Joseph Cammarata and Judy Cammarata v. State Farm Florida Insurance Company

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
July Term 2014

JOSEPH CAMMARATA and JUDY CAMMARATA,
Appellants,

v.

STATE FARM FLORIDA INSURANCE COMPANY,
Appellee.

No. 4D13-185

[September 3, 2014]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Eileen O’Connor, Judge; L.T. Case No. 11-27972 14.

George A. Vaka and Nancy A. Lauten of Vaka Law Group, Tampa, and
Kelly L. Kubiak of Merlin Law Group, Tampa, for appellants.

Paul L. Nettleton of Carlton Fields, P.A., Miami, for appellee.

EN BANC

PER CURIAM.

The insureds appeal a final summary judgment finding that their bad
faith action was not ripe. They argue that because the insurer’s liability
for coverage and the extent of their damages has been determined, their
bad faith action was ripe. The insurer argues that because the insurer’s
liability for breach of contract has not been determined, the insureds’ bad
faith action was not ripe. Based on Florida Supreme Court case law, we
are compelled to agree with the insureds’ argument. We hold that an
insurer’s liability for coverage and the extent of damages, and not
necessarily an insurer’s liability for breach of contract, must be
determined before a bad faith action becomes ripe. Thus, we reverse and
remand for reinstatement of the insureds’ bad faith action in this case.

In this opinion, we first present the policy claim’s chronology. Second,
we present the bad faith action’s history, including discussion of our case
law. Third, we examine Florida Supreme Court precedent which compels
our reversal and our need to recede from one of our recent opinions.
 The Policy Claim’s Chronology

October 2005 – The insureds sustained damages to their home as a
result of Hurricane Wilma.

September 2007 – The insureds filed a claim for benefits under their
homeowners’ policy.

October 2007 – The insurer notified the insureds that it had inspected
their home, estimated the amount of their damages to be lower than the
policy deductible, and owed no payment to them as a result.

April 2008 – The insureds requested the insurer to participate in the
policy’s appraisal process. The insureds’ request identified their appraiser.

May 2008 – The insurer identified its appraiser and requested the
insureds’ appraiser’s damage estimate.

June 2008 – The insureds’ appraiser submitted a damage estimate
which was higher than the policy deductible.

July 2008 – The insurer’s appraiser submitted a damage estimate
which was lower than the policy deductible.

August 5, 2008 – The insurer filed a petition requesting the circuit court
to appoint a neutral umpire pursuant to the policy.

August 15, 2008 – The insureds filed a petition requesting the circuit
court to appoint a neutral umpire pursuant to the policy.

October 2008 – The circuit court appointed a neutral umpire.

October 16, 2009 – The umpire issued a damage estimate in an amount
lower than the insureds’ appraiser’s estimate but higher than the insurer’s
appraiser’s estimate. The estimate was higher than the policy deductible.

October 27, 2009 – The insurer’s appraiser agreed to the umpire’s
damage estimate.

December 2009 – The insurer paid the insureds the umpire’s damage
estimate minus the policy deductible.

April 2010 – The circuit court entered an agreed order dismissing with
prejudice the parties’ petitions to appoint a neutral umpire.

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 The Bad Faith Action’s History

After the circuit court entered the agreed order dismissing with
prejudice the parties’ petitions to appoint a neutral umpire, the insureds
filed their action against the insurer for not attempting in good faith to
settle their claim. See § 624.155(1)(b)1., Fla. Stat. (2011) (“Any person
may bring a civil action against an insurer when such person is damaged
. . . . [b]y . . . [the insurer’s] [n]ot attempting in good faith to settle claims
when, under all the circumstances, [the insurer] could and should have
done so, had it acted fairly and honestly toward its insured and with due
regard for her or his interests[.]”). The bad faith action alleged that, before
the umpire was appointed, the insureds filed a notice of violation pursuant
to section 624.155, Florida Statutes (2011). See § 624.155(3)(a), Fla. Stat.
(2011) (“As a condition precedent to bringing an action under this section,
the [Department of Financial Services] and the authorized insurer must
have been given 60 days’ written notice of the violation.”). The bad faith
action further alleged that the insurer did not pay the damages or correct
the alleged violation. See § 624.155(3)(d), Fla. Stat. (2011) (“No action shall
lie if, within 60 days after filing notice, the damages are paid or the
circumstances giving rise to the violation are corrected.”).

The insurer filed a motion for summary judgment, and the insureds
responded. In support of their positions, the insurer and the insureds
each cited a different opinion from this court. We will discuss the motion,
the response, and the cited opinions in detail because of the apparent
discrepancy between our opinions’ holdings.

The insurer’s motion argued, among other things, that because the
insurer’s liability for breach of contract had not been determined, the
insureds’ bad faith action was not ripe. In support, the insurer relied on
this court’s opinion in Lime Bay Condominium, Inc. v. State Farm Florida
Insurance Co., 94 So. 3d 698 (Fla. 4th DCA 2012).

In Lime Bay, a dispute arose between the insured and the insurer over
the amount of a claim for property damage suffered during Hurricane
Wilma. The insured filed a complaint for breach of contract against the
insurer. The breach of contract action later was abated when the parties
engaged in the appraisal process. The appraisal process resulted in an
award closer to the amount of the insured’s damage claim. The insurer
paid the appraisal award to the insured. The insured then filed an action
against the insurer for not attempting in good faith to settle the claim. The
insurer filed a motion to dismiss the bad faith action, arguing that there
had not been a final determination of liability and maintaining that it

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intended to dispute liability in the breach of contract action. The circuit
court agreed with the insurer and dismissed the bad faith action as
prematurely filed.

We affirmed. Id. at 699. We reasoned that the insured “did not, and
could not, allege that there had been a final determination of liability since
the [insured’s] breach of contract case was still pending.” Id. (citation
omitted). We directed the circuit court to “first resolve the issue of [the
insurer’s] liability for breach of contract, as well as the significance, if any,
of the appraisal award.” Id. (citation omitted).

In response to the insurer’s reliance on Lime Bay in this case, the
insureds argued that only an insurer’s liability for coverage and the extent
of damages, and not for breach of contract, must be determined before a
bad faith action becomes ripe. In support, the insureds relied on this
court’s more recent opinion in Trafalgar at Greenacres, Ltd. v. Zurich
American Insurance Co., 100 So. 3d 1155 (Fla. 4th DCA 2012).

In Trafalgar, a dispute arose between the insured and the insurer over
the amount of a claim for property damage suffered during Hurricane
Wilma. The insured filed a complaint for breach of contract against the
insurer. The insurer invoked the appraisal provision of the contract. The
appraisal process resulted in an award closer to the amount of the
insured’s damage claim. The insurer paid the appraisal award to the
insured and moved for summary judgment on the breach of contract claim.
Meanwhile, the insured moved to amend its complaint to state an action
against the insurer for not attempting in good faith to settle. The circuit
court granted both the insurer’s motion for summary judgment on the
breach of contract claim and the insured’s motion to amend to state a bad
faith action. The insurer then moved for summary judgment on the bad
faith action. The insurer argued that because the court granted the
insurer’s motion for summary judgment on the breach of contract action,
the insured failed to obtain a favorable resolution on the breach of contract
claim. The circuit court agreed with the insurer and granted summary
judgment on the bad faith action. The court rested its decision on a finding
that the insured’s ability to assert a bad faith action was dependent upon
the insured having obtained a favorable resolution or determination of
liability in the underlying breach of contract action. The court reasoned
that because the insured lost on summary judgment on the breach of
contract action, the insured failed to satisfy that prerequisite and,
therefore, was precluded from proceeding with a bad faith action.

We reversed. Id. at 1157-58. We held that an appraisal award which
occurred after the insured filed suit for breach of contract, “constitute[d] a

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‘favorable resolution’ of an action for insurance benefits, so that [the
insured] . . . satisfied the necessary prerequisite to filing a bad faith claim.”
Id. at 1158. We reasoned that the circuit court’s summary judgment in
the insurer’s favor on the breach of contract action was based on the
insurer’s compliance with the contract after the appraisal process. Id. at
1157. Thus, we concluded that “the appraisal award was tantamount to
a ‘favorable resolution’ necessary to proceed with a bad faith action.” Id.
at 1157-58 (citation omitted). We rejected the insurer’s argument that the
summary judgment in its favor on the breach of contract action precluded
the insured’s ability to pursue the bad faith action. Id. at 1158. Citing
our supreme court’s precedent, we reasoned that “[a] judgment on a
breach of contract action is not the only way of obtaining a favorable
resolution” necessary to proceed with a bad faith action. Id. (citing
Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216
(Fla. 2006) (an arbitration award establishing the validity of an insured’s
claim satisfies the condition precedent required to bring a bad faith
action)). However, our opinion in Trafalgar did not mention its apparent
discrepancy with Lime Bay.

After considering the parties’ arguments in this case, the circuit court
granted the insurer’s motion for summary judgment. In support of its
decision, the circuit court relied on Lime Bay.

After the circuit court entered a final judgment, this appeal followed.
As in the circuit court, the insureds argue that because the insurer’s
liability for coverage and the extent of their damages has been determined,
their bad faith action was ripe. The insurer again argues that because the
insurer’s liability for breach of contract has not been determined, the
insureds’ bad faith action was not ripe.

Our review is de novo. See Major League Baseball v. Morsani, 790 So.
2d 1071, 1074 (Fla. 2001) (“The standard of review governing a trial court’s
ruling on a motion for summary judgment posing a pure question of law
is de novo.”) (footnote omitted).

Supreme Court Precedent Compelling Our Reversal

Based on our supreme court’s precedent, we are compelled to agree
with the insureds’ argument. We hold that an insurer’s liability for
coverage and the extent of damages, and not an insurer’s liability for
breach of contract, must be determined before a bad faith action becomes
ripe. Our holding is based on the evolution of our supreme court’s
holdings from Blanchard v. State Farm Mutual Automobile Insurance Co.,

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575 So. 2d 1289 (Fla. 1991), to Vest v. Travelers Insurance Co., 753 So. 2d
1270 (Fla. 2000). We address each case in detail.

In Blanchard, the insureds filed a breach of contract action against
their insurer in state court. The insureds won a verdict against the
insurer. The insureds then filed an action against the insurer in federal
court for bad faith failure to settle. The insurer moved to dismiss the bad
faith action. The insurer argued that the insureds had to assert their bad
faith action along with the breach of contract action in state court. The
federal district court granted the motion to dismiss.

On review, the Eleventh Circuit Court of Appeals certified to our
supreme court the following question: “Does an insured’s claim . . . under
section 624.155(1)(b)1., Florida Statutes, for allegedly failing to settle the
. . . claim in good faith accrue before the conclusion of the underlying
litigation for the contractual . . . benefits?” Blanchard v. State Farm Mut.
Auto. Ins. Co., 903 F.2d 1398, 1400 (11th Cir. 1990).

In response, our supreme court answered:

[A]n insured’s underlying first-party action for insurance
benefits against the insurer necessarily must be resolved
favorably to the insured before the cause of action for bad faith
in settlement negotiations can accrue. It follows that an
insured’s claim . . . for failing to settle the claim in good faith
does not accrue before the conclusion of the underlying
litigation for the contractual . . . benefits. Absent a
determination of the existence of liability . . . and the extent of
the [insured’s] damages, a cause of action cannot exist for a
bad faith failure to settle.

Blanchard, 575 So. 2d at 1291.

Reading Blanchard’s certified question and answer in a vacuum,
without the knowledge of the procedural context in which it arose – the
pre-existence of a breach of contract action – the reader logically might
assume that an insured must have filed a breach of contract action, and
then obtained a favorable resolution of the breach of contract action,
before a bad faith action accrues. However, no language in Blanchard
expressly states that an insured must have filed any breach of contract
action before a bad faith claim accrues. Rather, another interpretation of
Blanchard is that: (1) the insured need only obtain a “determination of the
existence of liability . . . and the extent of the [insured’s] damages” on the
underlying claim “before the cause of action for bad faith in settlement

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negotiations can accrue”; and (2) Blanchard’s references to the “underlying
first-party action for insurance benefits” and “underlying litigation for the
contractual . . . benefits” being “resolved favorably to the insured before
the cause of action for bad faith in settlement negotiations can accrue”
related only to the procedural context under which Blanchard arose.

The latter interpretation of Blanchard appears to have been articulated
by our supreme court’s later opinion in Vest. In Vest, the insured
demanded her insurer to pay its policy limits on her claim. After the
insurer did not pay its policy limits, the insured filed an action claiming
that the insurer refused to settle and acted in bad faith in failing to pay its
policy limits. The insurer later paid its policy limits to the insured. The
insurer then filed a motion for summary judgment on the bad faith action.
The circuit court granted the motion because the insurer had paid its
policy limits to the insured. On appeal, the district court affirmed. Vest
v. Travelers Ins. Co., 710 So. 2d 982, 984 (Fla. 1st DCA 1998).

However, our supreme court quashed the district court’s decision with
direction that the insured’s bad faith action be allowed to proceed. Vest,
753 So. 2d at 1276. The supreme court reasoned:

We understand that [Blanchard’s] language, “Absent a
determination of the existence of liability . . . and the extent of
the plaintiff’s damages, a cause of action cannot exist for a
bad faith failure to settle,” . . . may be so broadly stated that
our holding could be read as the district court has read it. For
that reason we will here clarify.

First, we point out that Blanchard arose in the context of a
certified question arising out of an issue as to whether the
failure to pursue a bad-faith action for violation of section
624.155(1)(b)1[.] in an action for breach of the underlying
insurance contract for nonpayment of benefits was the
improper splitting of a cause of action. We held that it was
not. Our decision in that case had to do with the timing of the
bringing of causes of actions and not as to what claims could
be pursued when a claim for bad faith ripened.

Second, we expressly state that Blanchard is properly read
to mean that the “determination of the existence of liability
. . . and the extent of the [insured’s] damages” are elements of
a cause of action for bad faith. Once those elements exist,
there is no impediment as a matter of law to a recovery of

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 damages for violation of section 624.155(1)(b)1[.] dating from
the date of a proven violation.

Therefore, in this case, the trial court erred in ruling as a
matter of law that there was no claim for bad faith for acts
which occurred prior to the approval of the settlement . . . .
An action prior to that settlement was premature and was
subject to dismissal without prejudice. However, upon that
settlement, the claim for bad-faith damages accrued from the
date the violation of section 624.155(1)(b)1[.] ripened because
at that time the final element of the cause of action occurred.

In sum, we expressly hold that a claim for bad faith
pursuant to section 624.155(1)(b)1[.] is founded upon the
obligation of the insurer to pay when all conditions under the
policy would require an insurer exercising good faith and fair
dealing towards its insured to pay. This obligation on the part
of an insurer requires the insurer to timely evaluate and pay
benefits owed on the insurance policy. We hasten to point out
that the denial of payment does not mean an insurer is guilty
of bad faith as a matter of law. The insurer has a right to deny
claims that it in good faith believes are not owed on a policy.
Even when it is later determined by a court or arbitration that
the insurer’s denial was mistaken, there is no cause of action
if the denial was in good faith. Good-faith or bad-faith
decisions depend upon various attendant circumstances and
usually are issues of fact to be determined by a fact-finder.

....

We continue to hold in accord with Blanchard that bringing
a cause of action in court for violation of section
624.155(1)(b)1[.] is premature until there is a determination
of liability and extent of damages owed on the first-party
insurance contract.

Id. at 1275-76 (emphasis added).

In reaching the foregoing holding in Vest, the supreme court cited with
approval our decision in Brookins v. Goodson, 640 So. 2d 110 (Fla. 4th
DCA 1994). The supreme court described the issue in Brookins as
“whether a settlement constituted the ‘determination of damages’ required
by Blanchard . . . .” Vest, 753 So. 2d at 1273. The supreme court then
quoted from Brookins the following excerpt of our holding and reasoning:

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 The supreme court has recently held that to state a cause
of action for first party bad faith there must be an allegation
that there has been a determination of the insured’s damages.
Imhof v. Nationwide Mut. Ins. Co., 643 So. 2d 617 (Fla. 1994).
The court did not, however, require that the damages be
determined by litigation, that there be an allegation of a
specific amount of damages or that the damages be in excess
of the policy limits. The court was not faced with the
circumstance presented here where the policy limits are
subsequently tendered by the insurer. The insured in Imhof
received an award of damages through arbitration of an
amount less than the policy limits. The amount or extent of
damages was held not to be determinative of whether an
insured could bring a first party bad faith claim; the purpose
of the allegation concerning a determination of damages was
to show that “Imhof had a valid claim.” Id. at 618.

We hold that the payment of the policy limits by the insurer
here is the functional equivalent of an allegation that there has
been a determination of the insured’s damages. It satisfies the
purpose for the allegation – to show that the insured had a valid
claim.

....

Neither in Blanchard nor more recently in Imhof does the
supreme court suggest that the required resolution of the
insured’s underlying claim must be by trial or arbitration . . . .
However, as noted in Blanchard, a resolution of some kind in
favor of the insured is a prerequisite. There was a favorable
resolution here.

Vest, 753 So. 2d at 1273-74 (quoting Brookins, 640 So. 2d at 112-13)
(emphasis added).

Based on Vest’s clarification of Blanchard and reliance on Brookins, we
are compelled to hold that an insurer’s liability for coverage and the extent
of damages, and not an insurer’s liability for breach of contract, must be
determined before a bad faith action becomes ripe. To paraphrase Vest,
the determination of the existence of liability and the extent of the
insured’s damages are the conditions precedent to a bad faith action, along
with the notice requirement of section 624.155(3)(a), Florida Statutes
(2011). Those first two conditions may be established when a settlement

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determines the existence of liability and the extent of the insured’s
damages. As stated in Brookins, and as approved in Vest, that settlement
does not require the damages to be determined by litigation.

Applying the foregoing principles here, the parties’ settlement via the
appraisal process, which determined the existence of liability and the
extent of the insured’s damages, established the first two conditions
precedent of a bad faith action. Put another way, the appraisal award
“constitute[d] a ‘favorable resolution’ of an action for insurance benefits,
so that [the insured] . . . satisfied the necessary prerequisite to filing a bad
faith claim.” Trafalgar, 100 So. 3d at 1158. Thus, the circuit court erred
in finding that, because the insurer’s liability for breach of contract had
not been determined, the insureds’ bad faith action was not ripe.

We have considered the insurer’s arguments for affirmance. We
conclude, without further discussion, that those arguments lack merit.

Based on the foregoing, we reverse and remand for reinstatement of the
insureds’ bad faith action. We take no position on whether the bad faith
action has merit.

Because of the conflict between this court’s opinion in Lime Bay versus
(1) the supreme court’s opinion in Vest, (2) this court’s opinion in
Trafalgar, and (3) today’s opinion, we are compelled to recede from Lime
Bay to the extent it held that an insurer’s liability for breach of contract
must be determined before a bad faith action becomes ripe, even though
the insurer’s liability for coverage and the extent of the insured’s damages
already have been determined by an appraisal award favoring the insured.

However, we stand by our numerous prior opinions holding that, where
the insurer’s liability for coverage and the extent of damages have not been
determined in any form, an insurer’s liability for the underlying claim and
the extent of damages must be determined before a bad faith action
becomes ripe. See, e.g., State Farm Mut. Auto. Ins. Co. v. Tranchese, 49
So. 3d 809, 810 (Fla. 4th DCA 2010) (quashing order denying motion to
abate bad faith action “because the final determination of coverage and
damages for the underlying claim has not been made, which must precede
a statutory bad faith action”).

Reversed and remanded.

DAMOORGIAN, C.J., STEVENSON, GROSS, TAYLOR, MAY, CIKLIN, GERBER, LEVINE,
CONNER, FORST, and KLINGENSMITH, JJ., concur.
WARNER, J., recused.

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GERBER, J., concurs specially with an opinion, in which CONNER, FORST,
and KLINGENSMITH, JJ., concur.

GERBER, J., concurring specially.

Based on Vest’s controlling nature, I am compelled to concur in the
majority opinion. I write separately to express my concern regarding the
possible effect of the majority opinion.

In theory, the majority opinion would open the door to allow an insured
to sue an insurer for bad faith any time the insurer dares to dispute a
claim, but then pays the insured just a penny more than the insurer’s
initial offer to settle, without a determination that the insurer breached
the contract. Such a slippery slope would appear to conflict with the
supreme court’s own warning in Vest:

We hasten to point out that the denial of payment does not
mean an insurer is guilty of bad faith as a matter of law. The
insurer has a right to deny claims that it in good faith believes
are not owed on a policy.

753 So. 2d at 1275 (emphasis added).

This slippery slope may be avoided if an insured was required either to:
(1) establish an insurer’s liability for breach of contract as a condition
precedent to suing an insurer for bad faith; or (2) obtain a settlement
amount which is at least a certain percentage above the insurer’s initial
offer to settle. However, any such requirement is one which the legislature
must impose through an amendment to section 624.155, Florida Statutes
(2011). This court is unable to impose any such requirement because of
Vest’s controlling nature. But see State Farm Mut. Auto. Ins. Co. v. Brewer,
940 So. 2d 1284, 1286 n.3 (Fla. 5th DCA 2006) (“To obtain a determination
regarding liability and the extent of damages owed on the insurance
contract [to allow a statutory bad faith claim to proceed], [the insured]
would need to bring an action on the contract . . . .”) (emphasis added).

The policy claim history in this case provides a good example of why
the legislature may wish to require an insured to establish an insurer’s
liability for breach of contract, or to obtain a settlement amount which is
at least a certain percentage above the insurer’s initial offer to settle, as a
condition precedent to suing an insurer for bad faith. Here, after the
insureds took two years to file their Hurricane Wilma claim, the insurer
took only one month to inspect their home and estimate the amount of
their damages. Then, after the insureds took six more months to request

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the insurer to participate in the policy’s appraisal process, the insurer took
only one month to agree to the appraisal process. When the parties’
appraisers did not agree on a damage estimate, it was the insurer, and not
the insureds, which first filed a petition requesting the circuit court to
appoint a neutral umpire. Within two months of the neutral umpire
issuing its own damage estimate, the insurer paid the insureds the neutral
umpire’s damage estimate minus the policy deductible.

In sum, the record here provides no basis indicating that the insurer
breached the contract, much less failed to act in good faith to settle the
claim. On the contrary, the record here indicates that the insurer merely
exercised its rights under the contract’s agreed-upon dispute resolution
process of appraisal. The insurer’s exposure should be at an end. As our
sister court stated in Hill v. State Farm Florida Insurance Co., 35 So. 3d
956 (Fla. 2d DCA 2010):

The appraisal process . . . is not legal work arising from an
insurance company’s denial of coverage or breach of contract;
it is simply work done within the terms of the contract to
resolve the claim. Thus, except under the most extraordinary
of circumstances, we do not envision fees for such work to be
recoverable . . . . Instead, the fees should normally be limited
to the work associated with filing the lawsuit after the
insurance carrier has ceased to negotiate or has breached the
contract and the additional legal work [is] necessary and
reasonable to resolve the breach of contract.

Id. at 961 (emphasis added). See also Nationwide Prop. & Cas. Ins. v.
Bobinski, 776 So. 2d 1047, 1049 (Fla. 5th DCA 2001) (“[I]t maintains the
better policy of this state to encourage insurance companies to resolve
conflicts and claims quickly and efficiently without judicial intervention.
Arbitration and appraisal are alternative methods of dispute resolution
that provide quick and less expensive resolution of conflicts.”). Cf. State
Farm Fla. Ins. Co. v. Silber, 72 So. 3d 286, 289-90 (Fla. 4th DCA 2011)
(after insurer paid appraisal award, insureds had no cause of action
against insurer to recover attorney’s fees under section 627.428, Florida
Statutes, because the purpose of the appraisal process is to resolve
disputes without litigation).

* * *

Not final until disposition of timely filed motion for rehearing.

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