In a recent opinion, a federal trial court reviewing Florida law ruled on the issue of whether a Complaint involving a condominium association stated a claim against insurers for breach of a fiduciary duty in adjusting a first-party claim for damages. Grandrimo v. Parkcrest Harbour Island Condo. Assoc., Inc., No. 10-964, 2011 WL 550579 (M.D. Fla. February 9, 2011). The claim involved significant water damage, requiring extensive repairs forcing the Plaintiff, a unit owner within the condominium association, to stay in a hotel. The Plaintiff filed suit against the condominium association and numerous insurer Defendants asserting, among other things, that the insurers breached a fiduciary duty in the handling of the claim.

The Middle District Court of Florida dismissed the claim for breach of fiduciary duty against the insurers with prejudice, meaning it could not be brought again in the action. The Middle District Court agreed with the insurers’ argument that insurers in Florida do not have a common law fiduciary duty to an insured making a claim under a first-party insurance contract. If something arises from common law, it means that it has been recognized in case law traditionally in that jurisdiction, rather than having its origin in statute. The Court cited a Florida case, Baxter v. Royal Indemnity Co., 285 So.2d 652 (Fla. 1st DCA 1973), in support of its reasoning and quoted the following excerpt:

Because the interests of the insurer are wholly adverse to those of its insured [in a first party claim under an uninsured motorist provision], no basis for a fiduciary relationship between the insurer and insured exists.

Nine years after Baxter was decided, the Florida Legislature enacted Florida Statute 624.155, which recognizes a fiduciary obligation owed by the insurer in a first-party claim. If an insurer does not attempt “in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests,” the insurer can be held liable for damages, including attorneys fees, caused by the insurer’s conduct.

In Grandrimo, a claim was not made under section 624.155, so the Middle District Court dismissed the Plaintiff’s common law fiduciary duty claim.

After reading this ruling, and its quote of the Baxter case, it made me wonder whether we are we really in good hands if our insurers’ interests “are wholly adverse to those of its insured” in a first-party claim? Last time I checked, a good neighbor is not your adversary.

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