What Is Bad Faith Insurance in Florida After Tort Reform?

Insurance companies have legal obligations — not just to their policyholders, but in how they handle claims made against those policyholders. When an insurer unreasonably refuses to pay a valid claim, drags out resolution to the claimant’s detriment, or fails to protect its policyholder from an excess judgment, that conduct may constitute bad faith. Florida has long recognized bad faith insurance claims as a remedy for these practices. HB 837, Florida’s 2023 tort reform law, made changes to the bad faith landscape that injury victims need to understand.

What Bad Faith Insurance Means

Bad faith, in the insurance context, refers to an insurer’s failure to fulfill its obligations with honesty and fair dealing. Every insurance policy in Florida carries an implied covenant of good faith and fair dealing — an obligation to handle claims reasonably, honestly, and in accordance with the policy terms.

When an insurer violates that obligation, it may be liable not only for the policy benefits it should have paid, but for additional damages that flow from its unreasonable conduct. Florida’s bad faith statutes provide a mechanism to hold insurers accountable beyond the original policy limits.

Two Types of Bad Faith Claims in Florida

Florida recognizes bad faith claims against insurers in two primary contexts:

• First-party bad faith: This arises when your own insurer fails to handle your claim in good faith. After a car accident, for example, if you file a claim under your own uninsured/underinsured motorist (UM/UIM) policy and your insurer unreasonably denies it, delays it, or lowballs it without a reasonable basis, that conduct may support a first-party bad faith claim.
• Third-party bad faith: This arises when an at-fault party’s liability insurer fails to act in good faith toward the injured person making a claim. The most common scenario: an injured claimant makes a demand within the at-fault driver’s liability policy limits, the insurer refuses to settle within those limits without a reasonable basis, and the case goes to trial — producing a judgment that exceeds the policy limits. The insurer’s failure to settle exposes it to liability for the excess judgment.

What Bad Faith Looks Like in Practice

Bad faith is not simply a low settlement offer or a disputed claim — insurance companies regularly dispute claims without bad faith exposure. Bad faith typically involves conduct that is unreasonable, arbitrary, or dishonest. Conduct that may support a bad faith claim includes:

• Failing to properly investigate a claim: An insurer that denies or delays a claim without conducting a reasonable investigation into the facts, the coverage, or the claimant’s damages may be acting in bad faith.
• Unreasonable delays: Claims that sit without action for extended periods, with no legitimate reason for the delay and no communication to the claimant, suggest bad faith.
• Misrepresenting policy provisions: An insurer that misrepresents what the policy covers — or does not cover — to avoid paying a valid claim acts in bad faith.
• Failing to settle within policy limits: When a settlement demand is reasonable, within policy limits, and the insurer refuses to pay without justification — and the case proceeds to an excess verdict — the insurer may be liable for the amount over the policy limit.
• Denying without basis: Claim denials that are unsupported by the facts or the policy terms, particularly when the insurer had access to information establishing coverage, may constitute bad faith.

HB 837 and Bad Faith — What Changed

HB 837 made changes to Florida’s bad faith framework that affect how these claims arise and are litigated. Without characterizing specific statutory provisions with more precision than the current state of judicial interpretation allows, the key practical points for claimants are these:

HB 837 generally raised the bar for bad faith claims and modified the circumstances under which excess verdicts expose insurers to bad faith liability. The law also allows the trier of fact to weigh the claimant’s own conduct, and it gives insurers a window to pay a claim — and avoid bad faith exposure — after receiving notice. Defense interests argued the previous framework encouraged strategic litigation designed to manufacture bad faith exposure; plaintiff interests argued the changes reduce accountability for genuine insurer misconduct.

Florida courts continue to interpret the specific implications of HB 837’s bad faith provisions case by case. An attorney familiar with how courts are currently applying these changes is essential for anyone pursuing a bad faith claim.

Bad Faith Claims as Leverage in Personal Injury Cases

Even where a standalone bad faith lawsuit is not the primary goal, the threat of bad faith liability shapes how insurers handle claims. An insurer that refuses to settle a clear liability case within its policy limits — knowing that doing so risks an excess verdict and subsequent bad faith liability — faces a calculation that favors a reasonable pre-trial settlement.

This dynamic is more relevant when:

Liability is clear and well-documented

The claimant’s damages clearly exceed the policy limit

A formal, documented settlement demand within policy limits has been made

The insurer’s response is unreasonable given the evidence

An attorney who understands bad faith law can position a case to maximize the pressure this framework places on an insurer to settle fairly, even when a bad faith lawsuit is never ultimately filed.

When to Pursue a First-Party Bad Faith Claim

If your own insurer has handled your claim improperly — unreasonably denying your UM/UIM benefits, delaying without basis, or refusing to pay documented losses — a first-party bad faith claim may be available. Florida provides a mechanism for putting your insurer on formal notice of bad faith conduct and demanding that it cure the deficiency before litigation proceeds.

First-party bad faith claims involve specific notice steps that must be followed correctly. An attorney should be involved to ensure those procedural requirements are satisfied and the claim is properly preserved.

Eric A. Hernandez — Insurance Accountability in South Florida

Attorney Eric A. Hernandez at HLM Injury Lawyers has spent more than 25 years representing injury victims against insurance companies throughout Coral Springs, Broward County, and South Florida. As a former Assistant U.S. Attorney for the Southern District of Florida, Eric is experienced in taking on well-resourced adversaries — including insurers that have built entire claims-management systems designed to minimize what they pay.

Whether your case involves a first-party bad faith dispute with your own insurer or a third-party liability case where the at-fault driver’s insurer is acting unreasonably, HLM Injury Lawyers provides the representation needed to hold insurers accountable.

Contact HLM Injury Lawyers — Free Consultation

Insurance companies do not always play fair — and Florida law provides remedies when they do not. If you believe your insurer has handled your claim unreasonably or in violation of your policy rights, speak with a personal injury attorney who understands Florida’s bad faith framework.

Call HLM Injury Lawyers today for a free consultation with attorney Eric A. Hernandez.

(305) 842-2100 3301 N. University Dr., Suite 100 Coral Springs, FL 33065

Serving Coral Springs, Parkland, Coconut Creek, Margate, Tamarac, Pompano Beach, and all of Broward County. Spanish-language service available.