42 Fla. L. Weekly
D1768bop of Form

Insurance
— Homeowners — Sinkhole claim — Bad faith — An insured is not required to
wait until the appraisal process is completed before filing a civil remedy
notice — The filing of a civil remedy notice before the appraisal process is
complete and damages are determined does not render the CRN a legal nullity,
thereby precluding a bad faith claim

PHILLIP LANDERS, Appellant, v. STATE FARM FLORIDA INSURANCE
COMPANY, Appellee. 5th District. Case No. 5D15-4032. Opinion filed August 11,
2017. Appeal from the Circuit Court for Seminole County, Jessica J.
Recksiedler, Judge. Counsel: George A. Vaka and Nancy A. Lauten, of Vaka Law
Group, PL, Tampa, and Kelly L. Kubiak, of Merlin Law Group, Tampa, for
Appellant. Matthew J. Lavisky, Anthony J. Russo and Lee Craig, of Butler
Weihmuller Katz Craig LLP, for Appellee.

(PER CURIAM.) In this appeal, we consider whether, when an
insurance contract provides for an appraisal process, an insured must wait
until that process is completed before filing a civil remedy notice pursuant to
section 624.155, Florida Statutes (2008). Because we find no such limitation in
the statute or relevant case law, we reverse.

In 2009, Phillip Landers’s home sustained a loss from
suspected sinkhole activity. He submitted a claim to his insurer, State Farm
Florida Insurance Company (“State Farm”).1
State Farm hired SDII Global Corporation (“SDII”), to conduct a subsidence
investigation. SDII verified that sinkhole activity was the cause of the
damage, and State Farm admitted coverage. SDII initially concluded that 975
cubic yards of grout needed to be injected into forty-nine holes around the
home’s perimeter. SDII did not recommend underpinning. After considering the
report of a neutral evaluator from the Department of Financial Services
pursuant to section 627.7074, Florida Statutes (2008), SDII amended its report
to require an additional fifteen grout injection points.

Landers obtained an independent opinion from Biller Reinhart
Structural Group (“Reinhart”). In Reinhart’s opinion, proper stabilization
required underpinning.2
State Farm provided Reinhart’s report for review by the neutral evaluator. The
neutral evaluator concluded that underpinning was unwarranted. While State Farm
demanded appraisal under the policy to resolve the parties’ disagreement over
the amount of the loss,3
Landers agreed, pursuant to the terms of the insurance contract, to proceed
with SDII’s recommended repair plan, despite his belief that the repairs were
inadequate. State Farm placed its appraisal demand on hold while the
stabilization repairs were made. Further appraisal would be required to address
cosmetic repairs to the home.

After the repairs were completed in September 2011, State
Farm reiterated its request for appraisal of the cosmetic damage to the home.
The home continued to experience damage after repairs were completed. As a
result, Landers hired Sonny Gulati, a geotechnical engineer, to examine the
property. In January 2012, while Gulati’s report was pending, Landers filed a
civil remedy notice (“CRN”), alleging, among other things, claim delay, failure
to promptly and properly investigate the claim, failure to adjust the loss, and
the failure to tender policy limits. Landers contended that the repairs were
completed pursuant to State Farm’s expert’s recommendation, yet his home
remained unlivable. Landers demanded the immediate tender of “the policy limits
for dwelling . . . of $1,026,500.00 minus any prior payments that have been
made to the insured . . . so that [Landers] may adequately complete the repairs
[he] has started to [his] home.” In response, State Farm requested that all
issues be submitted to appraisal.

In March 2012, Landers brought suit against State Farm for
breach of contract. In that suit, State Farm sought to compel appraisal, which
Landers opposed. The circuit court compelled appraisal, and Landers appealed
from that order. This Court affirmed. Landers v. State Farm Fla. Ins. Co.,
149 So. 3d 33 (Fla. 5th DCA 2014). In July 2014, the appraisal panel determined
that the amount of loss exceeded the policy limits. State Farm tendered the
policy limits in August 2014, without any deduction for the amounts previously
paid.

Landers then brought the underlying first-party bad-faith
suit against State Farm, alleging ten purported violations of sections
624.155(1)(b)(1) and 626.9541(1)(i), Florida Statutes (2008), including
allegations of claim delay and low-balling. Landers contended that his damages always
exceeded policy limits and that State Farm acted in bad faith by delaying
paying the policy limits until after appraisal.

State Farm moved for summary judgment. State Farm asserted
that when Landers filed the CRN, “there was no contractual amount due and no
damages owed under the contract” because a condition precedent to payment —
determining the amount of loss through appraisal — had not been fulfilled.
Therefore, the CRN was not valid and Landers had no claim. The trial court
granted summary judgment, but the order granting summary judgment contained no
explanation, findings of fact, or conclusions of law.4
This appeal followed.

This Court reviews orders granting summary judgment de novo.
Volusia Cty. v. Aberdeen at Ormond Beach, 760 So. 2d 126, 130 (Fla.
2000). The issue presented on appeal is primarily a question of law: whether
the insurer’s demand for appraisal tolls the filing of a CRN until the amount
of the appraisal has been established. State Farm asserts the CRN was void
because Landers’s claim was not yet ripe.5

Bad-faith claims are governed by section 624.155, Florida
Statutes (2008). Section 624.155(1) provides that:

(1) Any person may bring a civil
action against an insurer when such person is damaged:

. . . .

(b) By the commission of any of the
following acts by the insurer:

1. Not attempting in good faith to
settle claims when, under all the circumstances, it could and should have done
so, had it acted fairly and honestly toward its insured and with due regard for
her or his interests . . . .

§ 624.155(1)(b)1., Fla. Stat.

As a condition precedent to bringing such an action,
Florida’s Department of Financial Services and the insurer must be given sixty
days’ written notice of the claim. See id. § 624.155(3)(a). The CRN must
set forth the specific statutory provision the insurer allegedly violated, the
facts giving rise to the violation, the relevant policy language, and a
statement that the notice is given to perfect the right to pursue the civil
remedy authorized by the statute. Id. § 624.155(3)(b). During the
sixty-day period, the insurer has an opportunity to cure the alleged violation
— no action will lie if, within those sixty days, “the damages are paid or the
circumstances giving rise to the violation are corrected.” See id. §
624.155(3)(d).6

There are three prerequisites to filing a statutory
bad-faith claim: (1) determination of the insurer’s liability for coverage; (2)
determination of the extent of the insured’s damages; and (3) the required
notice must be filed under section 624.155(3)(a). See Cammarata v. State
Farm Fla. Ins. Co., 152 So. 3d 606, 612 (Fla. 4th DCA 2014). The settlement
of a sinkhole claim via the appraisal process is sufficient to satisfy the
first two requirements. See id. (finding that appraisal award was a “
‘favorable resolution’ of an action for insurance benefits, so that [the
insured] . . . satisfied the necessary prerequisite to filing a bad faith
claim” (alteration in original) (quoting Trafalgar at Greenacres, Ltd. v.
Zurich Am. Ins. Co., 100 So. 3d 1155, 1158 (Fla. 4th DCA 2012))).7

State Farm argues that the CRN is not effective until all of
the contractual preconditions to suit are met and there has been a final
determination of coverage and the amount owed. The plain language of section
624.155(3)(d) provides no time limitation for when a CRN may be filed and does
not require a final determination of coverage and damages before it is filed.
The statute simply states that “no action shall lie” if the bad-faith allegation
is corrected or the damages are paid within sixty days of the insurer receiving
the notice.

This case is controlled by Vest v. Travelers Insurance
Co., 753 So. 2d 1270, 1272 (Fla. 2000). In Vest, the Florida Supreme
Court expressly noted that under section 624.155, “there is no statutory
requirement which prevents the insured from sending the statutory notice before
there is a determination of liability or damages. Nor is the insurer’s
appropriate response to that notice dependant on such a determination.” 753 So.
2d at 1275. Vest clarifies that the purpose of the CRN is to facilitate
and encourage good-faith efforts to timely settle claims before litigation, not
to vindicate continuing efforts to delay. Filing a CRN before the appraisal
process is complete and damages are determined does not render the CRN a legal
nullity, precluding Landers’s bad-faith claim.8

Preventing an insured from filing a CRN before coverage and
liability have been conclusively established would frustrate the purpose of the
statute by further delaying the time necessary to assess and pay out claims and
discouraging insurers from taking timely, independent action on claims.
Accordingly, we find that pursuant to the plain language of section
624.155(1)(d), the fact that the appraisal process is ongoing does not render a
CRN filed during that process a legal nullity. Once the appraisal process is
complete, and a legally sufficient CRN had previously been provided, the
conditions precedent to filing a statutory bad-faith claim are met. Cf.
Cammarata, 152 So. 3d at 612.

In this case, Landers filed his CRN before the appraisal
process was complete. State Farm did not cure the alleged violation within the
sixty-day window in section 624.155(3)(d). Landers’s position is that had State
Farm properly investigated his claim, it would have known that the subsurface
repair plan was inadequate. Whether State Farm actually acted in bad faith in
resolving his claim presents a question of fact that remains to be resolved.
Yet, nothing in the statute or case law precludes the filing of a CRN while a
demand for appraisal is outstanding. We reverse the order granting summary
judgment and remand for further proceedings.

REVERSED and REMANDED. (COHEN, C.J., and NICHOLS, D.,
Associate Judge, concur. BERGER, J., dissents without opinion.)

__________________

1Landers’s policy
provided coverage in excess of $1,000,000.

2The neutral evaluator’s
cost of remediation was estimated at approximately $350,000. Reinhart’s cost of
remediation was closer to $1,000,000.

3The appraisal clause of
the insurance policy stated:

If you and we fail to agree on the
amount of loss, either one can demand that the amount of the loss be set by
appraisal. If either makes a written demand for appraisal, each shall select a
competent, disinterested appraiser. Each shall notify the other of the
appraiser’s identity within 20 days of receipt of the written demand. The two
appraisers shall then select a competent, impartial umpire. . . . The
appraisers shall then set the amount of the loss. If the appraisers fail to
agree within a reasonable time, they shall submit their differences to the
umpire. Written agreement signed by any two of these three shall set the amount
of the loss.

4The only reasoning
provided by the court was at the summary-judgment hearing, where the court
appears to have adopted State Farm’s theory that the CRN was void because it
was filed before the appraisal was complete.

5State Farm argues
alternatively that the CRN was invalid because it failed to comply with the
statute. Because we cannot determine whether the court ruled on this basis, we
decline to address this issue for the first time on appeal. It also is not
clear whether the trial court determined if State Farm’s handling of the claim
constituted bad faith. Statutory bad-faith claims generally involve
fact-intensive disputes that are resolved under a “totality of the circumstances”
standard. State Farm Mut. Auto. Ins. Co. v. LaForet, 658 So. 2d 55, 62-63 (Fla.
1995); Menchise v. Liberty Mut. Ins. Co., 932 So. 2d 1130, 1133 (Fla. 2d
DCA 2006). It is the rare case where “the facts . . . allow a court to rule on
a bad faith claim as a matter of law at summary judgment.” Kearney v.
Auto-Owners Ins. Co., 664 F. Supp. 2d 1234, 1243 (M.D. Fla. 2009).
Therefore, both of these issues may be addressed on remand.

6In Talat Enterprises,
Inc. v. Aetna Casualty & Surety Co., 753 So. 2d 1278, 1284 (Fla. 2000),
the Florida Supreme Court explained that, “in creating this statutory remedy
for bad-faith actions, the Legislature provided this sixty day window as a last
opportunity for insurers to comply with their claim-handling obligations when a
good-faith decision by the insurer would indicate that contractual benefits are
owed.” Furthermore, “[t]he purpose of the civil remedy notice is to give the
insurer one last chance to settle a claim with its insured and avoid
unnecessary bad faith litigation — not to give the insured a right of action
to proceed against the insurer even after the insured’s claim has been paid or
resolved.” Lane v. Westfield Ins. Co., 862 So. 2d 774, 779 (Fla. 5th DCA
2003).

In Talat, the insured obtained an appraisal award that
was paid in full before the insured ever filed a CRN. 753 So. 2d at 1283.
Accordingly, the insured did not have a statutory bad-faith claim in that case
because the insurer remedied the claim before the expiration of the sixty-day
period following the CRN. Talat did not address and does not stand for
the proposition that a CRN filed after appraisal has been demanded is a legal
nullity as State Farm argues.

7The trial court
correctly relied on Cammarata for the proposition that a bad-faith claim
is not ripe until the appraisal process is complete. However, a finding that an
action is not ripe does not mean that the CRN was not appropriately filed.

8Federal courts that have
addressed this issue likewise have reached the merits of bad-faith claims, even
when the CRN was filed after the invocation of appraisal. See Fox Haven of
Foxfire Condo. IV Ass’n v. Nationwide Mut. Fire Ins. Co., No.
2:13-CV-399-FTM-29CM, 2015 WL 667935, at *1 (M.D. Fla. Feb. 17, 2015) (denying
insurer’s motion for summary judgment as the facts do not demonstrate that the
insurer acted in good faith as a matter of law; insured demanded appraisal and
then filed CRN while the appraisal process was ongoing); see also 316, Inc.
v. Maryland Cas. Co., 625 F. Supp. 2d 1187, 1193 (N.D. Fla. 2008).