Florida’s Bad-Faith Claims Reform Law Not Retroactive, Appeals Court Says

A Florida appeals court has re-affirmed a major state Supreme Court decision, helping to answer lingering questions about whether the 2022 bad-faith litigation reform law can be applied retroactively.

The answer is “no,” Florida’s 1^st District Court of Appeals said this week in Cindy Vo vs. Scottsdale Insurance Co. Because Florida statute 624.1551, passed as part of major insurance law changes in 2022, made a substantive change to the law, it could not be applied to cases begun before the law took effect, as Scottsdale had argued, explained Josh Beck, an insurance defense attorney who was not involved in the case.

The 2022 reforms aimed to eliminate a big thorn in property insurers’ sides: a frequent tactic used by plaintiffs’ attorneys – claiming bad faith, sometimes only because a claim had been denied. That led to larger jury awards, settlements and extensive loss adjustment expenses for insurers, many insurance attorneys and executives had complained for years.

The 2022 law made it more difficult to claim that insurers had acted in bad faith, by first requiring a judicial finding of breach of contract on the insurance claim. Also, “the difference between an insurer’s appraiser’s final estimate and the appraisal award … does not, on its own, give rise to a cause of action,” the statute reads.

The Pensacola homeowner’s attorney, well-known plaintiffs’ lawyer Chad Barr, had sued Scottsdale, now known as Nationwide E&S Insurance, for breach of contract and bad faith after Vo’s 2020 hurricane claim was denied. A public adjuster pegged the loss at about $38,500. Scottsdale offered just $420. An appraisal landed on $34,546, the court explained. Scottsdale ended up settling for that amount minus the deductible, but still faced the bad-faith allegations.

Scottsdale’s attorney, Aleida Mielke, argued in court that the 2022 bad-faith law was remedial in nature, and court rulings have allowed remedial laws to be applied retroactively. The trial court in Escambia County agreed and dismissed Vo’s lawsuit against Scottsdale. Vo had failed to allege “an adverse adjudication by a court of law that the property insurer breached the insurance contract” or that “a final
judgment or decree has been rendered against the insurer.”

But on appeal, the 1^st DCA judges reversed.

“We cannot disagree that the statute has this remedial purpose,” 1^st District Appeals Court Judge Brad Thomas wrote in the Feb. 26 opinion. “But we must disagree that on this basis, the statute can be applied retroactively…” or to pending cases.

The state Supreme Court’s 2010 decision known as Menendez v. Progressive Express Insurance, along with a 1994 ruling, Arrow Air v. Walsh, essentially held that when a new law eliminates a previously valid cause of action, it cannot be retroactive, Beck and the court explained.

The appeals court remanded the Vo case to the trial court with instructions to deny Scottsdale’s motion to dismiss and to reinstate Vo’s lawsuit. The appeals court opinion can be seen here.

Topics Florida Claims