Third District rules that an appraisal award constitutes a favorable resolution in a first-party action for benefits.

During the underlying litigation, an appraisal award was entered, and the appellant moved to amend the complaint to add a bad faith action pursuant to Florida Statute § 624.155. The trial court denied this motion without explanation. The appellant then appealed, arguing that, without a finding of prejudice, abuse of privilege or futility, a denial of a motion to amend was in error. The appellee argued that the amendment would be futile because there was no breach of contract as the appellee complied with the subject insurance policy.

The Third District noted that a judgment on a breach of contract is not the only way to obtain a favorable resolution to fulfil the prerequisite of filing a bad faith claim, and that a cause of action for bad faith does not arise until the underlying first-party action for benefits is resolved favorably to the insured. Citing Trafalgar at Greenacres, Ltd. v. Zurich Am. Ins. Co., the Third District advised that the insured is not obligated to obtain a determination of liability and the full extent of the damage through a trial. The insured can utilize other means of doing so, including agreed settlement, arbitration or stipulation before pursuing a bad faith cause of action. 

The Third District also conveyed that precedent treats an arbitration award the same as an appraisal award for the purpose of deciding whether the underlying action was resolved favorably to the insured. Thus, the Third District ruled that an appraisal award constitutes a favorable resolution in a first-party action for benefits; therefore, the appellant satisfied the necessary prerequisite to pursuing a bad faith claim, reversing the trial court’s denial of the appellant’s motion to amend complaint. 

It should be noted that this case was originally filed in 2018, so the Civil Remedy statute changes made in 2019, 2020 and 2023 are not applicable to this case, nor is Florida Statute § 624.1551, which was enacted in 2022.

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