Citizens (Florida): Immune from Bad Faith and Consequential Damages?

Citizens Property Insurance Corporation (“Citizens”) is a not-for-profit insurer created by the Florida legislature in 2002 to provide property insurance coverage to those who are unable to obtain it in the private market. Citizens is the largest insurer in Florida and is considered the “insurer of last resort” for homeowners who cannot obtain insurance elsewhere. While Citizens offers coverage to many homeowners, its policies often have lower coverage limits and higher premiums than policies from private insurers.

The Perdido Sun Case. 

In 2015, Florida Supreme Court ruled that Citizens cannot be sued for bad faith by policyholders. The case, Citizens Property Insurance Corporation v. Perdido Sun Condominium Association, involved a condominium association that sued Citizens for bad faith after the insurer denied a claim for damages caused by a hurricane. The court ruled that because Citizens is a government entity, it is protected by statutory immunity and cannot be sued for bad faith.

The Manor House Case. 

The Florida Supreme Court’s decision in Citizens Property Insurance Corp. v. Manor House, LLC, issued in January 2021, addressed the issue of whether Citizens can be held liable for consequential damages (without regard to policy limits) due to Citizens’ failure to properly investigate and/or pay a property damage insurance claim. 

The Florida Supreme Court held that Citizens cannot be held liable for consequential damages resulting from its handling of property damage claims. The court reasoned that the Florida Legislature intended to shield Citizens from liability for consequential damages (which it held are recoverable in a bad faith suit only), and that such damages are not recoverable under the insurance policy or under Florida law from Citizens. Therefore, the court dismissed the plaintiff’s claim for consequential damages finding that (a) consequential damages are bad faith damages and (b) Citizens is immune, pursuant to Florida statute, to suits seeking recovery for bad faith damages.

While the Manor House decision limits the scope of damages that can be recovered from Citizens, it does not absolve the insurer of its duty to properly investigate and handle property damage claims. Policyholders still have a right to expect fair and timely claims handling, and they may pursue legal action against Citizens for breach of contract or potentially other claims (such as “willful torts”) if the insurer fails to fulfill its obligations under the policy.

Despite the limitations on bad faith actions (as discussed in Perdido Sun) and actions for consequential damages (as discussed in Manor House) against Citizens, policyholders should still take steps to protect themselves and ensure they receive fair treatment from the insurer. This includes carefully reviewing their policy and understanding the coverage and limits, documenting their property and its contents with photos and videos, and promptly reporting any damage covered by their policy to Citizens. Policyholders should also consider seeking the assistance of an experienced attorney who can help navigate the claims process and advocate for their rights if they believe they are being treated unfairly by Citizens (or any other insurer they may have).