For years a debate raged over whether Florida law recognized an action for breach of a common law obligation of good faith and fair dealing in a first party insurance claim. At the center were condominium associations that suffered damages from Hurricane Wilma and either had their claims underpaid or denied altogether. After years of waiting, the Florida Supreme Court issued its ruling in QBE Insurance Corporation v. Chalfonte Condominium Association, Inc.,1 holding there can be no independent cause of action for breach of the common law obligation of good faith and fair dealing.

Many have argued this forecloses the possibility of having a jury consider whether an insurance company’s failure to act reasonably and in good faith can be considered a breach of the insurance contract. Relying on Chalfonte, carriers have argued, in essence, that they can act unreasonably without consequence in the breach of contract arena. Recently, a federal court in the Middle District of Florida ruled otherwise. In Lumpuy v. Scottsdale Insurance Company,2 the court ruled that issues of a carrier’s reasonableness in exercising discretion under the contract should be considered in a breach of contract action.

Lumpuy involved a sinkhole claim where the policyholder and insurance company disagreed over the appropriate method of repair. When the carrier refused to approve the repair contract the policyholder obtained, Lumpuy alleged this refusal was a breach of the insurance contract.

The court found that the reasonableness of the insurance carrier’s refusal to approve the contract was an issue to be determined by the jury. According to the court, the jury could, and should, find a breach of contract if it determined that the carrier had acted unreasonably. The court considered the Florida Supreme Court’s decision in Chalfonte but ultimately found it distinguishable.

This order raises a major distinction not addressed in the Chalfonte briefing or opinion. The issue in Chalfonte was whether “Florida law recognize[s] a claim for breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer’s failure to investigate and assess the insured’s claim within a reasonable period of time.” There was no discussion of whether, like in Lumpuy, an insurer breaches the insurance contract by failing to exercise reasonable discretion in the decisions it makes in response to a policyholder’s claim.

Rest assured that this trial court order will not be the end of the discussion. Aside from an appellate decision on this order, there will likely be a number of other courts considering similar issues. We will keep you posted as events unfold.


1 QBE Ins. Corp. v. Chalfonte Condominium Association, Inc., 94 So.3d 541 (Fla. 2012).
2 Lumpuy v. Scottsdale Ins. Co., 2013 WL 2249288 (M.D. Fla. May 22, 2013).