Fowler White Insurance Regulation & Litigation eNews

Florida Supreme Court Takes Important Step to Limit Bad Faith Liability

It is an unfortunate, but well-accepted fact that Florida has become a friendly venue for plaintiffs pursuing bad faith claims against their insurers. A complex web of opinions from Florida courts impose numerous requirements and restrictions on insurers that are simply trying to act in the best interest of their insureds. The result is often that insurers are placed between a rock and a hard place with respect to conducting themselves in a manner that precludes any bad faith claims while doing everything they can to protect their insureds. Case law in Florida has also expanded plaintiffs’ abilities to recover for bad faith, whether by statute or under common law, leaving the remedy available for any interested party who manages to exploit the impossible decisions insurers are too often forced to make under Florida law.

In Perera v. USF&G, 35 So. 3d 893 (Fla. 2010), the Florida Supreme Court recently took an opportunity to reign in the unwieldy cause of action of insurer bad faith. In Perera, the Court emphasized the requirement that a bad faith claimant may not prevail upon proof of bad faith conduct alone. Rather, the claimant must prove damages as a result of such conduct. Specifically, the alleged bad faith must have resulted in excess exposure or an excess judgment against the insured.

Perera involved a wrongful death action against an employer. The employer had a self-insured retention, an excess worker’s compensation employer’s liability policy, a general liability policy, and an umbrella excess policy. The general liability carrier and the umbrella excess carrier settled the matter, along with the employer’s self-insured retention and additional settlement contribution. Notwithstanding this settlement, which precluded excess exposure, the injured plaintiff tried to maintain an action against the excess worker’s compensation employer’s liability carrier for its alleged bad faith refusal to settle.

The jury found that the insurer acted in bad faith by refusing to settle based on an erroneous belief that its policy did not cover the injury at issue. The Florida Supreme Court rejected that finding because the insured’s other carriers settled the claims within the insured’s policy limits, meaning that the insured did not suffer excess exposure or an excess judgment. Accordingly, notwithstanding the alleged bad faith refusal to settle, the insured was not damaged.

Perera stands as a reminder that a bad faith remedy cannot exist without damages, and an insured has no damages where there was never any excess exposure despite the alleged bad faith conduct. This case is a welcome addition to Florida case law and signals an important turn to reign in this unwieldy remedy. For more information, please contact Sarah Lahlou-Amine in the Tampa office of Fowler White Boggs P.A.

Insurers, Reinsurers Could Benefit from Financial Reform Law

The Dodd-Frank Wall Street Reform and Consumer Protection Act could help U.S. insurers and reinsurers "maintain their competitive positions in the global marketplace," according to an analysis by Standard & Poor's Corp.
Read full story at Business Insurance.

Energy Insurers Expected to See Only Modest Increase in Costs

Major losses sustained in the Gulf of Mexico will not have the same market-changing impact on the upstream energy insurance market as other major events such as Hurricane Katrina, according to a new report published by insurance brokerage giant Marsh.
Read full story at Insurance Journal.

Florida Insurer Ordered to Stop Selling Unauthorized Health Plans

State insurance regulators warned that health insurance plans sold by the Association of Independent Managers are unauthorized and could leave Floridians who buy the coverage without insurance when they need medical care. The Office of Insurance Regulation issued a cease and desist order to the company, which estimates show may already have sold 1,800 policies in the state.
Read full story at Miami Herald (free reg. req'd).

Salaries of Insurance Executives Remained Stable in 2009

In its 2010 Executive Compensation Review, Charlottesville, Va.-based SNL Financial, a provider of financial data and analysis on the banking, financial services and insurance markets, examines pay packages across a number of lines of business for the 2009 fiscal year. While CEO base salary ebbed slightly (down .86 percent) for all insurance companies, there were some large variances across all lines, notes the report.
Read full story at Financial-Planning.com.

Citizens Property Insurance Raises Rates by Average 10.2 Percent

Florida homeowners insured through Citizens Property Insurance can expect to see their rates go up by an average of 10.2 percent. Several categories of residents including homeowners, condo owners and renters had their rate hiked by an average of 9.3 percent; commercial residential wind only saw an average increase of 11.6 percent; commercial non-residential wind only saw its rates rise by an average of 10 percent and commercial residential multi-peril climb by an average of 8.4 percent.
Read full story at South Florida Business Journal.

State Regulators Have Little Control Over Insurance Prices

As Americans struggle with double-digit hikes in their health insurance bills, millions are coming up against a hard reality: the state regulators who are supposed to protect them can often do little to control what insurers are charging. In many states, it is the insurance industry that largely controls the regulatory process, funneling money to key state lawmakers and squelching efforts to expand government oversight of premiums, a review of state regulations and campaign donations shows.
Read full story at Los Angeles Times (free reg. req'd).

Regulators Assigned to Review Insurers' Death Benefits Practices

State watchdogs have assigned a group of regulators to review life insurers' practice of retaining death benefits and investing the funds to build company profits. U.S. life insurers, a group led by MetLife, have drawn fire from state and national elected officials since Bloomberg Markets reported that more than 100 carriers profit by holding and investing $28 billion owed to life insurance beneficiaries.
Read full story at Bloomberg.

Insurance Regulators Seek Firm to Review CMBS Investment Losses

Insurance regulators are seeking a firm to review commercial mortgage-backed securities after hiring Pacific Investment Management Co. to assess the industry's home-loan investments. State insurance commissioners, in search of an alternative to rating firms Moody's Investors Service and Standard & Poor's, could pick an evaluator by Sept. 3 to review investment losses that carriers might suffer on about 7,500 commercial mortgage-backed securities.
Read full story at Bloomberg Businessweek.

Report Finds FHA Had Fewer Mortgage Insurance Claims

Mortgages backed by the Federal Housing Administration have performed better than expected so far this fiscal year, though the improvements could be overturned if home prices sink, according to a report the agency submitted to Congress. The FHA's report to Congress said that from October through June, the FHA had 19,310 fewer insurance claims on loans gone bad and paid $3.7 billion less than projected by the audit.
Read full story at The Washington Post (free reg. req'd).

IASB Standard Expected to Bring Insurance Industry Transparency

An updated international accounting standard for insurance should make insurers' accounts more comparable and transparent, experts say. The International Accounting Standards Board in late July published a draft of the international accounting standard that the IASB said aims to ensure greater consistency and comparability of insurers' accounts and make them easier to understand.
Read full story at Business Insurance.

More Americans Seeing Benefits to Pet Insurance

Once unheard of, pet insurance is slowly catching on in the United States. Many veterinarians now routinely suggest that their clients at least research companies that offer such coverage.
Read full story at Chicago Tribune (free reg. req'd.).

Florida Offers Insurance Agent, Adjuster Licenses Electronically

The Florida Division of Agent and Agency Services is now making license identifications available electronically for insurance agents, adjusters and other licensees. The move will save taxpayers an estimated $420,000 a year, Alex Sink, the state's chief financial officer, said in a release.
Read full story at Tampa Bay Business Journal.