January 14, 2019

In December 2018, the U.S. District Court for the Southern District of Florida dismissed, without prejudice, another bad faith claim brought by an insured against his insurer that the court found to be “premature.” The case is Aligned Bayshore Holdings, LLC v. Westchester Surplus Lines Ins. Co., Civil Action No. 18-21692-Civ-Scola, 2018 U.S. Dist. LEXIS 207823 (S.D. Fla. Dec. 10, 2018).

On September 10, 2017, Aligned Bayshore Holdings, LLC sustained losses due to the impacts of Hurricane Irma. Aligned notified its insurer, Westchester Surplus Lines Ins. Co., of its losses. Westchester did not promptly pay for all covered losses and Aligned served a Civil Remedy Notice, which Westchester did not rectify within the required 60-day period under Fla. Stat. § 624.155. Aligned filed a breach of contract action, including one count of bad faith. Westchester moved to dismiss the bad faith count, arguing that the allegations were premature without a coverage decision. The insured agreed that the bad faith count may have been premature, but argued that instead of dismissed, the count should be abated “in the interests of judicial economy”.

The district court granted Westchester's motion to dismiss Aligned's bad faith count for two reasons. First, the court explained that actions against insurers for bad faith under Fla. Stat. § 624.155 do not accrue until the insured's underlying claim for insurance benefits is resolved, and that premature bad faith claims may either be abated or dismissed at the discretion of the trial court. Second, pursuant to the Federal Rules of Civil Procedure, federal courts cannot take jurisdiction of actions that are not yet ripe. The court dismissed without prejudice Aligned's bad faith claim against Westchester.

Editors Note: An abatement, in law, is the interruption of legal proceeding upon the pleading by a defendant that prevents the plaintiff from going forward with a suit at that time or in that form. When a count is abated, the count remains in the complaint to be dealt with later. Abatement is more economic than bringing the count again in a different action at a later date. But if a complaint contains an abated claim of bad faith and becomes admissible in the breach of contract action, it may unduly influence a jury in favor of the insured. Federal courts have discretion in whether they should either dismiss or abate bad faith actions in breach of contract disputes. State courts more frequently err on the side of abatement because abatement tends to be more economic. At this point there are very few cases addressing this at the state court level in Florida. Insurers should move to strike any bad faith allegations in breach of contract actions in order to avoid having their jury unduly influenced by an allegation of bad faith.

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