In Can a Condo Association Get Out of an Insurance Settlement Agreement? Jeremy Tyler discussed a recent California case involving a homeowner association’s challenge of an insurance settlement agreement. He provided an analysis into the factors an association would need to consider when attempting to challenge an insurance settlement agreement. Challenging such a settlement, even if based upon fraudulent inducement, can be a difficult decision for an association to make since, as Jeremy discussed, they may have to return the payment they did receive from the insurer. The facts in the case of Village Northridge Homeowners Ass’n v. State Farm Fire and Cas. Co., 237 P.3d 598 (Cal. 2010), where the policyholder alleged that the insurance company represented that the policy provided only $4.9 million worth of coverage when it in fact it provided $11.9 million, is very problematic and troubling.

From a Florida perspective and assuming that an insurance company did misrepresent the policy coverage limit to induce its insured to enter into a settlement, such a misrepresentation could violate good faith claims handling practices, constitute an unfair trade practice, and may potentially violate certain Florida ethical regulations adjusters must follow.

In Florida, adjusters are required to follow the Adjuster’s Code of Ethics in Administrative Rule 69B-220.201. Subsection (3) of the Administrative Rule states:

The work of adjusting insurance claims engages the public trust. An adjuster shall put the duty for fair and honest treatment of the claimant above the adjuster’s own interests, in every instance. The following are standards of conduct that define ethical behavior, and shall constitute a code of ethics that shall be binding on all adjusters:

2. An adjuster shall adjust all claims strictly in accordance with the insurance contract.
(c) An adjuster shall not approach investigations, adjustments, and settlements in a manner prejudicial to the insured.
(d) An adjuster shall make truthful and unbiased reports of the facts after making a complete investigation.
(e) An adjuster shall handle every adjustment and settlement with honesty and integrity, and allow a fair adjustment or settlement to all parties without any remuneration to himself except that to which he is legally entitled.

(m) An adjuster shall not knowingly fail to advise a claimant of the claimant’s claim rights in accordance with the terms and conditions of the contract and of the applicable laws of this state.

An insurer and its adjusters cannot attempt to induce policyholders into signing a release and settlement agreement on terms less favorable than the policy and Florida law provide. The Florida Code of Ethics even places certain duties on adjusters working for insurers and standards of conduct in dealing with policyholders. If the insurer’s or adjuster’s actions are done to induce a policyholder to settle for less than the amount they are owed under the policy and Florida law, those actions are likely to violate Florida law and the Adjuster’s Code of Ethics.