present a claim for insurance bad faith under 42 Pa. C.S.A. § 8371, to which a two year statute of limitation applies. He first filed a praecipe for writ of summons before the expiration of the statute of limitation. However, the plaintiff did not attempt to serve the praecipe or writ until after the statute of limitations had expired. Additionally, the service failed as the plaintiff had mailed the original process to an incorrect address. Despite receipt of the Postal Service’s failure to deliver the original process, the plaintiff did not attempt to re-serve the writ. Two months later, the plaintiff filed a complaint and then successfully served that complaint. The insurer sought to dismiss the plaintiff’s bad faith claim as time-barred by the statute of limitations. The district court agreed. Though the plaintiff had filed a praecipe for a writ of summons prior to the expiration of the statute of limitations, the statute is only tolled if there is a good faith effort to serve that original process. In this case, the court determined that the plaintiff had failed to perform a “good faith effort to serve the original process”. Additionally, though the filing and service of a complaint can serve as alternative original process when the lawsuit is commenced by the filing of a praecipe for a writ of summons, the plaintiff filed his complaint after the statute of limitations had expired. The plaintiff’s bad faith claim was therefore determined to be barred by the statute of limitations and dismissed by the court, with prejudice. A key takeaway for the defense is not to assume that the statute of limitations has been successfully tolled by a plaintiff merely because a praecipe for a writ of summons or complaint has been filed prior to the expiration of the statute. A filed complaint or writ is only part of the equation. The defense should carefully review the docket and filings to confirm that the plaintiff also performed the requisite good faith effort to serve that original process. A thorough review of the docket may reveal that the plaintiff failed to make the good-faith service efforts necessary to toll the statute of limitations.

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