In a decision that may have significant impact for Florida’s insurance policyholders, the First District Court of Appeals ruled that Citizens Property Insurance Corporation can be sued for bad faith.

The appeal originated from an appeal of a final order that dismissed a bad faith complaint against Citizens, filed by Perdido Sun Condominium Association. The bad faith lawsuit was filed pursuant to section 624.155 of the Florida Statutes, which provides a civil remedy for person’s damaged by an insurer’s failure to settle claims in good faith. The case originated from a lawsuit brought by the condo association for Citizens failure to properly adjust and pay an insurance hurricane loss. After the condo association won at trial, they brought the bad faith lawsuit against Citizens but it was dismissed by the trial court.

In the reversal, the appellate court held that the law does impose a duty of good faith on Citizens regarding its policy holders. Although Citizens differs from private insurers because Citizens has “a duty to the state to manage its assets responsibly to minimize its assessment potential,” the same statute imposes upon Citizens a “duty to its policyholders to handle claims carefully, timely, diligently, and in good faith.” § 627.351(6)(s)2., Fla. Stat.

The First District Court of Appeal went on to hold that “because the law, in section 627.351(6)(s), specifically imposes upon Citizens a duty to handle its insured’s claims in good faith, a breach of this duty falls under the broad definition of “tort.” They found that it was the legislative intent to create a private cause of action in “any person . . . when such person is damaged” against “an insurer” for failure to attempt in good faith to settle claims is clear under section 624.155.

Last, the appellate decision stated “the fact that Citizens is “not a private insurance company” (§ 627.351(6)(a)1., Fla. Stat.) does not mean that it is not an “insurer” as defined by section 624.103, Florida Statutes, and as contemplated in section 624.155(1).

Pursuant to this new decision, Citizens can now be exposed to bad faith suits. This decision will likely be taken up to the Supreme Court and in so doing all Florida policyholders should hope that the appellate decision is confirmed.