What is a Civil Remedy Notice (CRN)?
According to the Florida Department of Financial Services (DFS), a CRN can be filed against an insurer when “a party feels they have been damaged by specific acts of the insurer.” The role of the DFS is administrative, to monitor progress, and does not provide the ability of the Department to involve itself in any communications or pre-suit negotiations with the insurer. The purpose of a CRN is to give the insurance company enough time (sixty days) to investigate its handling of the claim, correct any misdeeds and reach an amicable settlement with the insured. To be valid, a CRN must contain all of the following information:
- The specific statutory provision and language of the statute, with facts and circumstances to support how the insurer violated the statute;
- The name of the individual(s) you interacted with at the insurance company after filing your claim;
- The language-specific language in the insurance policy that relates to the violation, if applicable;
- Clear language, which spells out that the purpose of the notice is to perfect the right to file a civil lawsuit under the stated statute.
To be legally valid, the CRN must contain enough detail to provide the insurer with the opportunity to cure the violations that allegedly gave rise to bad faith for the particular claim. No action can be brought against the insurer if these circumstances that gave rise to the allegations of bad faith are corrected during the sixty-day period. In such cases, the insurer will report to the Florida Department of Financial Services that the dispute with their insured has been resolved, and a civil action for bad faith and extra-contractual damages will be barred.
When to File a Civil Remedy Notice (CRN)
Insurance companies love to collect premiums, but they hate paying out claims. That is why they do everything possible to delay, deny, and underpay when customers try to collect what they are entitled to under their policies. Floridians do not have to take this lying down. Bad faith civil actions are available to customers that do not get the treatment they deserve from their insurance company under Florida Statute §624.155. To commence a bad faith action, a Civil Remedies Notice (CRN) must be filed with the Florida Department of Financial Services and the insurance company as a condition precedent. A civil action for bad faith can be filed if the dispute over first-party benefits has not been resolved within the allotted sixty days.
The Importance of Filing a CRN
Thousands of property damage insurance claims are denied each year in Florida without a thorough investigation or assessment of the claim. Insurance companies are most likely to rubber-stamp denials of more minor claims, hoping that the insured might not bother to pursue an action against them. This strategy is unethical but effective because the cost of litigation renders lawsuits for smaller amounts of damages economically impossible. The good news is that filing a CRN is relatively easy and inexpensive, and this action incentivizes the insurance company to boost a claim to a more knowledgeable and experienced claims representative. Once the claim is being taken seriously and adequately handled, more minor claims can often be promptly resolved. For larger or more complicated disputes, it’s more likely to begin the process that will lead to the ability to file a lawsuit for bad faith against the insurance company.
Dismissal For Insufficient CRN
Filing a CRN is relatively simple but still requires a great deal of attention to detail to ensure that the case is not dismissed due to an insufficient CRN. In Fenderson v. United Auto Ins. Co., the court held that the CRN was not sufficiently specific, rendering it invalid as a basis for a bad faith claim against the insurer. The court reached a similar conclusion in Yuval Lugassy and Susan Lugassy v. United Property and Casualty Insurance Company (“United,) holding that the plaintiff’s CRN was insufficient to support a claim because the appraisal by United had not been completed. The plaintiff relied on the 2014 case Cammarata v. State Farm, alleging that the CRN preserved their claim and that the subsequent appraisal award would simply “ripen the fruit.” The court rejected this premise, signaling that Florida courts will become more diligent in scrutinizing CRNs before allowing “intrusive and expensive” lawsuits against insurers to proceed. Florida courts are now more strictly construing CRNs based on the Talat Enters, Inc. v. Aetna Casualty case. This case held that because Florida Statute §624.155 is intended to create a cause of action that is absent in common law, it must be strictly construed based on the language of the statute’s text.
Suppose you can’t settle your dispute with the insurance company within sixty days of filing your CRN. In that case, a valid CRN will establish the right to sue your insurance company for improper behavior and refusal to settle your claim properly. Unfair Claims Settlement Act, Florida Statute §626.9541, provides for bad faith claims against insurers, but there must first be a determination that coverage is warranted under an insurance policy. Vest v. Travelers Ins. clarifies this by stating, “Bringing a cause of action in court . . . is premature until there is a determination of liability and extent of damages owed on the first-party insurance contract.” The Act only sets forth actions for third-party bad faith, but Florida Statute § 624.155 specifically provides for first-party actions for bad faith. Before its enactment in 1982, it was not possible to bring a first-party bad faith action against an insurer because Florida did not recognize such claims. The statute creates the right to sue your insurance company when it fails to attempt in good faith to settle claims fairly and honestly. These are the factors the Florida courts use to determine whether or not an insurer has acted in good faith:
- Whether the insurer has performed a thorough investigation into the facts and circumstances surrounding the claim;
- Did the insurer makes settlement offers that are reasonable considering those facts and circumstances;
- Settled claims in a manner expected of a reasonable and prudent person.
Determining bad faith is a fact-driven but subjective analysis. For example, bad faith has been held to include failure to communicate in a timely manner with a claimant, but what constitutes timely? Taking a few days or even a week to return a call may or may not be bad faith, but if a claimant left ten voicemails and emails without getting a response, it’s more clearly bad faith. On the other hand, Florida courts do not consider mere negligence as bad faith, so if the insurer can show that the messages were never adequately routed, the bad faith claim would fail. Another common type of bad faith is when an insurer denies a property damage claim for lack of substantiation without notifying the claimant that they need to provide receipts.
Proposed Changes to §624.155
Florida Senate Bill 1334: Financial Services proposed to add additional language to the CRN provision of §624.55 to require much more specific claims against the insurer. It would require that the notice states precisely how much damages should be paid by the insurer pursuant to the policy, how much had already been paid out by the insurer, and the amounts of applicable deductibles. The proposed bill also states that the notice “may not demand vague remedial action regarding changes to claim-handling procedures or practices.” For obvious reasons, insurers hail such changes that would limit costly lawsuits against them and would also reduce their need to invest in additional staff and training to improve their claims handling processes. Bills such as these are being considered as a remedy to the skyrocketing cost of homeowners insurance in Florida and its “bad faith” friendly litigation environment where it’s rare for trial judges to grant a directed verdict or summary judgment in an insurer’s favor based on “insufficient evidence of bad faith.”
It’s no secret that insurance companies collect premiums but don’t like to pay out claims. In some cases, the bad faith is intentional, such as providing lowball estimates and offers, but sometimes it results from insurers cutting corners on staffing and training. These are some of the types of actions that Florida courts have held to be bad faith on the part of an insurance company, such as:
- Failing to promptly settle a claim when it’s become clear the insurer is obligated to do so;
- Failing to investigate a claim fully;
- Failing to keep the insured informed about the claims process;
- Failing to minimize the magnitude of a possible excess judgment by acting promptly;
State Farm Mutual Auto Insurance Company v. LaForet sets forth the “totality of the circumstances” test that’s used by Florida courts to determine whether a claimant’s allegation of bad faith should be sustained:
- Efforts by the insurance company to promptly resolve disputes;
- How substantive the issue is;
- The legal authority for the issue;
- The thoroughness of the insurance company’s investigation of the pertinent facts;
- Whether the insurer properly reserved their rights to deny coverage.
Vest v. Travelers Insurance Company held that a contractual relationship must pre-exist a bad faith action in Florida, and Mutual Insurance Company v. The Farm, Inc. clarified that a bad faith action is premature until the extent of damages and liability has been determined based on the first-party contract. Florida courts are split on the issue of whether a premature bad faith claim should be abated or dismissed without prejudice. Some Florida courts have found the simultaneous adjudication of coverage and bad faith to be unfair to the insurer, stating that it “could well jaundice the jury’s view of the coverage issue” and that it’s also unfair to the plaintiff because they cannot obtain the insurer’s claims file, business policies, or claims practices until after coverage is determined,” Old Republic Nat’l Title Ins. Co. v. Home American Credit, Inc.
It is well established that first-party bad faith claims under Florida Statute §624.155 can recover consequential damages above the policy limits. The goal is to encourage good faith efforts by insurance companies to settle claims promptly within the policy limits because failure to do so can open the door to substantial financial liability for the insurer. This is clear from the plain text of §624.155(7), which states that “damages recoverable pursuant to this section shall include those damages that are a reasonably foreseeable result of a specified violation of this section by the insurer and may include an award of judgment in an amount that exceeds the policy limits.” The sky’s the limit because cases such as Time Insurance Co. Inc v. Burger have opened up the possibility of claims of emotional distress that could persuade a jury to award a significant judgment in favor of a claimant. The language of the Time case suggests that it could be limited to health insurers; it’s not hard to imagine an insured that’s been forced to live longer than they should have to in a waterlogged home, having a compelling claim for emotional distress. Attorney’s fees have also been awarded to successful claimants for first-party bad faith claims in Florida, another reason for insurers to avoid putting themselves in a position where they are vulnerable to these lawsuits. Punitive damages are not recoverable unless the plaintiff can prove that the insurance company has a pattern and practice of unfair claim settlement. In other words, it must be shown that the general practice of the insurance company is unjust, settlement practices that are willful, wanton, malicious, and are in reckless disregard of the insured’s rights. Successful claims for punitive damages are extremely rare, especially against the major insurers. That said, it’s not unusual for insurers to be hit with seven-figure bad faith verdicts when the underlying insurance policy had limits of $100,000 or less.