Vest v. Travelers Ins. Co.
2000 Fla. LEXIS 484, 25 Fla. L. Weekly Supp. 177, 753 So. 2d 1270 (2000)
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Rule of Law:
A cause of action for first-party bad faith against an insurer does not accrue until the underlying insurance claim is resolved. However, once the claim accrues, the insured may recover damages for the insurer's bad-faith conduct that occurred prior to the resolution of the underlying claim.
Facts:
- In 1995, Dr. Thomas Vest was killed in an automobile accident with an underinsured motorist.
- His wife, Jana P. Vest, was insured by Travelers Insurance Company under an underinsured motorist (UM) policy with a $200,000 limit.
- On March 28, 1995, Vest notified Travelers that the tortfeasor's insurer had offered its policy limits of $1.1 million to settle her wrongful death claim.
- On that same day, Vest requested authorization from Travelers to accept the settlement and also demanded payment of her $200,000 UM policy benefits.
- Travelers did not immediately pay the benefits upon Vest's demand.
- At a later date, Travelers approved the settlement between Vest and the tortfeasor.
- On March 12, 1996, nearly a year after her initial demand, Travelers paid Vest the $200,000 UM policy limits.
Procedural Posture:
- On May 30, 1995, Vest filed a Civil Remedy Notice of Insurer Violation with the Department of Insurance.
- On August 9, 1995, Vest sued Travelers in a Florida trial court, asserting claims for UM benefits and statutory bad faith.
- The trial court granted summary judgment in favor of Travelers on the bad-faith claim, ruling that no claim could exist because Travelers paid the benefits after Vest settled with the tortfeasor.
- Vest, as appellant, appealed to the Florida First District Court of Appeal.
- The First District Court of Appeal affirmed the trial court's decision, holding that a bad-faith action requires a prior determination of damages, which it concluded happened at the time of settlement, leaving no room for a bad-faith claim.
- The Supreme Court of Florida accepted the case for review based on the district court's misapplication of precedent.
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Issue:
Does the legal requirement that an insured's underlying claim for benefits be resolved before a bad-faith action can accrue preclude the insured from recovering damages for the insurer's bad-faith conduct that occurred prior to that resolution?
Opinions:
Majority - Wells, J.
No. The requirement that an insured's underlying claim be resolved before a bad-faith action can be filed does not prevent the insured from recovering damages for the insurer's bad-faith conduct that occurred before that resolution. The court clarified its prior holdings in Blanchard and Imhof, explaining that the resolution of the underlying claim (the 'determination of liability and extent of damages') is merely an element of the bad-faith cause of action that must be met before a lawsuit can be brought. It is not a rule that immunizes an insurer for bad-faith conduct that occurs during the claim adjustment process. The insurer's duty of good faith exists from the time a claim is made, and damages for a breach of that duty begin to run from the date of the violation, even if the lawsuit itself is premature until the underlying contractual claim is finalized. Therefore, once Vest's claim for bad faith ripened upon settlement, she could pursue damages for Travelers' alleged bad-faith acts that occurred prior to that settlement.
Analysis:
This decision significantly clarifies the timing and scope of first-party bad-faith claims in Florida. It separates the procedural requirement for the accrual of a cause of action (when a lawsuit can be filed) from the substantive scope of the claim (the period of actionable conduct). By holding that damages can date back to the insurer's initial violation, the court reinforced that an insurer's duty of good faith is continuous throughout the claims process. This prevents insurers from strategically delaying payments with the belief that they are immune from bad-faith liability until the underlying claim is formally resolved, thereby strengthening protections for policyholders.
