Combined With Florida Insurance Reform, Recent Florida Appellate Court Ruling Affords Insurers Significant Shield Against Costly Discovery and Bad Faith Claims

On February 8, 2023, Florida’s intermediate appellate court quashed a trial court order that had erroneously compelled discovery of work product materials from an insurer’s claim file in a breach of contract action concerning property damage to its insureds’ home. Family Security Ins. Co. v. Stein, et. al., No. 4D22-1468 (Fla. 4^th DCA Feb. 8, 2023). After the insurer asserted work product protection for certain claim file materials sought in discovery, the trial court granted the insureds’ motion to compel and ordered the insurer to produce its field adjuster loss report, nonfinal estimate, and supporting documentation. Florida’s District Court of Appeal then stepped in, granting the insurer’s petition for a writ of certiorari and quashing the trial court order.

In quashing the trial court’s order, the appellate court made clear that “an insurer’s claim file constitutes work product and is protected from discovery prior to a determination of coverage.” Opinion at 2 (quoting State Farm Fla Ins. Co. v. Aloni, 101 So. 3d 412, 414 (Fla. 4th DCA 2012)). The court had no trouble finding that the adjustor’s loss report, nonfinal estimate, and supporting documentation all fell squarely within the category of protected work product generated during an insurer’s investigation of a claim. It therefore concluded that the trial court’s order compelling production of the claim file materials “constitute[d] a departure from the essential requirements of law resulting in irreparable harm” and quashed the order. Opinion at 1.

The significance of this ruling comes into focus when linked to Florida’s recent insurance reform legislation, Senate Bill No. 2-A, enacted on December 16, 2022. With that reform now in place, a property insurer in Florida cannot be sued for bad faith unless the insured has first “established through an adverse adjudication by a court of law that the property insurer breached the insurance contract and a final judgment or decree has been rendered against the insurer.” Fla. Stat. § 624.1551. In other words, when a breach of contract claim is pending, a bad faith claim is off-limits.  

Taken together, this appellate court ruling and insurance reform legislation mean that insurers have a powerful shield against unnecessary and costly discovery in coverage litigation in Florida, and against the prospect of plaintiffs misusing the discovery process in breach of contract actions to attempt to discover evidence to support a later bad faith claim. Broad requests for work product materials in an insurer’s claim file are now off-limits in breach of contract coverage suits in Florida, and plaintiffs cannot cull through protected claim file materials to search for possible grounds for alleging bad faith.  This follows from (1) the Florida appellate court’s conclusion that work product in an insurer’s claim file is protected from discovery in breach of contract actions; and (2) the Florida legislature’s recent action providing that a bad faith claim cannot be asserted unless a breach of contract has been established.

Insurers will thus have significant protection against fishing expeditions for evidence that can be used to allege bad faith claim-handling, and in turn this may limit the number of bad-faith claims that will be filed and thereby help to control the explosion of insurance litigation that has pushed the Florida property market into crisis.