In Florida, insurance companies have a legal duty to act in good faith when handling claims. This duty encompasses a range of responsibilities, including thoroughly investigating claims, fairly evaluating damages, and promptly paying legitimate claims. Failure to uphold these responsibilities can expose an insurer to liability beyond the policy limits. For example, if a homeowner suffers significant damage from a hurricane and the insurance company unreasonably delays or denies payment, leaving the homeowner unable to repair their home, the insurer might be subject to legal action.
This legal framework serves as a crucial safeguard for policyholders, ensuring they receive the benefits they contracted for and are protected from unfair or deceptive practices. Its existence encourages insurance companies to act responsibly and ethically, promoting fair settlements and reducing unnecessary litigation. Historically, this legal principle evolved to address instances where insurers exploited policyholders’ vulnerabilities or used their superior bargaining power to avoid paying valid claims. It aims to level the playing field and provide recourse for individuals and businesses facing wrongful claim denials or underpayments.