Skip to main content

Insured Can Pursue Bad Faith After Favorable Appraisal Award

In Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Company, No. 4D11-1376, 2012 WL 3822215, *1 (Fla. 4th DCA Sept. 5, 2012), the Florida Fourth District Court of Appeal, applying Florida law, overturned the trial court’s summary judgment order and held that an appraisal award pursuant to an insurance contract can constitute a “favorable resolution” of an underlying breach of contract dispute for purposes of filing a bad faith cause of action.

In this breach of contract case, a policyholder who suffered property damage from Hurricane Katrina alleged that the insurer failed to pay all proceeds due from the related claim.  In response, the insurer invoked the policy’s appraisal provision. An appraisal award was entered in the policyholder’s favor and the insurer paid it within the required time frame.

When the insurer moved for summary judgment on the breach of contract claim, the trial court granted the motion, but also granted the policyholder’s motion to amend its complaint to raise a statutory bad faith claim.  This new claim alleged that the insurer “engaged in a pattern of delay and denial before and after litigation was filed.”  To counter, the insurer again filed for summary judgment, arguing that the policyholder could not bring a bad faith claim because it had not obtained a “favorable resolution” from the underlying breach of contract action. The trial court agreed and granted the insurer’s motion. The appellate court reversed.

Under Florida law, before a policyholder can bring a bad faith claim, the underlying claim must be “resolved favorably for the insured.”  The Trafalgar court noted that the requirement for a favorable resolution does not require a policyholder to obtain a court judgment in its favor – an arbitration award may also satisfy the condition. The Trafalgar court went on to hold that there was “no meaningful distinction” between an arbitration award and an appraisal award for the purposes of deciding whether an underlying action was “resolved favorably.” Thus, the court held that the policyholder’s appraisal award was a “favorable resolution,” and satisfied the necessary precondition for a bad faith claim. 

The Trafalgar decision is significant because it reaches a conclusion different from that reached by other Florida courts that have held that a policyholder cannot bring a bad faith claim if an appraisal award is paid by the insurer within the requisite time frame. See e.g., North Pointe Insurance Co. v. Tomas, 999 So.2d 728 (Fla. 3d DCA 2008). In these situations, insurance carriers still may consider arguing that invoking a policy’s appraisal provision – and paying any award within the time prescribed – represents compliance with the policy and precludes a finding that the insurer has breached the policy, which should in turn preclude a finding that an underlying claim has been resolved in the policyholder’s favor.

If you are interested in receiving either the Trafalgar decision or the Tomas decision, please do not hesitate to contact me at


Popular posts from this blog

Maritime Law--U.S. Crewmember Required to Arbitrate Claims Applying Norwegian Law

In Alberts v. Royal Caribbean Cruises, Ltd., No. 15-14775 (11th Cir. Aug. 23, 2016), the U.S. Court of Appeals for the Eleventh Circuit held that a U.S. citizen, working aboard a Royal Caribbean cruise ship is required to arbitrate his claims against Royal Caribbean.
Plaintiff, a United States citizen, worked as the lead trumpeter on a passenger Royal Caribbean cruise ship. The ship is a Bahamian flagged vessel with a home port in Fort Lauderdale, Florida. Royal Caribbean, the operator of the vessel, is a Liberian corporation with its principal place of business in Florida. After plaintiff became ill while working for Royal Caribbean, he filed suit alleging unseaworthiness, negligence, negligence under the Jones Act, maintenance and cure, and seaman’s wages and penalties. Royal Caribbean moved to compel arbitration, and the district court granted the motion. This appeal presented an issue of first impression: Whether a seaman’s work in international waters on a cruise ship that calls o…

Maritime Law--Tour Boat Captain Implicated in Tragedy Off Nicaragua

As reported in the Daily Business Review on January 25, 2016, Nicaragua's police, army and navy will investigate the captain of a tourist boat and his assistant for the deaths of 13 Costa Rican passengers killed on January 23rd when the vessel capsized in bad weather. The Reina del Caribe, Spanish for "Caribbean Queen," was carrying 33 people when it went down Saturday amid rain and strong winds as it ferried between the Corn Islands, a popular tourist destination, off Nicaragua's Caribbean coast. The Daily Business Review article can be accessed here=> Daily Business Review article.

The government clarified on the 24th that the boat was carrying 25 Costa Ricans, two Americans, two British citizens, a Brazilian and three Nicaraguans. Previous reports had said there were 32 people on board, including four Americans. All the dead were Costa Ricans.

Nicaragua's naval commander for the southern Caribbean region said the boat's captain was detained because the …

Maritime Law--Lawsuits Filed Over RCCL's "Storm Cruise"

Royal Caribbean Cruises Ltd ("RCCL") faces lawsuits by passengers accusing the company of negligently endangering their lives by letting Anthem of the Seas sail into a February 7, 2016 storm.  One class action lawsuit filed in federal court in Miami specifically states that RCCL should be required to pay punitive damages to passengers on its ship for "knowingly sailing directly into" a strong winter storm with 120-mph winds. It is also alleged that people aboard the ship were "subjected to hours of sheer terror as the gigantic cruise ship was battered by hurricane-force winds and more than 30-foot waves."

The vessel reportedly encountered 100 mph winds and 30-foot waves, and RCCL said the storm was more severe than expected. RCCL later turned the ship around, and it returned to New Jersey on February 10. Anthem of the Seas’ port azipod reportedly burnt through “all four clutches” during the storm. RCCL reported four minor injuries among more than 6,000 p…