(Article from Insurance Law Alert, May 2019)
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A Florida appellate court ruled that an insurer’s post-suit payment of an appraisal award constitutes a confession that it incorrectly denied benefits and that such conduct raised an issue of fact as to the insurer’s bad faith. Bryant v. GeoVera Specialty Ins. Co., 2019 WL 2017972 (Fla. Ct. App. May 8, 2019).
The coverage dispute arose out of a water leak in the policyholders’ residence. An adjuster estimated the loss at approximately $21,000. The insurer requested a sworn proof of loss, which the policyholder did not provide within the 60-day period required by the policy. However, before the 60 days expired, the insurer issued a coverage notice, indicating that it would pay for limited coverage of $6,000. Thereafter, the policyholders filed suit, alleging breach of contract and bad faith. They submitted a proof of loss on the same day they filed an amended complaint. Litigation was stayed so that the parties could comply with the policy’s appraisal provision. The appraisal award itemized damages in excess of $30,000. One month after the appraisal award was issued, the insurer paid the balance due under the appraisal award.
Following this payment, a Florida trial court granted the insurer’s summary judgment motion, holding that the policyholders had not timely submitted a proof of loss and had never disputed the insurer’s adjustment of the loss prior to filing suit. The appellate court reversed.
The appellate court ruled that the insurer’s payment of the appraisal award constituted a confession that it breached the policy by erroneously invoking certain policy provisions to limit coverage. The court noted that not all post-suit payments by an insurer fall within the “confession of judgment” doctrine, but explained that where, as here, an incorrect partial denial of benefits is followed by the insurer’s abandonment of its prior coverage position and payment of an appraisal award, the doctrine applies.
The appellate court also ruled that the insurer waived the proof of loss requirement by issuing the initial payment of $6,000 and denying coverage above that amount without citing the failure to provide proof of loss as a basis for denying or limiting coverage.
Finally, the court ruled that in light of the aforementioned findings, issues of disputed fact exist as to whether the insurer acted in good faith when it incorrectly limited coverage in the first place.