Academic journal article Journal of Risk and Insurance

Bad Faith Action by Third Party Claimant

Academic journal article Journal of Risk and Insurance

Bad Faith Action by Third Party Claimant

Article excerpt

State Farm Fire & Casualty Co. v. Zebrowski, 1997 Fla. LEXIS 1965 (Nov. 26, 1997)

Florida's bad faith statute permits "any person" to bring an action against an insurer for unfair claims practices and also provides "any person" with a right of action against an insurer for bad faith failure to attempt settlement (see Fla. Stat. 624.155(1)(b)(1)). However, this broad statutory language does not permit a third-party claimant to sue an insurer for bad faith refusal to settle during the course of such claimant's action against the insured tortfeasor. In order to sue the insurer for bad faith in refusing to attempt settlement, there must first be a judgment against the insured that exceeds the insured's liability policy limits.

In so ruling, the Florida Supreme Court noted that the statutory "cause of action is predicated on the failure of the insurer to act `fairly and honestly toward its insured and with due regard for his interests.' The duty runs only to the insured. Therefore, in the absence of an excess judgment, a third-party plaintiff cannot demonstrate that the insurer breached a duty toward its insured." State Farm Fire & Casualty Co.v. Zebrowski, 1997 Fla. LEXIS 1965 at *6-*7 (Nov. 26, 1997)(quoting statute).

According to the Florida high court, permitting the third party to simultaneously sue the insured and its insurer would create an intractable conflict of interest for the insurer and raise the costs of providing liability insurance (id. …

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