Title: Dadeland Depot, Inc., Et Al. v. St. Paul Fire and Marine Insurance Co., Et Al.

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
 
____________ 
 
No. SC04-1828 
____________ 
 
DADELAND DEPOT, INC., et al.,  
Appellants, 
 
vs. 
 
ST. PAUL FIRE AND MARINE INSURANCE CO., et al., 
Appellees. 
 
[December 21, 2006] 
 
LEWIS, C.J. 
 
We have for review five very discrete questions of Florida law certified by 
the United States Court of Appeals for the Eleventh Circuit that are determinative 
of a cause pending in that court and for which there appears to be no controlling 
precedent.  We have jurisdiction.  See art. V, § 3(b)(6), Fla. Const.  Based on the 
facts and analysis outlined below, we answer the first, second, third, and fifth 
questions certified by the Eleventh Circuit in the affirmative, and hold that the 
fourth certified question should be answered in the negative. 
FACTS 
This action arises from an appeal to the United States Court of Appeals for 
the Eleventh Circuit wherein the plaintiffs-appellants Dadeland Depot, Inc., and 
Dadeland Station Associates, Ltd. (hereinafter “Dadeland”) asserted that the 
United States District Court for the Southern District of Florida erred in entering a 
summary judgment in favor of the defendants-appellees St. Paul Fire and Marine 
Insurance Company and American Home Assurance Company (hereinafter “St. 
Paul”) and dismissing Dadeland’s claim against St. Paul for bad faith in refusing to 
settle a claim under a performance bond issued by St. Paul on one of Dadeland’s 
business developments.  Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 
383 F.3d 1273 (11th Cir. 2004).  In its opinion, the Eleventh Circuit deferred 
rendering a decision pending certification of several questions to this Court due to 
the circuit court’s concern that “th[e] case turns on important questions of state law 
for which there is no controlling precedent.”  Id. at 1273. 
The relevant facts, as outlined in the Eleventh Circuit’s opinion, demonstrate 
that in 1995, Dadeland entered into a contract with Walbridge Contracting, Inc. 
(hereinafter “Walbridge”), for the construction of a shopping center (hereinafter 
the “project”) located in Miami, Florida.  See id.  In connection with this project, 
St. Paul issued a standard performance bond (hereinafter “the bond”) in the amount 
of $26,500,000, the face amount of the initial construction contract.  See id.  
Pursuant to the terms of the bond, Walbridge was named as the principal, Dadeland 
 
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was named as the owner, and St. Paul was named as the surety.  See id.  The bond 
incorporated the terms of the construction contract and bound both Walbridge and 
St. Paul to the performance of the contract.  Under the terms of the bond, if the 
contractor failed to complete performance of the construction contract, Dadeland 
was required to take certain steps to trigger St. Paul’s obligations under the bond.  
See id.  Once Dadeland completed the steps outlined by the bond, St. Paul was 
required to fulfill its obligations in accordance with the terms of the bond.  See id.
Walbridge began work on the project in September or October of 1995.  See 
id.  The project was completed, opened, and leased to commercial tenants in 
November of 1996.  See id.  On July 24, 1997, Dadeland and Walbridge entered 
into a settlement agreement which acknowledged that the project was complete and 
released each other, along with St. Paul, from future liability with the exception of 
certain specifically identified items.  Subsequent to completion and tenant 
occupancy, Dadeland’s consulting engineer notified Dadeland of the existence of 
certain construction defects, which information Dadeland accordingly passed to 
Walbridge.  See id. at 1273-74.  Shortly thereafter, county building officials 
determined that the project contained violations of numerous provisions of the 
South Florida Building Code.  See id. at 1274.  Dadeland then contacted Walbridge 
and requested that the defective work be repaired.  See id.  In response, Walbridge 
asserted that certain defects were due to Dadeland’s structural engineer or its 
 
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architect or both of them, and that Walbridge would not repair defects that were 
due to the fault of others or beyond the scope of its responsibility.  See id.
On September 24, 1997, Dadeland notified Walbridge and St. Paul that 
Dadeland had reason to believe that Walbridge had failed to perform its obligations 
under the construction contract.  See id.  In accordance with the requirements of 
the bond, Dadeland informed St. Paul and Walbridge that Dadeland was 
considering declaring a contractor default and requested a conference to discuss 
repair issues.  See id.  This conference was held on October 22, 1997, with 
representatives for Dadeland, Walbridge, and St. Paul in attendance.  See id.  At 
the conclusion of this conference, Walbridge agreed to make certain repairs within 
a specified time period.  See id.  On March 18, 1998, Dadeland notified Walbridge 
and St. Paul that Walbridge had failed to perform any of its obligations pursuant to 
the October 22 agreement, and that Dadeland intended to proceed with arbitration 
and to arrange for another contractor to make the necessary repairs.  See id.   
On March 20, 1998, Dadeland filed an arbitration complaint naming 
Walbridge and St. Paul as respondents.  See id.  Dadeland alleged that Walbridge 
had failed to fulfill its obligation under the terms of the construction contract by 
neglecting to submit final as-built drawings to Dadeland and county officials.  See 
id.  Dadeland further asserted that Walbridge wrongfully failed and refused to 
perform all but a very small portion of the agreed-upon repairs, and that St. Paul 
 
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had failed to take any action to correct the deficiencies.  See id.  Dadeland 
requested damages in the amount of approximately $4.4 million.  See id.   
The arbitration proceedings in this case involved thirty-five days of hearings, 
over one thousand exhibits, and twenty-five witnesses.  See id. at 1275.  By order 
dated May 15, 2000, the arbitration panel concluded that all parties, including the 
engineer, the architect, Dade County, Dadeland, and Walbridge were responsible 
for the deficient construction of the project.  The arbitration panel determined that 
Walbridge owed Dadeland $1,417,842 for its defective work, and that Dadeland 
owed Walbridge $261,036 for contract balances and additional work performed.  
See id.  In addition, the arbitration panel included the following provision with 
regard to St. Paul in its award: 
[St. Paul] is bound to this award to the extent that [Walbridge] is 
obligated under the award and its defenses are denied.  
The monetary award was timely paid by Walbridge with interest.   
 
After entry of the arbitration order, Dadeland filed the instant action in the 
Fifteenth Judicial Circuit of Florida asserting that St. Paul had engaged in a bad-
faith refusal to perform the duties required under the bond in contravention of 
sections 624.155(1)(b)(1) and 626.9541(1)(i) of the Florida Statutes (1995).  See 
383 F.3d at 1275.  St. Paul removed the case to federal court and moved to dismiss 
the action.  The trial court denied the motion and entered a detailed order which 
explained the applicable conclusions of law.  The court reasoned, in part, that 
 
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Dadeland had standing to advance this action because it had sufficiently presented 
discrete and concrete injury and damage due to nonperformance of the insurance 
contract which would support a claim for statutory bad faith.  Two years later, St. 
Paul moved for summary judgment after this case was transferred to a different 
division of the trial court.  The United States District Court for the Southern 
District of Florida then granted St. Paul’s motion and entered a summary 
judgment.  See id.  The district court concluded that Dadeland had failed to allege 
that there had been a prior determination that St. Paul was actually liable to 
Dadeland under the terms of the bond––a condition precedent to instituting a bad-
faith claim in Florida.  See id.  Additionally, the court found that any bad-faith 
claim was not sustainable because Dadeland had failed to establish that any alleged 
unfair claims practice of St. Paul was frequent enough to be considered a general 
business practice.  See id.  Lastly, as to any claim for breach of contract, the 
district court determined that such claim was barred by res judicata, reasoning that 
it could have been asserted during the arbitration proceedings.  See id.  Dadeland 
appealed the judgment of the district court, seeking review in the Eleventh Circuit.  
See id.  Although the dissent would decline to answer the questions certified 
because in its view no discrete statutory bad faith damages exist, this position was 
not advanced by the appellees nor was it the basis of the trial court’s decision.  
 
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Additionally, no issue relating to damages has been certified to us, nor does the 
present record provide a sufficient basis for that analysis. 
 
On appeal, the Eleventh Circuit noted that the issues were “entirely 
controlled by Florida law, and [that] because the Florida courts have yet to address 
the[] issues” decided by the district court, the Eleventh Circuit, prior to rendering 
its decision in the matter, deemed it necessary to certify the following questions to 
this Court: 
1.  IS THE OBLIGEE OF A SURETY CONTRACT CONSIDERED 
AN “INSURED” SUCH THAT THE OBLIGEE HAS THE RIGHT 
TO SUE THE SURETY FOR BAD-FAITH REFUSAL TO SETTLE 
CLAIMS UNDER § 624.155(1)(b)(1)?  
2.  IF SO, DOES THE LANGUAGE IN § 624.155(1)(b)(3) 
ELIMINATE § 626.9541’s REQUIREMENT OF PROOF OF A 
GENERAL BUSINESS PRACTICE WHEN THE PLAINTIFF IS 
PURSUING A § 626.9541 CLAIM THROUGH THE RIGHT OF 
ACTION PROVIDED IN § 624.155?  
3.  IS AN ARBITRATOR’S FINDING THAT A SURETY’S 
PRINCIPAL HAS BREACHED ITS DUTY TO THE OBLIGEE, 
AND THAT THE SURETY IS BOUND TO THE ARBITRATION 
AWARD TO THE EXTENT THAT ITS PRINCIPAL IS BOUND, 
SUFFICIENT TO SATISFY THE CONDITION PRECEDENT TO A 
LATER BAD-FAITH REFUSAL TO SETTLE CLAIM THAT 
THERE BE A PRIOR ADJUDICATION THAT THE PLAINTIFFS 
WERE ENTITLED TO A PAYMENT OF A CLAIM FROM THE 
SURETIES?  
4.  IF NOT, IS THAT ARBITRATOR’S DECISION RES 
JUDICATA BARRING DADELAND’S LATER CLAIM AGAINST 
THE SURETIES FOR BAD-FAITH REFUSAL TO SETTLE?  
5.  WILL AN ARBITRATOR’S DENIAL OF THE DEFENDANT’S 
AFFIRMATIVE DEFENSES IN A BREACH OF CONTRACT 
 
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CLAIM COLLATERALLY ESTOP THE SAME DEFENDANTS 
FROM RAISING THE SAME DEFENSES IN A SUBSEQUENT 
BAD-FAITH REFUSAL TO SETTLE CLAIM AGAINST THE 
SAME PLAINTIFF? 
Id. at 1279.  This proceeding has followed. 
ANALYSIS 
 
Initially, contrary to the position of the dissent that no damages cognizable 
under the bad faith statute exist and the dissent’s preference that we decline to 
respond to any of the certified questions, the United States Court of Appeals is 
very specific in the discrete questions certified and we most certainly afford that 
Court credibility to understand its own record and the damages that may have been 
sustained.  This case was concluded at the trial level in a summary judgment 
without trial and the full development of evidence as to the extent or nature of the 
damages claimed as a result of statutory bad faith.  We most certainly will not 
presume that the questions certified by the federal court are without any purpose, 
particularly on the record before us.  Additionally, we note that the United States 
Court of Appeals has not certified any questions with regard to the concerns of the 
dissent. 
 
Secondly, we note that the first question certified by the Eleventh Circuit is 
extremely narrow.  The question posed by the circuit court does not require that we 
comment on the merit or wisdom of the statutory section at issue, nor does the 
question require that this Court define the similarities and differences between 
 
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suretyship and other forms of insurance.  Rather, the task with which we are 
confronted today is to provide the construction of section 624.155(1)(b)(1) of the 
Florida Statutes (1999), as enacted by the Legislature and its application as 
written––not as we might think it should have been written.  Accordingly, this 
decision does not address the merits of Dadeland’s claim as we merely construe the 
language of section 624.155(1)(b)(1) of the Florida Statutes (1999), as passed by 
the Legislature and nothing more. 
The first certified question implicates only a single subsection of section 
624.155 of the Florida Statutes (1999).  The statutory provision that is to be 
analyzed pursuant to the question certified states: 
(1) Any person may bring a civil action against an insurer when 
such person is damaged: 
 
. . . . 
(b) By the commission of any of the following acts by the 
insurer: 
1. Not attempting in good faith to settle claims when, under all 
the circumstances, it could and should have done so, had it acted fairly 
and honestly toward its insured and with due regard for her or his 
interests; . . . . 
§ 624.155(1)(b)(1), Fla. Stat. (1999).  The Eleventh Circuit’s question regarding 
this statutory provision reflects that the term “insured” in the above-quoted statute 
has not been defined by the Legislature, nor has the definition of that term in this 
context been addressed by this Court.  The Eleventh Circuit has certified the 
question of whether the obligee of a surety bond is considered an “insured” for 
 
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purposes of initiating an action under this statute as determinative of this cause of 
action by Dadeland.  
 
The dissent expresses a preference for the Court to decline to answer the first 
certified question, asserting that there are no damages to be recovered in a bad faith 
action, which results in the certified question not being determinative of this cause 
of action.  However, the dissent fails to recognize that section 624.155 expressly 
provides for the award of extra-contractual damages for bad faith conduct in 
connection with the insurance contract clearly beyond those that may have been 
awarded under the construction contract.  Therefore, whether Dadeland is entitled 
to an award for bad faith damages resulting from a failure to act in good faith 
under the bond beyond any contractual amounts owed can only be properly 
determined as this case proceeds to trial and Dadeland is afforded the opportunity 
to develop and prove damages, if any, suffered as a result of the alleged bad faith 
conduct of St. Paul.  The legislation specifically contemplates damages recoverable 
under the bad faith statute that are a reasonably foreseeable result of a specified 
violation of the applicable section by the insurer and may include an award or 
judgment in an amount that exceeds the insurance amount.  See § 624.155(7), Fla. 
Stat. (1999).  In Time Insurance Co. v. Burger, 712 So. 2d 389 (Fla. 1998), we 
specifically recognized that the Legislature has specifically authorized first parties 
to recover damages in bad faith actions and that the legislation contemplated more 
 
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than the recovery of the same damages already available in a breach of contract 
action.1  If the damages established by Dadeland at trial are merely duplicative of 
those submitted to and awarded by the arbitration panel, we would agree that 
Dadeland would not be entitled to recover those identical damages in a bad faith 
action.  However, the damages at issue in this action are those resulting from a 
statutory violation and bad faith under the bond, which could not have been 
presented prior to resolution of the underlying construction contract dispute.  Our 
analysis is buttressed by Dadeland’s complaint in this bad faith action which 
sought recovery for “actual damages, including but not limited to . . . loss of use of 
monies . . . [and] loss of business opportunities.”  A review of Dadeland’s demand 
for arbitration reveals that recovery for these consequential bad faith damages was 
                                          
 
               1.  The dissent challenges our reliance upon Time Insurance Co., suggesting 
that it “involved a very different situation involving a health care insurer who 
failed to authorize treatment by a health care provider.”  Dissenting op. at 52.  This 
is a distinction without a difference.  Both Time Insurance Co. and the instant case 
address bad faith actions against insurance companies, and the same principles 
with regard to bad faith apply.  In Time Insurance Co., the insured claimed that “as 
a direct result of Time’s failure to pay his claims in a timely fashion, he could not 
obtain needed medical treatment. He also complained of depression and an 
inability to communicate with his family as a result of his dealings with Time.”  
712 So. 2d at 390.  We ultimately held that “section 624.155(1)(b)(1) authorizes 
the recovery of damages for emotional distress in a first-party bad faith claim 
against a health insurance company.”  Id. at 392.  Despite the dissent’s assertion to 
the contrary, Dadeland’s allegations in its complaint that it suffered damages from 
“loss of use of monies . . . [and] loss of business opportunities” due to the bad faith 
of St. Paul are far more tangible than the allegations of intangible damages of 
emotional distress raised in Time Insurance Co., which were authorized by this 
Court.  
  
 
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not and undoubtedly could not have been sought by Dadeland in the arbitration 
forum.  The dissent fails to recognize this fact and, therefore, incorrectly concludes 
that because the arbitration award has been paid in full, there can be no basis for a 
bad faith cause of action here because Dadeland has received full compensation for 
the damages alleged in this statutory bad faith claim, i.e., the amount expended to 
repair the inadequate work that was performed by Walbridge.  The problem with 
the view expressed by the dissent is that it fails to acknowledge that the arbitration 
addressed only the construction contract, not a bad faith claim, and that Dadeland 
has claimed consequential bad faith damages in this bad faith action which are in 
addition to the damages asserted and awarded at the arbitration.  This deficiency in 
the dissent’s analysis is rooted in its refusal to recognize the damages actually 
being sought by Dadeland in the complaint filed in this matter, and instead 
concluding that the Court should accept statements contained within the trial 
judge’s order and the Eleventh Circuit’s recitation of the facts as to what damages 
Dadeland is seeking in this bad faith action.  However, contrary to the dissent’s 
position, at this point in these proceedings––at the summary judgment stage prior 
to Dadeland having the opportunity to prove the damages alleged in its complaint  
––we refuse to simply ignore the actual prayer for relief in the complaint and the 
damages alleged therein. 
 
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Contrary to the views expressed by the dissent, we conclude that the first 
certified question concerning whether the obligee of a surety contract is properly 
considered an insured for purposes of section 624.155(1)(b)(1) is properly before 
this Court, and that the facts of this case present an opportunity for us to clarify the 
law in Florida on this issue.  The question was certified to this Court because we 
have no controlling precedent on this issue and the federal court considers this 
question to be determinative of the cause of action.  We now turn to our analysis of 
the first question certified by the Eleventh Circuit. 
The scope of the duty created by section 624.155(1)(b)(1) in the third-party 
tortfeasor context was addressed by this Court in State Farm Fire & Casualty Co. 
v. Zebrowski, 706 So. 2d 275 (Fla. 1997).  In Zebrowski, we considered whether 
an injured third party could institute an action against a liability insurer under 
section 624.155(1)(b)(1) subsequent to the third party obtaining a judgment against 
State Farm’s insured in a personal injury action that was within the insured’s 
policy limits and satisfied by State Farm.  See id. at 275.  In holding that the 
statutory provision did not provide a cause of action, we noted that although the 
statute provides that “any person may bring a civil action,” § 624.155(1), Fla. Stat. 
(1999) (emphasis supplied), it is “necessary to consider what th[e] words [“any 
person”] modify in order to determine the particular persons authorized to pursue 
 
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the various claims authorized by section 624.155.”  Zebrowski, 706 So. 2d at 277.  
In addressing subsection (b), the Court determined that  
the cause of action is predicated on the failure of the insurer to act 
“fairly and honestly toward its insured and with due regard for his 
interests.”  The duty runs only to the insured.  Therefore, in the 
absence of an excess judgment, a third-party plaintiff cannot 
demonstrate that the insurer breached a duty toward its insured.  See 
Dunn v. National Sec. Fire & Cas. Co., 631 So. 2d 1103 (Fla. 5th 
DCA 1993) (only damages caused to the insured are recoverable 
under section 624.155(1)(b) 1). 
Zebrowski, 706 So. 2d at 277 (emphasis supplied).  Therefore, pursuant to our 
decision in Zebrowski, whether Dadeland qualifies as an “insured” as that term is 
used in section 624.155 is crucial in determining whether a valid cause of action is 
available, because we have determined that the duty imposed by subsection 
(1)(b)(1) flows only to an “insured.” 
 
Initially, as we begin the analysis we note that Florida’s Insurance Code is 
abundantly clear that a surety is included within the definition of an “insurer” and 
is regulated as an “insurer.”  Section 624.03 of the Florida Statutes defines an 
insurer as “every person engaged as indemnitor, surety, or contractor in the 
business of entering into contracts of insurance or of annuity.”  § 624.03, Fla. Stat. 
(1999) (emphasis supplied).  Most importantly, in David Boland, Inc. v. Trans 
Coastal Roofing Co., 851 So. 2d 724 (Fla. 2003), we have already specifically 
noted that the term “‘insurer’ is clearly defined under the Florida Insurance Code 
to include a ‘surety.’”  Id. at 726 n.1  (citing Nichols v. Preferred Nat’l Ins. Co., 
 
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704 So. 2d 1371, 1373 (Fla. 1997)).  Moreover, the different classifications of 
insurance that exist within the State of Florida as provided by the Legislature 
explicitly include suretyship as one of those classifications.  See § 624.6011, Fla. 
Stat. (1999) (“Insurance shall be classified into the following ‘kinds of insurance’: 
. . . (5) Surety.”).  Additionally, surety contracts are also included within Florida’s 
Insurance Code as a type of insurance contract.  See §§ 627.751-.759, Fla. Stat. 
(1999).  “Surety insurance” is defined in terms of a “contract bond” or 
“performance bond.”  See § 624.606(1)(a), Fla. Stat. (1999).  On consideration of 
the initial motion to dismiss, the trial court here reasoned “that the language in the 
statute is not ambiguous, nor unclear” in concluding that the statute afforded a 
basis for a bad faith action in this context.  With this foundation, it is clear that the 
Legislature intended that sureties would be governed by Florida’s Insurance Code.  
However, the Legislature’s inclusion of a surety within its definition of an 
“insurer,” along with its inclusion of suretyship as a “kind of insurance,” although 
persuasive, may not necessarily answer the question of whether an obligee of a 
surety is an “insured” for purposes of section 624.155(1)(b)(1). 
 
Dadeland asserts that the term “insured” is not defined by section 624.155, 
and, therefore, its meaning must and should be derived contextually by reference to 
other statutory provisions found in the insurance code.  Specifically, Dadeland 
refers to section 627.756 of the Florida Statutes, which governs attorney fees in 
 
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any action filed by an owner against a surety under a performance bond issued in 
conjunction with a construction contract.  See § 627.756, Fla. Stat. (1999).  Section 
627.756 provides that the general provision with regard to attorney fees in 
prevailing actions against insurers found in section 627.428 also applies to these 
actions, and that “[o]wners . . . shall be deemed to be insureds or beneficiaries for 
purposes of this section.”  § 627.756(1), Fla. Stat. (1999).  Dadeland contends that 
the inclusion of an owner/obligee as an insured in this statutory section reflects the 
Legislature’s intent that obligees are considered “insureds” for purposes of the 
insurance code as a whole.   
In response, St. Paul advances that the inclusion of an owner/obligee within 
the definition of an “insured” was expressly limited by the Legislature to this 
attorney fee provision only by the inclusion of the limiting language “for purposes 
of this section.”  Therefore, St. Paul contends that Dadeland’s position is contrary 
to the expressed intent of the Legislature to limit this definition of an “insured” 
solely to section 627.756.  Additionally, St. Paul argues that the express inclusion 
of owners/obligees as insureds for purposes of this section, and the lack of a 
corresponding provision in section 624.155, demonstrates a legislative intent that 
the civil remedy statute does not extend to obligees of surety contracts.   
We reject the position advanced by St. Paul but conclude that the theory 
suggested by Dadeland does not automatically answer the question we must 
 
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resolve.  We conclude that the Legislature’s intent in enacting section 627.756 was 
to not only identify obligees as standing in the position of insureds, but to also 
ensure that principals of payment or performance bonds would not be entitled to 
recover attorney’s fees in actions filed pursuant to those bonds.  Consequently, the 
Legislature’s inclusion of an obligee within the definition of “insured” for purposes 
of section 627.756, although persuasive, is not totally determinative of whether 
that term should be similarly construed for purposes of section 624.155.  
Therefore, we must turn to principles of statutory construction to assist in our 
construction of the use of the term “insured” in section 624.155.   
With this foundation in mind, we initially look to the plain and ordinary 
meaning of the term “insured” in attempting to discern whether the Legislature 
intended for the term to include the obligee of a surety bond.  Words of common 
usage, when used in a statute, should be construed in the plain and ordinary sense, 
because it must be assumed that the Legislature knows the plain and ordinary 
meaning of words used in statutes and that it intended the plain and obvious 
meaning of the words used.  See Mitchell v. State, 911 So. 2d 1211, 1214 (Fla. 
2005) (“If the language of a statute or rule is plain and unambiguous, it must be 
enforced according to its plain meaning.”); Clines v. State, 912 So. 2d 550, 555 
(Fla. 2005) (“We have ‘repeatedly held that the plain meaning of statutory 
 
- 17 -
language is the first consideration of statutory construction.’”) (quoting Stoletz v. 
State, 875 So. 2d 572, 575 (Fla. 2004)). 
Insurance has been legislatively defined as “a contract whereby one [the 
insurer] undertakes to indemnify another [the insured] or pay or allow a specified 
amount or a determinable benefit upon determinable contingencies.”  § 624.02, 
Fla. Stat. (1999).  When applying this definition to the relationship created under a 
surety bond one could conclude that, because a surety is undertaking the 
responsibility of indemnifying the obligee of a surety bond, an obligee is an 
“insured” as that term is ordinarily understood in the traditional insurance context.  
This conclusion is also buttressed by a review of the nature of the surety 
relationship.  In general, suretyship has been described as  
a contractual tripartite relationship in which one party (the surety) 
guarantees to another party (the obligee) that a third party (the 
principal) will perform a contract in accordance with its terms and 
conditions.  The surety promises the obligee to answer the debt, 
default, or miscarriage of the principal.  Suretyship is a form of 
guaranty.  In exchange for a premium, the surety lends its financial 
strength and credit to the principal on the condition that, if the surety 
has to satisfy the principal’s debt or default, the principal will 
indemnify the surety for its losses and expenses.  In essence, the 
surety becomes the guarantor of the principal’s ability to perform its 
obligations to the obligee. 
Edward Etcheverry, Rights and Liabilities of Sureties, in Florida Construction Law 
and Practice at 8-7 (5th ed. 2006); see also Roger P. Sauer, Creation of the 
Relationship, in The Law of Performance Bonds 3 (Lawrence R. Moelmann & 
 
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John T. Harris eds., 1999) (“A performance bond provides available funds to 
complete the principal’s contract should the latter be in default of the performance 
it owes the obligee.”).  Given this description, it is reasonable to conclude that an 
owner/obligee, by requiring that a bond be obtained by the principal, is essentially 
insuring itself from potential losses that would result in the event the principal 
defaults on its obligations required by the underlying construction contract.  See 
Am. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 593 So. 2d 195, 198 (Fla. 
1992) (“The surety agrees to complete the construction or to pay the obligee the 
reasonable costs of completion if the [principal] defaults.”).  This interpretation of 
the suretyship relationship appears to clearly bring an obligee within the definition 
of an “insured” as that term is commonly understood.  Nevertheless, the surety 
relationship possesses characteristics that are unique and distinct from the 
traditional liability insurance relationship and, therefore, our analysis does not end 
here. 
 
The dissent stresses that a surety’s liability is generally limited by the terms 
of the bond and that this should in some manner favor an interpretation that an 
obligee should not be considered an “insured” for purposes of section 624.155.  
We cannot conclude that a limitation of a surety’s liability to the penal sum of the 
bond requires such a conclusion.  In our view, this characteristic of the traditional 
surety relationship is highly analogous to the conventional insurance relationship, 
 
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since an insurer’s liability is also generally limited by the terms of the insurance 
contract unless, of course, the insurer or surety is shown to have acted in bad faith 
pursuant to Florida’s statutory scheme.  In addition, the dissent attempts to 
emphasize that “[i]n a surety situation, the contract is not called an insurance 
contract, the contract is called a ‘bond,’” and that “[t]he words ‘insurer’ or 
‘insured’ are not used in the present performance bond and neither are they used in 
the usual construction surety bond.”  Dissenting op. at 58-59.  Contrary to the 
dissenting opinion, we conclude that it is an assessment of the actual nature of the 
surety relationship and its classification in our statutory provision that is required 
to answer the certified question rather than merely focusing on the labels that may 
be given in the underlying contract and parties involved in that relationship.  It is 
the substance of this surety relationship that guides our analysis of this certified 
question, not the labels that may be attached. 
 
We recognize that in Pearlman v. Reliance Insurance Co., 371 U.S. 132 
(1962), the Court was asked to determine whether monies withheld from a 
bankrupt construction company that were paid to the trustee in bankruptcy should 
be paid to the surety that had made payment to discharge debts of the bankrupt 
contractor.  See id. at 133.  In concluding that the surety, having paid the debts of 
the construction company, was entitled to the money, the High Court noted in dicta 
that although suretyship and insurance have similar characteristics, “the usual 
 
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view, grounded in commercial practice, [is] that suretyship is not insurance.”  Id. at 
140 n.19; see also W. World Ins. Co. v. Travelers Indem. Co., 358 So. 2d 602, 604 
(Fla. 1st DCA 1978) (noting the distinctions between a general liability insurance 
policy and a statutory penal bond for purposes of considering indemnification).  
Notwithstanding these distinctions, the United States District Court for the 
Southern District of Florida has recognized that “[t]he inclusion of surety and 
surety insurance in [Florida’s] insurance code is strong evidence that Florida 
intended to hold surety insurers to the same standards as ordinary insurers.”  
Shannon R. Ginn Constr. Co. v. Reliance Ins. Co., 51 F. Supp. 2d 1347, 1350 (S.D. 
Fla. 1999).  In Shannon R. Ginn, the district court was faced with the issue of 
whether section 624.155(1)(b)(1) of the Florida Statutes provided a principal in 
this context a basis to sue a surety for bad faith.  See Shannon R. Ginn, 51 F. Supp. 
2d at 1348.  In analyzing this issue, the district court first recognized the 
distinctions between insurance and suretyship.  See id. at 1350.  However, the 
court then held that it is the obligee that looks to the surety for protection from 
calamity and, correspondingly, it is the obligee to whom the surety owes a duty of 
good faith, not the principal.  See id. 1352.  The district court concluded that a 
claim for a bad faith failure to settle must involve an underlying duty of good faith, 
and, therefore, a principal is not vested with the right to file a bad faith action 
pursuant to section 624.155 because it does not qualify as an “insured” under that 
 
- 21 -
statute.  See id. at 1353.  In dicta the district court further reasoned that “if any 
party has a claim for bad faith failure to settle under section 624.155(1)(b)1, 
Florida Statutes, it would be the . . . obligee under the performance bond” since it 
is the surety who owes a duty of good faith to the obligee.  Id. at 1352. 
 
Although we conclude that the statutory construction here supports the 
notion that a statutory bad faith action is available in this context, given that 
Florida’s Insurance Code does not expressly define the term “insured,” and that the 
ordinary meaning of “insured” does not fit neatly into the surety context, our 
conclusion is further supported upon consideration of how that term has been 
construed in other jurisdictions under similar scenarios involving bad faith claims 
against sureties along with subsequent legislative amendments to section 624.155 
which enlighten the Legislature’s intended meaning of the word “insured” as it is 
used in section 624.155(1)(b)(1). 
Case Law from Other Jurisdictions 
 
In looking to the treatment of this issue in other jurisdictions it is evident 
that there is a split of authority as to whether an action is available to an obligee 
against its surety for bad faith in the claims settlement process.  Although 
somewhat helpful in our analysis, many of the cases discussed below address the 
existence of a bad faith claim against a surety only in the common law context and 
are therefore not determinative of the issue in Florida where the Legislature has 
 
- 22 -
directly addressed bad faith claims within the insurance code and has expressly 
created a private statutory cause of action for such claims. 
 
Action Allowed 
 
The Supreme Court of Arizona, in Dodge v. Fidelity & Deposit Co. of 
Maryland, 778 P.2d 1240 (Ariz. 1989), held that the surety on a performance bond 
could be held liable under the common law for the tort of bad faith failure in 
investigating a claim on the bond or in failing to remedy the principal’s default.  
See id. at 1241.  In reaching its conclusion, the Arizona court noted the 
legislature’s inclusion of suretyship in Arizona’s Insurance Code as one of the 
types of insurance regulated by the Code.  See id. at 1241-42.  The court also 
recognized the differences between liability and suretyship, but reasoned that the 
analysis is not directed to whether there are differences, but rather, whether the 
Legislature included suretyship among the classes of businesses it intended to 
regulate under the Insurance Code.  See id. at 1242.  In Arizona, as in Florida, the 
legislature has done so.  Given this analysis, the court concluded that it was 
appropriate to extend even the common law action for breach of the duty of good 
faith that is traditionally recognized in the liability coverage insurer-insured 
relationship to the relationship between a surety and its obligee.  See id. at 1244. 
 
Several other jurisdictions, utilizing comparable analyses, have reached 
similar results––holding that the law of the jurisdiction would recognize a common 
 
- 23 -
law bad-faith action against a surety.  See Loyal Order of Moose, Lodge 1392 v. 
Int’l Fidelity Ins. Co., 797 P.2d 622 (Alaska 1990) (holding that an implied 
covenant of good faith exists between a surety and its obligee on performance 
bonds such as to authorize a common law action in tort by the obligee against the 
surety for breaching that covenant); Transamerica Premier Ins. v. Brighton Sch. 
Dist. 27J, 940 P.2d 348 (Colo. 1997) (holding that the similarities between the 
traditional insurance relationship and suretyship, along with the inclusion of the 
surety business in the insurance statutes allows for a common law cause of action 
for a surety’s failure to act in good faith when processing claims by an obligee 
pursuant to a performance bond); Int’l Fidelity Ins. Co. v. Delmarva Sys. Corp., 
No. 99C-10-065WCC, 2001 WL 541469 (Del. Super. Ct. May 9, 2001) (holding 
that a common law claim sounding in tort for the bad faith breach of a surety 
contract instituted by an obligee against its surety exists in Delaware due to (1) the 
relationship between a surety and an obligee being nearly identical to the one 
between an insurer and an insured; and (2) the inclusion of sureties by the 
legislature within the insurance statutes); Bd. of Dirs. of the Ass’n of Apartment 
Owners of Discovery Bay Condo. v. United Pac. Ins. Co., 884 P.2d 1134 (Haw. 
1994) (holding that a surety owes a duty of good faith to both its principal and 
obligee, and by implication that a common law action for breach of this duty would 
be available where the surety is found to be liable on the underlying bond); K-W 
 
- 24 -
Indus. v. Nat’l Sur. Corp., 754 P.2d 502 (Mont. 1988) (holding that a surety on a 
payment bond is liable at common law in tort to the obligee for bad faith conduct 
violating the State’s Unfair Claims Settlement Practices Act due to the legislature’s 
inclusion of sureties within the general insurance code which also included the 
more specific claims practices act even though, unlike Florida, there was no 
statutory provision creating a private cause of action for violation of the statute); 
Szarkowski v. Reliance Ins. Co., 404 N.W.2d 502 (N.D. 1987) (holding that North 
Dakota’s Unfair Insurance Practices Act applies to sureties issuing performance 
bonds and that although the practices act did not create a private cause of action for 
violations of its provisions, unlike Florida, a surety could be held liable under the 
common law for a cause of action sounding in tort for withholding the payment of 
a claim in bad faith); Suver v. Pers. Serv. Ins. Co., 462 N.E.2d 415 (Ohio 1984) 
(recognizing the dissimilarities between suretyship and insurance but holding that a 
surety has a duty to act in good faith in handling the claims of a third party injured 
by the principal of a financial responsibility bond and that failure to abide by this 
duty could result in common law tort liability outside the amount of the bond).   
As noted, although very persuasive and helpful in conducting an analysis of 
the issue presented, none of the cases discussed above are directly applicable in the 
instant matter due to the common law/statutory distinction.  Even though none of 
the insurance codes in any of the foregoing jurisdictions contained a statutory 
 
- 25 -
provision expressly creating a private cause of action for an insurer’s bad faith 
conduct, as does Florida, many relied on similar statutory schemes to support 
common law actions.  However, it is clear that the Legislature in Florida intended 
to include sureties within the regulatory scheme of Florida’s Insurance Code and 
evidence of such intent, under the reasoning of the courts above, supports a result 
that would subject sureties to bad faith actions if found to be in violation of the 
civil remedy provision contained in section 624.155 of the Florida Statutes (1999). 
 
Action Not Allowed 
 
The Supreme Court of California’s opinion in Cates Construction, Inc. v. 
Talbot Partners, 980 P.2d 407 (Cal. 1999), is probably the most often-cited case in 
which a deciding court has determined that a common law cause of action for bad 
faith is not available against a surety.  The California Supreme Court first noted 
that California’s Unfair Insurance Practices Act did not create a statutory private 
cause of action against insurers who violate the practices enumerated in the Act, 
unlike the corresponding Florida practices act.  See id. at 417.  The court held that 
a common law cause of action in tort against a surety did not exist under California 
law and that “recovery for a surety’s breach of the implied covenant of good faith 
and fair dealing is properly limited to those damages within the contemplation of 
the parties at the time the performance bond is given or at least reasonably 
foreseeable by them at that time.”  Id. at 427.  Simply stated, only an action on the 
 
- 26 -
contract would be recognized.  It is clear that although relevant to a discussion of 
common law actions, Cates is certainly not controlling authority for the issue 
before us. 
Several other states without statutory provisions similar to those in Florida 
have reached results similar to Cates––concluding that in the absence of a statutory 
action a private cause of action for bad faith does not exist at common law in the 
suretyship context.  See Cincinnati Ins. Co. v. Centech Bldg. Corp., 286 F. Supp 
2d. 669 (M.D.N.C. 2003); Superior Precast, Inc. v. Safeco Ins. Co. of Am., 71 F. 
Supp 2d. 438 (E.D. Pa. 1999); Inst. of Mission Helpers v. Reliance Ins. Co., 812 F. 
Supp. 72 (D. Md. 1992); Great Am. Ins. Co. v. Gen. Builders, Inc,, 934 P.2d 257 
(Nev. 1997); Masterclean, Inc. v. Star Ins. Co., 556 S.E.2d 371 (S.C. 2001); Great 
Am. Ins. Co. v. N. Austin Mun. Util. Dist. No. 1, 908 S.W.2d 415 (Tex. 1995). 
Legislative Amendments to Section 624.155 
 
During the 2005 Legislative Session, the Florida Legislature adopted Senate 
Bill 652 which became law on June 14, 2005.  Section 2 of this bill created 
subsection (9) of section 624.155 of the Florida Statutes which in its entirety reads: 
(9) A surety issuing a payment or performance bond on the 
construction or maintenance of a building or roadway project is not an 
insurer for purposes of subsection (1). 
Ch. 2005-218, § 2, Laws of Fla.  This amendment to section 624.155 removes all 
uncertainty for the future as to whether certain specified surety bonds are subject to 
 
- 27 -
its provisions.  After the passage of Senate Bill 652, those sureties specifically 
issuing “payment or performance bond[s] on the construction or maintenance of a 
building or roadway project” are clearly not considered insurers for purposes of 
section 624.155 of the Florida Statutes.  Ch. 2005-218, § 2, Laws of Fla.  No other 
type of surety contract is mentioned.     
We have held in the past that when construing a statute, a court “may look to 
acts passed at subsequent sessions to discern legislative intent.”  Clair v. Glades 
County Bd. of Comm’rs, 649 So. 2d 224, 227 n.5 (Fla. 1995) (citing Murthy v. N. 
Sinha Corp., 644 So. 2d 983 (Fla. 1994); Watson v. Holland, 20 So. 2d 388 (Fla. 
1944)).  Further, we have recognized that we have “the right and duty, in arriving 
at the correct meaning of a prior statute, to consider subsequent legislation.”  
Parker v. State, 406 So. 2d 1089, 1092 (Fla. 1981) (quoting Gay v. Canada Dry 
Bottling Co., 59 So. 2d 788, 790 (Fla. 1952)).  However, this tool of statutory 
construction was called into question somewhat by our opinion in Knowles v. 
Beverly Enterprises-Florida, Inc., 898 So. 2d 1 (Fla. 2004).  In Knowles, decided 
not more than two years ago, we were faced with the issue of determining the 
proper construction of section 400.023 of the Florida Statutes (1997).  In 
construing this statutory section, we refused to consider a legislative amendment 
passed by the Legislature during the pendency of the case which specifically 
addressed and cured the controversy at issue; noting that the legislative history was 
 
- 28 -
silent as to why the change was made and concluding the “revision to be of no 
moment with regard to the particular issue in this case.”  Id. at 6 n.1.  Moreover, 
we have also been reluctant to look at subsequent amendments to determine 
legislative intent when the language of a statute is clear and unambiguous, see 
Savona v. Prudential Ins. Co. of Am., 648 So. 2d 705 (Fla. 1995), or when an 
amendment is passed long after the original act was made law as occurred here, see 
State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55 (Fla. 1995).  Strict 
adherence to this latter rule has not been followed, but only when a subsequent 
amendment is enacted soon after a controversy regarding a statute’s interpretation 
has arisen.  See State v. Cotton, 769 So. 2d 345 (Fla. 2000) (citing Parole Comm’n 
v. Cooper, 701 So. 2d 543 (Fla. 1997); Lowry v. Parole & Prob. Comm’n, 473 So. 
2d 1248, 1250 (Fla. 1985)). 
Based on the foregoing, it may be within this Court’s discretion to look to 
the Legislature’s recent amendment of section 624.155 to assist in construing the 
term “insured” but we have most recently refused to do so.  We are also mindful 
that the Legislature’s recent amendment to section 624.155 was passed twenty-
three years after that statutory section’s original enactment, and some six years 
after the Southern District’s opinion in Shannon R. Ginn, in which the district court 
indicated concern as to the correct interpretation of the term “insured” as that term 
is used in section 624.155(1)(b)(1).  In addition, Justice Pariente correctly notes in 
 
- 29 -
her separate opinion that “the legislative history of this amendment does not 
explain why section 624.155(9) was added [and a]bsent legislative history 
confirming or supporting the dissent’s conclusion” that the amendment was added 
to provide the answer to the certified question, such a conclusion is improper.  
Specially concurring op. at 48 (footnote omitted); see also Knowles, 898 So. 2d at 
6 n.1.  Nonetheless, we find it helpful to our analysis in this case that the 
Legislature, when exempting only some surety bonds from the purview of section 
624.155 when it amended this statutory section, chose to exempt only certain 
limited types of bonds from the application of section 624.155.  This important 
fact, which the dissent ignores, suggests that the Legislature intended that other 
types of suretyship relationships be subject to section 624.155, and indicates that 
prior to this exemption the suretyship business has been within the purview of the 
civil remedy provisions of section 624.155.  
 
Based on the foregoing analysis, and our prior cases in which we have noted 
that the term “insurance” includes a surety, we hold that an obligee is an “insured” 
for purposes of presenting a cause of action under section 624.155 of the Florida 
Statutes (1999).  Although we recognize the split of authority in other jurisdictions 
as to whether a common law cause of action should be recognized against a surety 
for breach of the duty of good faith, we find it compelling that Florida’s 
Legislature has deemed it appropriate to enact a statutory provision in derogation 
 
- 30 -
of the common law expressly creating a private cause of action, thus suggesting the 
Legislature’s intent to provide an insured with more protection than was 
traditionally afforded by the common law.  Moreover, as noted in several other 
jurisdictions, the relationship between a surety and its obligee, although unique, is 
extremely similar to the relationship between an insurer and its insured––one party, 
the insured/obligee, is seeking to protect itself against a contingency, and the other 
party, the insurer/surety, has undertaken to provide certain benefits should that 
contingency occur.  In addition, the recent amendment to section 624.155 
buttresses our conclusion that the Legislature originally intended that the 
suretyship business would be subject to section 624.155.  Therefore, we answer the 
first certified question in the affirmative.2  
 
Having answered the first certified question, we now turn to the second 
question certified by the Eleventh Circuit––whether the language in section 
624.155 eliminates the requirement of proof of a general business practice when 
                                          
 
 
2.  The dissent contends that by answering the first certified question in the 
affirmative we are “requir[ing] that the surety [either] pay the amount that the 
obligee demands . . . or be in bad faith.”  Dissenting op. at 61.  Initially, we note 
that the dissent’s statement drastically oversimplifies the matter.  Simply because a 
surety or an insurance company declines to pay an amount demanded does not 
automatically result in a finding of bad faith, because the insured must demonstrate 
at trial that the actions of the surety or insurance company were in fact in bad faith 
as defined by the relevant statutory provisions.  Moreover, to the extent that a 
surety or insurance company is found to have acted in bad faith, our decision today 
does nothing more than apply a statute that requires that a surety company’s 
conduct be subject to the same requirements of good faith and fair dealing to which 
all forms of insurance must conform. 
 
- 31 -
the plaintiff is pursuing a section 626.9541 claim through the right of action 
provided in section 624.155.  Section 624.155(1) of the Florida Statutes, in its 
entirety, reads as follows: 
(1) Any person may bring a civil action against an insurer when 
such person is damaged: 
(a) By a violation of any of the following provisions by the 
insurer: 
1. Section 626.9541(1)(i), (o), or (x); 
2. Section 626.9551; 
3. Section 626.9705; 
4. Section 626.9706; 
5. Section 626.9707; or 
6. Section 627.7283. 
(b) By the commission of any of the following acts by the 
insurer: 
1. Not attempting in good faith to settle claims when, under all 
the circumstances, it could and should have done so, had it acted fairly 
and honestly toward its insured and with due regard for her or his 
interests; 
2. Making claims payments to insureds or beneficiaries not 
accompanied by a statement setting forth the coverage under which 
payments are being made; or 
3. Except as to liability coverages, failing to promptly settle 
claims, when the obligation to settle a claim has become reasonably 
clear, under one portion of the insurance policy coverage in order to 
influence settlements under other portions of the insurance policy 
coverage. 
Notwithstanding the provisions of the above to the contrary, a person 
pursuing a remedy under this section need not prove that such act was 
committed or performed with such frequency as to indicate a general 
business practice. 
§ 624.155(1), Fla. Stat. (1999) (emphasis supplied).  The circuit court’s second 
certified question implicates the emphasized portion of this statutory provision, and 
 
- 32 -
asks whether it eliminates the requirement of proof of a general business practice 
when the plaintiff is pursuing a section 626.9541 claim through the right of action 
provided in section 624.155. 
 
St. Paul asserts that the last paragraph of subsection (1) does not apply to 
actions under subsection (1)(a)(1).  In support of its assertion, St. Paul relies on the 
opinion of the United States District Court for the Middle District of Florida in 
Ticor Title Insurance Co. v. University Creek, Inc., 767 F. Supp. 1127 (M.D. Fla. 
1991), as requiring proof of a general business practice in actions based on section 
624.155(1)(a).  Contrary to St. Paul’s assertion, that is not at all what the district 
court determined in Ticor.  In addressing the plaintiff’s claims under section 
624.155 of the Florida Statutes, the Ticor court explicitly stated that section 
624.155(1)(a)(1) “provides a civil remedy for violations of section 626.9541(1)(i) 
without proof that the insurer committed unfair or deceptive acts with such 
frequency as to constitute a general business practice.”  See Ticor, 767 F. Supp. at 
1138 (emphasis supplied).  Ticor simply does not support St. Paul’s position and 
is, in our view, contrary to St. Paul’s analysis. 
 
Turning to the accepted rules of statutory construction, it is clear that the 
circuit court’s question should be answered in the affirmative.  Initially, a plain 
reading of the language of the paragraph in question reveals that it applies to a 
“person pursuing a remedy under this section.”  § 624.155, Fla. Stat. (1999) 
 
- 33 -
(emphasis supplied).  As we noted in Golf Channel v. Jenkins, 752 So. 2d 561 (Fla. 
2000), the Preface to the Florida Statutes explains the hierarchical numbering 
system of the Florida Statutes and provides guidance as to the structure and 
nomenclature used therein.  See id. at 565.  The preface advises that “each section 
within a chapter is identified by a whole decimal number consisting of the chapter 
number followed by digits appearing to the right of the decimal point.  For 
example, ‘s. 16.01’ would identify a section in chapter 16 of the Florida Statutes.”  
Linda S. Jessen, Preface to Florida Statutes at vii (2005).  With this introduction 
for uniformity, it is clear to us that the plain language of the paragraph at issue 
demonstrates that the Legislature intended that it apply to section 624.155 in its 
entirety, not merely to one subsection which would be identified differently within 
a “section.”  If the Legislature had intended for the paragraph at issue to apply 
solely to subsection (1)(b), it would have indicated this intent by noting that proof 
of a general business practice was not required for that subsection.  See Golf 
Channel, 752 So. 2d at 565.  However, section 624.155, as enacted by the 
Legislature, expressly states that proof of a general business requirement is not 
necessary for “a person pursuing a remedy under this section” without reference to 
any particular subsection.  § 624.155(1), Fla. Stat. (1999) (emphasis supplied).  
Moreover, if we were to construe this paragraph as applying only to subsection 
(1)(b) of section 624.155 and not to subsection (1)(a), it would essentially render 
 
- 34 -
the language meaningless, contrary to accepted principles of statutory construction  
that the Legislature does not intend to enact useless provisions and courts should 
avoid readings that would render part of a statute meaningless.  See State v. Goode, 
830 So. 2d 817, 824 (Fla. 2002).  The only other provision referred to in section 
624.155 which requires proof of conduct occurring with such frequency as to 
indicate a general business practice relates to violations of section 626.9541(1)(i), 
(o), and (x).  Therefore, if we were to conclude that the paragraph at issue does not 
eliminate the requirement of section 626.9541 with regard to a general business 
practice in actions brought pursuant to section 624.155(1)(a), we would essentially 
be rendering the language absolutely meaningless as no other provision referred to 
in section 624.155 requires proof of a general business practice.  Based on the 
foregoing, we answer the second certified question in the affirmative. 
 
The third question certified by the circuit court addresses whether an 
arbitration panel’s finding that the principal on a surety bond has breached its duty 
to the obligee and that the surety is bound to the extent the principal fails to pay the 
award satisfies the requirement that there must be a prior adjudication that the 
obligee is entitled to a payment of a claim from the surety before a section 624.155 
action can be instituted.  The question certified by the Eleventh Circuit stems from 
our decision in Blanchard v. State Farm Mutual Automobile Insurance Co., 575 
So. 2d 1289 (Fla. 1991), wherein we held that  
 
- 35 -
an insured’s underlying first-party action for insurance benefits 
against the insurer . . . must be resolved favorably to the insured 
before the cause of action for bad faith in settlement negotiations can 
accrue.  It follows that an insured’s claim against an uninsured 
motorist carrier for failing to settle the claim in good faith does not 
accrue before the conclusion of the underlying litigation for the 
contractual uninsured motorist insurance benefits. 
Id. at 1291.  In Blanchard, the plaintiff was injured in an automobile accident by an 
uninsured motorist.  See id. at 1290.  Following State Farm’s alleged refusal to 
properly settle Blanchard’s claim under his uninsured motorist coverage, 
Blanchard sued the original tortfeasor for negligence and also sought to compel 
State Farm to provide benefits under Blanchard’s insurance policy.  See id.  
Subsequent to trial, a verdict was entered in Blanchard’s favor awarding him 
damages, and a judgment was entered against State Farm in the amount of his 
policy limits.  See id.  Consequently, Blanchard sued State Farm pursuant to 
section 624.155 alleging bad faith refusal to settle the uninsured motorist claim.  
See id.  Blanchard’s action was dismissed by a federal district court, and appellate 
review of the dismissal resulted in the Eleventh Circuit certifying a question to this 
Court.  See id. at 1291.  In the above-quoted passage, we answered the Eleventh 
Circuit’s question and determined that Blanchard’s action had been improperly 
dismissed by the district court because it had erroneously concluded that Blanchard 
was required to also prosecute his bad faith claim in the original underlying action.  
See id.
 
- 36 -
 
Our decision in Blanchard was further clarified in Imhof v. Nationwide 
Mutual Insurance Co., 643 So. 2d 617 (Fla. 1994).  In Imhof, the First District 
certified the following question to this Court: 
IS AN ACTION FOR BAD-FAITH DAMAGES PURSUANT TO 
SECTION 624.155(1)(B)(1), FLORIDA STATUTES, BARRED BY 
BLANCHARD v. STATE FARM MUTUAL AUTOMOBILE 
INSURANCE COMPANY, 575 So. 2d 1289 (Fla. 1991), WHERE 
THE COMPLAINT FAILS TO ALLEGE THAT THERE HAD 
BEEN A DETERMINATION OF THE EXTENT OF 
APPELLANT’S DAMAGES AS A RESULT OF THE UNINSURED 
TORTFEASOR’S NEGLIGENCE? 
Id. at 617.  We answered the certified question in the affirmative, holding that, 
although there is no need to allege the specific amount of damages, it is necessary 
for a plaintiff to allege that a determination has been made with regard to “the 
existence of liability on the part of the uninsured tortfeasor and the extent of the 
plaintiff’s damages” because absent such a determination “a cause of action cannot 
exist for a bad faith failure to settle.”  Id. at 618 (quoting Blanchard, 575 So. 2d at 
1291).  Under the facts of Imhof, we specifically recognized that an arbitration 
award satisfies this condition precedent to a section 624.155 claim by “show[ing] 
that [the insured] had a valid claim.”  Id. at 619. 
 
Based on the foregoing, we conclude that the third certified question should 
be answered in the affirmative.  Initially, similar to the findings of liability on the 
part of the under- or uninsured motorists in Imhof and Blanchard, the arbitration 
panel in the instant matter determined that Walbridge was liable to Dadeland for 
 
- 37 -
failure to perform its obligations under the construction contract.  Additionally, the 
arbitration panel determined that Dadeland had a valid claim under the 
performance bond when it held:  “The surety is bound to the extent that its 
principal is obligated under this award.”  Any assertion on the part of St. Paul that 
an arbitration award cannot satisfy this condition precedent has already been 
rejected by our decision in Imhof.  Subsequent to Imhof, it is clear that an 
arbitration award establishing the validity of an insured’s claim satisfies the 
condition precedent set forth in Blanchard.  See Imhof, 643 So. 2d at 619 (“In the 
instant case, the arbitration award shows that Imhof had a valid claim.”).  
Therefore, we answer the third certified question in the affirmative and hold that 
the condition precedent announced by our decision in Blanchard is satisfied when 
an arbitration panel concludes that a principal has breached its duty to its obligee 
under a construction contract and that the surety on a bond issued covering the 
performance of the construction contract is bound to the extent of the principal’s 
liability.  The dissenting view is contrary to both Blanchard and Imhof. 
 
Although based upon our resolution of the third certified question we 
conclude that the fourth question certified by the Eleventh Circuit is rendered 
moot, we nevertheless write to address the concerns raised by the dissent with 
regard to the applicability of res judicata.  We have noted that for the doctrine of 
res judicata to apply, several conditions must exist, which include:  “identity of the 
 
- 38 -
thing sued for; identity of the cause of action; identity of [the] parties; and identity 
of the quality in the person for or against whom the claim is made.”  Albrecht v. 
State, 444 So. 2d 8, 12 (Fla. 1984).  Res judicata applies to matters actually raised 
and determined in the original proceeding and also to matters which could have 
properly been raised and determined.  See State v. McBride, 848 So. 2d 287, 290 
(Fla. 2003). 
Both parties in this action agree that the required prerequisites for the 
application of res judicata are not satisfied in the instant case with regard to 
Dadeland’s section 624.155 claim.  We also agree.  At the time of the arbitration 
proceeding, Dadeland’s section 624.155 claim had not even accrued because there 
had not been a determination as to whether Walbridge had breached its obligations 
under the construction contract or whether damages flowing from such breach 
were covered under the performance bond.  See Blanchard, 575 So. 2d at 1291 
(“[A]n insured’s underlying first-party action for insurance benefits against the 
insurer necessarily must be resolved favorably to the insured before the cause of 
action for bad faith in settlement negotiations can accrue.”).  Moreover, as we 
approved in Blanchard, a “claim arising from bad faith is grounded upon the legal 
duty to act in good faith, and is thus separate and independent of the claim arising 
from the contractual obligation to perform.”  Id.  Based on Blanchard, it is clear 
that the first two prerequisites for application of res judicata––identity of the thing 
 
- 39 -
sued for and identity of the cause of action––are not and cannot be satisfied by the 
facts of this case.  We hold that the arbitration panel’s award does not bar 
Dadeland’s bad faith claim against St. Paul and actually it was a condition 
precedent to this statutory cause of action. 
 
The final question certified to this Court by the Eleventh Circuit asks 
whether an arbitration panel’s denial of a defendant-surety’s affirmative defenses 
in a breach of contract claim collaterally estops the defendant from raising the 
same defenses in a subsequent bad-faith refusal to settle claim.  The essential 
elements that are required for the application of the doctrine of collateral estoppel 
were outlined in Department of Health & Rehabilitative Services v. B.J.M., 656 
So. 2d 906 (Fla. 1995).  In B.J.M., we held that the essential elements require that 
“the parties and issues be identical, and that the particular matter be fully litigated 
and determined in a contest which results in a final decision of a court of 
competent jurisdiction.”  Id. at 910.  We stressed that “collateral estoppel precludes 
relitigation of issues actually litigated in a prior proceeding.”  Id.  Several courts 
have appropriately concluded that a determination made during an arbitration 
proceeding can provide an appropriate foundation for the application of collateral 
estoppel.  See Greenblatt v. Drexel Burnham Lambert, 763 F.2d 1352, 1360 (11th 
Cir. 1985); In re Celotex Corp., 196 B.R. 602 (Bankr. M.D. Fla. 1996); In re 
Hallmark Builders, Inc., 205 B.R. 971, 972-74 (Bankr. M.D. Fla. 1996). 
 
- 40 -
 
St. Paul concedes that it is collaterally estopped from relitigating defenses 
that were presented during the prior arbitration and denied by the arbitration panel.  
However, St. Paul asserts that it should not be denied the opportunity to 
demonstrate the factual bases for the affirmative defenses as support for its present 
defense that it reasonably believed its affirmative defenses in the underlying 
dispute were valid and, therefore, it was not acting in bad faith in handling 
Dadeland’s bond claim.  In response, Dadeland recognizes that St. Paul must be 
given the opportunity to present a factual basis in support of its assertion that it did 
not act in bad faith in performing its obligations under the bond.  However, 
Dadeland asserts that this should not result in a reconsideration of defenses that 
were already litigated and rejected during the previous arbitration proceeding.  We 
agree with both parties.  In the instant matter, the essential elements for application 
of the doctrine of collateral estoppel are present, and, therefore, we answer the fifth 
certified question in the affirmative.   
However, notwithstanding the above, in answering this question we clarify 
that although St. Paul is precluded from reasserting its affirmative defenses that 
were previously rejected in the arbitration proceeding, it is not precluded from 
demonstrating the factual basis for its belief that the rejected defenses were in fact 
valid when it attempts to prove that it was not acting in bad faith.  We have 
previously stated that the issue of whether an insurer has acted in bad faith should 
 
- 41 -
be determined by the application of a totality of the circumstances analysis.  See 
State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55, 62 (Fla. 1995).  
Therefore, it is necessary for a court faced with a section 624.155 action to 
consider the entirety of the factual scenario underlying the plaintiff’s claim when 
determining whether the defendant-insurer acted in bad faith and any recoverable 
damages related to that bad faith.  In the instant matter, this factual scenario would 
necessarily include a review of whether St. Paul reasonably believed that its 
affirmative defenses were valid, thereby excusing it from performing its 
obligations under the performance bond.  For that reason, it is essential for a court 
determining the validity of Dadeland’s section 624.155 claim to consider whether 
it was reasonable and in good faith for St. Paul to assert the affirmative defenses 
prior to the arbitration panel determining that those defenses were not available to 
St. Paul.  Therefore, although we conclude that St. Paul is precluded from 
relitigating the affirmative defenses previously rejected by the arbitration panel, we 
hold that St. Paul should not be denied the opportunity to present the factual bases 
for those affirmative defenses as support for its present defense that it reasonably 
and in good faith believed that the previously rejected affirmative defenses were 
valid and that it was therefore not acting in bad faith in response to Dadeland’s 
bond claim. 
CONCLUSION 
 
- 42 -
For the foregoing reasons, we answer the first, second, third, and fifth 
certified questions in the affirmative, and hold that (1) the obligee of a surety 
contract qualifies as an “insured” and is therefore entitled to sue its surety for bad 
faith refusal to settle claims pursuant to section 624.155(1)(b)(1) of the Florida 
Statutes (1999); (2) the language of section 624.155(1)(b)(1) of the Florida Statutes 
(1999), eliminates the requirement of proof of a general business practice when a 
plaintiff pursues a section 626.9541 claim through the right of action provided by 
section 624.155(1)(b)(1); (3) an arbitration panel’s findings that a surety’s 
principal has breached its duty to the obligee and that the surety is obligated to the 
extent that its principal is bound satisfies the condition precedent to a section 
624.155 bad faith refusal to settle claim recognized by our decisions in Blanchard 
v. State Farm Mutual Automobile Insurance Co., 575 So. 2d 1289 (Fla. 1991), and 
Imhof v. Nationwide Mutual Insurance Co., 643 So. 2d 617 (Fla. 1994); (4) an 
arbitration panel’s findings that a surety’s principal has breached its duty to the 
obligee and that the surety is obligated to the extent that its principal is bound does 
not bar a later claim against a surety for bad faith refusal to settle under section 
624.155 under the doctrine of res judicata; and (5) an arbitration panel’s denial of a 
defendant’s affirmative defenses in a breach of contract claim collaterally estops 
the same defendant from raising those affirmative defenses in a subsequent section 
624.155 bad faith refusal to settle claim when the essential elements of collateral 
 
- 43 -
estoppel are present.  We note, however, that our decision is limited only to 
answering the questions certified by the Eleventh Circuit and is not intended to 
address the merits of the claims involved in this matter. 
It is so ordered. 
ANSTEAD, PARIENTE, and QUINCE, JJ., concur. 
PARIENTE, J., specially concurs with an opinion. 
WELLS, J., dissents with an opinion, in which BELL, J., concurs. 
CANTERO, J., recused. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND 
IF FILED, DETERMINED. 
 
 
PARIENTE, J., specially concurring. 
 
I share Justice Wells’ concern as to whether a statutory cause of action for 
bad faith exists under the facts of this case.  However, I concur with the majority 
because I conclude that we have an obligation to answer the legal questions posed 
by the Eleventh Circuit and because I agree with the majority’s resolution of the 
certified questions.       
 
I write separately to explain why I agree with the majority’s resolution of the 
first certified question and disagree with the dissent’s reliance on a subsequent 
legislative amendment in construing the statute in question.  The first certified 
question asks whether an obligee can be considered an “insured” within the 
meaning of section 624.155(1)(b)(1), Florida Statutes (2004).  This question must 
be answered by reference to principles of statutory construction.  
 
- 44 -
Because the Legislature does not define the term “insured” within the 
provisions of the Florida Insurance Code, section 624.155(1)(b)(1) is ambiguous as 
to whether the term as used therein encompasses an obligee in a suretyship.  
Section 624.155(1) clearly provides that “[a]ny person may bring a civil action 
against an insurer when such person is damaged.”  (Emphasis supplied.)  Section 
624.155(1)(b), Florida Statutes (2004), states that the insurer’s commission of 
certain enumerated acts will subject the insurer to liability.  For purposes of the 
Florida Insurance Code, the Legislature has defined the term “insurer” to mean 
“every person engaged as indemnitor, surety, or contractor in the business of 
entering into contracts of insurance or of annuity.”  § 624.03, Fla. Stat. (2004) 
(emphasis supplied).3  This language expressly includes sureties within the 
definition of an “insurer” as that term is used throughout the provisions of the 
Florida Insurance Code.   
 
Reading the definition of “insurer” in section 624.03 together with section 
624.155, which subjects an insurer to liability for certain enumerated acts, 
demonstrates that the Legislature intended for sureties to fall within the ambit of 
section 624.155.  Because section 624.155(1)(b)(1) subjects an insurer to liability 
                                          
 
 
3. The term “insurance” is defined as a “contract whereby one undertakes to 
indemnify another or pay or allow a specified amount or a determinable benefit 
upon determinable contingencies.”  § 624.02, Fla. Stat. (2004).  A surety contract 
is considered a type of insurance contract under the Florida Insurance Code.  See 
§§ 627.751-.759, Fla. Stat. (2004). 
 
- 45 -
for failing to act “fairly and honestly towards its insured and with due regard for 
her or his interests,” the question that arises is whether an obligee or a principal of 
a performance bond is an “insured” as that term is used in this section.   
In Shannon R. Ginn Construction Co. v. Reliance Insurance Co., 51 F. Supp. 
2d 1347 (S.D. Fla. 1999), the court concluded that a principal is not an insured 
within the meaning of section 624.155 because the surety does not owe a duty to 
the principal.  In a suretyship, the surety owes a duty to the obligee to pay or 
perform according to the terms of the bond if the principal fails to do so.  In effect, 
the surety insures against or protects the obligee from a determinable contingency: 
the principal’s inability or unwillingness to pay or perform according to the terms 
of the bond.  When the contingency occurs, the surety is directly liable to the 
obligee for the ensuing damages.  This suggests that an obligee should be 
considered an insured under section 624.155. 
 
Although there are distinct differences between insurance and a suretyship, 
these distinctions do not require a conclusion that an obligee is not an insured for 
purposes of section 624.155, especially considering the Legislature clearly 
intended for a surety to be an insurer within the meaning of the statute.  Until the 
2005 enactment of section 624.155(9), Florida Statutes, which provides that a 
“surety issuing a payment or performance bond on the construction or maintenance 
of a building or roadway project is not an insurer for purposes of subsection (1),” 
 
- 46 -
there was no indication, either express or by implication, that the term “insurer” 
when used in section 624.155 would have a different meaning from that expressly 
set forth in section 624.03.  Thus, it is reasonable to assume that prior to the 
enactment of section 624.155(9), the Legislature intended for the definition 
provided in section 624.03 to control.   
 
Concluding that an obligee is not an insured under section 624.155(1)(b)(1) 
would mean that this provision could never have been applied to a surety despite 
the fact that a surety is an “insurer” under section 624.03.  This interpretation is 
also inconsistent with section 624.155(1), which allows any person to bring a civil 
action against an insurer, and section 624.155(1)(b), which states in part that the 
insurer’s commission of any acts enumerated in subsection (1)(b)(1) will subject 
the insurer to liability under the statute.  Accordingly, I join the majority in 
concluding that an obligee is an insured within the meaning of section 624.155.4      
 
The question raised by Justice Wells’ dissent is whether, in deciding whether 
an obligee is an insured under the statute, we should rely on subsequent legislation 
amending section 624.155.  According to the dissent, it is reasonable to assume 
that section 624.155(9) was added “to provide the answer to this certified question 
in light of the Eleventh Circuit having certified the question to this Court on 
                                          
 
 
4.  Of course, this conclusion applies to the interpretation of section 624.155 
before the June 14, 2005, effective date of section 624.155(9).  
  
 
- 47 -
September 13, 2004.”  Dissenting op. at 54 n.6.  However, the legislative history of 
this amendment does not explain why section 624.155(9) was added.5  Absent 
legislative history confirming or supporting the dissent’s conclusion, the 
subsequent amendment of section 624.155 is not an appropriate consideration in 
answering the first certified question.  This section could have been added by the 
Legislature to clarify the Legislature’s intent that sureties not be subject to section 
624.155, or it could have been added to substantively change the law so that from 
the effective date of the amendment, sureties are no longer subject to section 
624.155.  In Knowles v. Beverly Enterprises-Florida, Inc., 898 So. 2d 1 (Fla. 
2004), this Court refused to rely on statutory amendments in interpreting the prior 
version of the statute because the “changes in [the statute] were substantial and the 
legislative history is silent as to why the particular change . . .  was made.”  Id. at 5 
n.1. (emphasis supplied).  The reasoning of Knowles is applicable to this case.   
Further, the enactment of section 624.155(9) occurred twenty-three years 
after the original enactment of section 624.155, and six years after concern was 
expressed by the judiciary about the correct interpretation of the term “insured” 
under section 624.155(1).  I do not agree that under these circumstances a 
subsequent amendment can be construed to “clarify” what a different Legislature 
                                          
 
 
5.  The staff analyses do not discuss the addition of subsection (9) because 
this provision was added to the Committee Substitute for Senate Bill 652 as a floor 
amendment after the analyses were prepared.  The floor amendment adding 
subsection (9) was approved without debate. 
 
- 48 -
enacted many years earlier.  Accordingly, I would answer the first certified 
question in the affirmative in accord with the majority.   
I agree with the majority on the answers to the remainder of the questions.  
 
 
WELLS, J., dissenting. 
 
I dissent because I conclude that the first certified question, if answered, 
should be answered in the negative.  In view of this answer to the first certified 
question, I would not answer the remaining certified questions.  However, since the 
majority has answered the third question, I will explain why I do not agree with the 
majority’s answer to that question. 
 
Preliminarily, I begin with two facts from the case which are important to 
my decision in the case.  The first is from the arbitration of the dispute by the 
parties to this case: 
By order dated May 15, 2000, the arbitration panel concluded that all 
parties, including the engineer, the architect, Dade County, 
[petitioner] Dadeland, and Walbridge were responsible for the 
deficient construction of the project.  The arbitration panel determined 
that Walbridge owed Dadeland $1,417,842 for its defective work, and 
that Dadeland owed Walbridge $261,036 for contract balances and 
additional work performed.  See id.  In addition, the arbitration panel 
included the following provision with regard to St. Paul in its award: 
[St. Paul] is bound to this award to the extent that 
[Walbridge] is obligated under the award and its defenses 
are denied.  
 
- 49 -
Majority op. at 5.  I believe it to be important to recognize that as the “Award of 
Arbitration” states, the parties “voluntarily participated in this proceeding and 
submitted themselves to the jurisdiction of the panel.” 
 
Further, as noted by Judge Hurley of the United States District Court, 
Southern District of Florida, in granting defendants’ motion for summary 
judgment, “The panel declared that the award ‘is in full settlement of all claims and 
counterclaims submitted to this arbitration.’”  Dadeland Station Assocs. Ltd. v. St. 
Paul Fire & Marine Ins. Co., No. 01-8287-CIV-HURLEY/LYNCH, order at 10 
(S.D. Fla. order filed June 13, 2003) (hereinafter Order).  Walbridge timely paid 
the award with interest.  Order at 10.  In other words, the principal under the 
performance bond paid to the obligee what was determined in a voluntarily agreed-
to arbitration to be owed pursuant to the contract. 
 
Second is the fact of what Dadeland sought as damages in the bad-faith 
action.  In respect to the damages in the bad-faith action, Judge Hurley’s order 
states that “as a result of the defendants’ actions, [plaintiffs] sustained damage in 
having to repair inadequate work performed and having to present their claims to 
arbitration.”  Order at 10.  The Eleventh Circuit in its opinion certifying the 
questions to this Court states that in the bad-faith actions, Dadeland alleged that, as 
a result of the surety’s actions, it sustained damages by having to repair inadequate 
work performed and having to present its claims to arbitration.  383 F.2d at 1375.  
 
- 50 -
The majority opinion does not accept these statements by Judge Hurley and the 
Eleventh Circuit but rather refers to the complaint for bad faith.  However, I 
conclude that this Court, in considering the certified questions, should accept the 
statements of the trial court and the Eleventh Circuit concerning what damages 
were sought.  This is a case pending in the federal court, to which the Federal 
Rules of Civil Procedure, including the Federal Summary Judgment Rule, apply.  
We are not to decide the case; rather, we are only requested to answer the certified 
question on the basis of what the federal courts present to us as a statement of the 
case. 
 
The facts are that the arbitration determined the damages for “inadequate 
work” owed to Dadeland by the surety’s principal and that the surety’s principal, 
Walbridge, paid the damages owed to Dadeland for “inadequate work” in full with 
interest.  I believe it can only logically follow that damages for “inadequate work” 
cannot be the basis for a bad-faith action.  The other damage that the trial court and 
the Eleventh Circuit state was the basis for the bad-faith actions was “having to 
present their claims to arbitration.”  I fail to see how this can be a recoverable 
damage since the arbitration was voluntary.  I know of no legal support for such 
damages.  The majority cites to Time Insurance Co. v. Burger, 712 So. 2d 389 (Fla. 
1998), to support its holding that there could be some kind of damages.  But 
 
- 51 -
plainly, Time Insurance Co. involved a very different situation involving a health 
care insurer who failed to authorize treatment by a health care provider. 
 
In sum, I do not understand how this is a “bad faith” claim against the 
surety, because Dadeland has suffered no cognizable damages for which Dadeland 
has not been timely paid by the principal of the bond once what was owed was 
determined by arbitration.  Thus there are no damages to be recovered in a bad-
faith action against the surety. 
 
To subject a surety to bad-faith damages in a situation in which a solvent 
contractor-principal pays to an owner-obligee what is fully owed within a 
reasonable time after the amount owed by the principal is determined in an agreed-
to arbitration does not stand the test of either law or logic.  The majority’s result 
ignores how practically construction contract surety works.  Importantly, a surety 
has a right to subrogation against the contractor’s principal, making it necessary in 
the workings of the surety-principal-obligee relationship to have determined what 
the principal owes before the surety makes a payment. 
 
Since there are no cognizable damages which could be the basis for a bad-
faith action in this case, my preference would be to decline to answer the certified 
questions.  Declination is within this Court’s discretion.  See article V, section 
3(b)(6), Florida Constitution, in which this Court is provided discretionary 
jurisdiction as follows: 
 
- 52 -
 
(6) May review a question of law certified by the Supreme 
Court of the United States or a United States Court of Appeals which 
is determinative of the cause and for which there is no controlling 
precedent of the supreme court of Florida. 
We have previously declined to answer a certified question from the United States 
Circuit Court which we determined was not determinative of the cause, Greene v. 
Massey, 384 So. 2d 24, 27-28 (Fla. 1980), as have courts in other jurisdictions.  
Palmore v. First Unum, 841 So. 2d 233 (Ala. 2002); Eley v. Pizza Hut of Am., 
Inc., 500 N.W. 2d 61 (Iowa 1993); Grant Creek Water Works, Ltd. v. Comm’r of 
Internal Revenue, 775 P.2d 684 (Mont. 1988); Bituminous Cas. Corp. v. Cowen 
Constr., Inc., 55 P.3d 1030, 1032 n. 3 (Okla. 2002); Cray v. Deloitte Haskins & 
Sells, 925 P.2d 60, 62 (Okla. 1996); Jefferson v. Moran, 479 A.2d 734, 737 (R.I. 
1984); Abrams v. West Va. Racing Comm’n, 263 S.E.2d 103, 105 (W. Va. 1980).  
I do not state this preference out of disrespect for the Eleventh Circuit.  I simply 
believe that we should answer the questions posed in a case in which there are real 
and cognizable bad-faith damages. 
 
Since the majority has answered question one, I write further to explain my 
disagreement with the answer. 
 
I do agree with the majority that the answer to this question involves the 
construction of section 624.155(1)(b)(1), Florida Statutes.  I conclude that this 
construction can be simple and straightforward.  The Legislature has recently 
 
- 53 -
stated in the statute what it intended to do in respect to these sureties.  As the 
majority states, the 2005 Legislature adopted section 624.155(9), Florida Statutes: 
 
A surety issuing a payment or performance bond on the 
construction or maintenance of a building or roadway project is not an 
insurer for purposes of subsection (1). 
I would adopt the legislative answer to the certified question and hold that the 
surety is not an insurer for purposes of section 624.155(1). 
 
We have stated that when scrutinizing the legislative history of a statute to 
determine legislative intent, courts may look to acts passed at subsequent sessions.  
See Murthy v. N. Sinha Corp., 644 So. 2d 983 (Fla. 1994).6  The majority states 
that this “tool of statutory construction was called into question somewhat by our 
opinion in Knowles v. Beverly Enterprises Florida, Inc., 898 So. 2d 1 (Fla. 2004).”  
Majority op. at 28.  However, Knowles was very different from the present case 
because a majority of the Court in Knowles concluded that the statutory language 
was clear and unambiguous, and that legislative intent had to be derived from the 
words used in the statute itself.  Id. at 11 (Cantero, J., concurring, with Wells, 
Anstead, and Bell, JJ., concurring).  It is clear from the majority opinion that in the 
present case the majority does not rest upon the pre-2005 section 624.155(1)(b)(1) 
being clear and unambiguous.  Nor could the majority rest upon the pre-2005 
                                          
 
 
6.  I believe it reasonable to assume that the statute was amended by the 
Legislature in 2005 to provide the answer to this certified question in light of the 
Eleventh Circuit having certified the question to this Court on September 13, 2004. 
 
- 54 -
statutory language because the certified question stems from word “insured” not 
being used in the statute. 
 
The task that the majority undertakes in answer to the question is to construe 
the statute to determine who would be considered to be an insured under the statute 
since the words “insured,” “obligee,” and “principal” are not used in the statute.  
We expressly noted the necessity for construction of section 624.155 in State Farm 
Fire & Casualty Co. v. Zebrowski, 706 So. 2d 275, 277 (Fla. 1997).  In Zebrowski, 
we considered the meaning of “any person” in the section 624.155(1) language:  
“Any person may bring a civil action against an insurer when such person is 
damaged.”  We held: 
 
While the words “any person” are all-inclusive, it is necessary 
to consider what those words modify in order to determine the 
particular persons authorized to pursue the various claims authorized 
by section 624.155.  In subsection (1)(a), there are no specified 
limitations upon claims for violation of any of the enumerated 
statutes.  However, in subsection (b), the cause of action is predicated 
on the failure of the insurer to act “fairly and honestly toward its 
insured and with due regard for his interests.”  The duty runs only to 
the insured. 
Because there is the need for construction, this is clearly different from Knowles.  
Since the Legislature has now clarified that a surety is not intended to be an insurer 
under section 624.155(1), this likewise clarifies that an obligee is not intended to 
be an insured.  It seems only reasonable to me that we accept this clarification.  We 
 
- 55 -
are dealing with a statutory cause of action, and looking to this timely legislative 
action is a recognized tool of statutory construction.  See Murthy. 
 
But even setting aside the simple answer of the legislative clarification, I still 
conclude that a contextual construction of the statute results in the statute not 
creating a bad-faith cause of action against these construction performance 
sureties.  I start from another fundamental rule of statutory construction applied to 
section 624.155 in Time Insurance Co. v. Burger, 712 So. 2d 389, 393 (Fla. 1998): 
A court will presume that such a statute was not intended to alter the 
common law other than as clearly and plainly specified in the statute.  
Ady v. American Honda Finance Corp., 675 So. 2d 577 (Fla. 1996); 
Law Offices of Harold Silver, P.A. v. Farmers Bank & Trust Co., 498 
So. 2d 984 (Fla. 1st DCA 1986) (statute designed to alter the common 
law must speak in unequivocal terms). 
Florida common law did not permit first party claims in which an insured 
contended that its insurance company was acting in bad faith for refusing to pay 
for benefits under the policy.  Time Ins. Co. v. Burger, 712 So. 2d at 391; Baxter v. 
Royal Indem. Co., 285 So. 2d 652 (Fla. 1st DCA 1973).  The statute did not plainly 
alter this rule as to construction performance sureties. 
 
Florida law and the United States Supreme Court have long recognized the 
difference between insurance such as liability insurance, Zebrowski, health 
insurance, Time Ins. Co., and a performance bond.  The majority opinion at page 
15 refers to the widely accepted statement from Pearlman v. Reliance Insurance 
Co., 371 U.S. 132, 140 n.19 (1962): 
 
- 56 -
 
Among the problems which would be raised by a contrary 
result would be the unsettling of the usual view, grounded in 
commercial practice, that suretyship is not insurance.  This distinction 
is discussed in Cushman, Surety Bonds on Public and Private 
Construction Projects, 46 A.B.A.J. 649, 652-653 (1960). 
In Western World Insurance Co. v. Travelers Indemnity Co., 358 So. 2d 602, 604 
(Fla. 1st DCA 1978), Judge Ervin wrote: 
The distinctions between a general liability insurance policy and a 
statutory penal bond are obvious.  “[T]he usual view, grounded in 
commercial practice, [is] that suretyship is not insurance.”  Pearlman 
v. Reliance Ins. Co., 371 U.S. 132, 140 n.19, 83 S. Ct. 232, 236, 9 L. 
Ed. 2d 190 (1962); United States v. Markowitz Bros. Inc., 383 F.2d 
595, 599 (9th Cir. 1967).  The surety on a bond is lending its credit to 
make certain, if the conditions of the bond are violated, that the 
aggrieved party will be protected in the event the principal is 
financially unable to comply with the conditions of the bond.  If the 
principal can satisfy the obligation, the surety need not respond.  The 
surety, unlike the liability insurer, however, is entitled to be 
indemnified by the one who should have performed the obligation.  
Cf. Anderson v. Trueman, 100 Fla. 727, 130 So. 12 (1930). 
In American Home Assurance Co. v. Larkin General Hospital, Ltd., 593 So. 2d 
195, 198 (Fla. 1992), this Court stated: 
The purpose of a performance bond is to guarantee the completion of 
the contract upon default by the contractor.  Florida Bd. of Regents v. 
Fidelity & Deposit Co., 416 So. 2d 30 (Fla. 5th DCA 1982).  
Ordinarily a performance bond only ensures the completion of the 
contract.  The surety agrees to complete the construction or to pay the 
obligee the reasonable costs of completion if the contractor defaults.  
[Ken Sobel, Owner Delay Damages Chargeable to Performance Bond 
Surety, 21 Cal.W.L. Rev. 128 (1984)] at 137. 
 
The liability of a surety is coextensive with that of the principal.  
Cone v. Benjamin, 150 Fla. 419, 8 So. 2d 476 (1942); National Union 
Fire Ins. Co. v. Robuck, 203 So. 2d 204 (Fla. 1st DCA 1967), cert. 
denied, 212 So. 2d 869 (Fla. 1968).  However, the surety’s liability for 
 
- 57 -
damages is limited by the terms of the bond.  Cone; Fidelity & 
Deposit Co. v. Sholtz, 123 Fla. 837, 168 So. 25 (1935).  Florida courts 
have long recognized that the liability of a surety should not be 
extended by implication beyond the terms of the contract, i.e., the 
performance bond.  State v. Wesley Constr. Co., 316 F.Supp. 490, 497 
(S.D. Fla. 1970), affirmed, 453 F.2d 1366 (5th Cir. 1972); Standard 
Accident Ins. Co. v. Bear, 134 Fla. 523, 184 So. 97 (1938); Gato v. 
Warrington, 37 Fla. 532, 19 So. 883 (1896).  See also Crabtree [v. 
Aetna Cas. & Sur. Co., 438 So. 2d 102 (Fla. 1st DCA 1983)] at 105 
(“[a] surety on a bond does not undertake to do more than that 
expressed in the bond, and has the right to stand upon the strict terms 
of the obligation as to his liability thereon”). 
In David Boland, Inc. v. Transcoastal Roofing Co., 851 So. 2d 724 (Fla. 2003), a 
majority of the Court joined in my view 
that the role of such a contract surety is sufficiently distinct from the 
role of insurers that issue insurance policies so that the attorney fee 
liability of a construction contract surety needs to be covered by a 
separate statute.  See American Home Assurance Co. v. Larkin 
General Hospital, Ltd., 593 So. 2d 195 (Fla. 1992). 
David Boland, Inc., 851 So. 2d at 727 (Wells, J., concurring, with Anstead, C.J., 
and Pariente, Cantero, and Bell, JJ., concurring). 
 
The differences between a construction performance surety bond and an 
insurance policy are many and important.  They begin, of course, with the self-
evident fact that in an insurance policy there is an insurer (the insurance company) 
and an insured (the person or entity who has an insurable interest).  In a surety 
situation, the contract is not called an insurance contract, the contract is called a 
“bond.” 
 
- 58 -
 
In the present case, the contract is a document from the American Institute 
of Architects and is titled “Performance Bond.”  The parties to the contract are the 
owner (who would be the obligee), the contractor (who is the principal), and the 
surety.  Thus, here, as in the usual construction surety situation, there is an obligee, 
a principal, and a surety.  The words “insurer” or “insured” are not used in the 
present performance bond and neither are they used in the usual construction 
surety bond––just as there is no use of the words “insured,” “principal,” or 
“obligee” in section 624.155. 
 
As Judge Ervin pointed out in Western World, the surety agrees to stand 
behind the principal in accord with the terms of the bond if the principal does not 
perform the construction contract.  The reason for the owner to require a surety is 
to assure the financial responsibility of the contractor so that the construction 
contract will be performed and the money that the owner is paying the contractor 
will result in the contracted-for construction.  Federal Ins. Co. v. Southwest Fla. 
Retirement Ctr., Inc., 707 So. 2d 1119, 1121 (Fla. 1998).  Differing from 
insurance, the amount charged for a bond by a surety (traditionally known as a fee 
rather than a premium) is based on the financial strength of the contractor rather 
than an actuarial calculation as is done in determining insurance premiums.  As 
Judge Hurley stated, the dollar amount of the bond is referred to as the penal sum 
 
- 59 -
of the bond or bond penalty, and the surety’s liability generally is limited to this 
penal sum.  Order at 16. 
 
Nor is it clear who would be the insured if there was considered to be an 
insured in the performance bond and whether the insured would be the obligee or 
the principal.  The majority notes the substantial split among the various 
jurisdictions who have decided the issue of whether there is a common law 
obligation of good faith owed by a surety to a performance bond obligee similar to 
that owed to an insured under an insurance contract.  Contrary to the majority, I 
believe the sounder view on this issue is with the majority in Cates Construction, 
Inc. v. Talbot Partners, 980 P.2d 407 (Cal. 1999), not with the dissent in that case, 
and by the Supreme Court of Texas in Great American Insurance Co. v. North 
Austin Municipal Utility District No. 1, 908 S.W.2d 415, 418 (Tex. 1995). 
 
I find that the tripartite relationship among the obligee, the principal, and the 
surety prevents either the obligee or the principal from being considered to be an 
“insured.”  As the Texas Supreme Court pointed out in Great American, “Unlike a 
liability insurance contract, in which the obligation of the insurer to the insured is 
the primary obligation of indemnity to the insured for loss, the obligation of a 
surety to a bond obligee is secondary to the obligation owed by its principal.”  Id. 
at 418-19.  If the principal (the contractor) breaches the construction contract, the 
obligee can sue the principal (contractor) directly for breach of contract.  If the 
 
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obligee does sue the surety, the surety has all the defenses available to the principal 
(contractor).  Further, the surety has a right of subrogation against the principal. 
 
Another distinction from insurance which creates uncertainty as to who 
would be considered to be the insured is that it is usually the principal who chooses 
the surety.  The amount of the surety’s fee is normally passed on to the obligee as 
part of the contract price, but usually the surety is a surety who regularly provides 
suretyship to the principal, similar to an insured choosing an insurer from which to 
purchase insurance.  When a dispute arises between an obligee and a principal, the 
surety is actually in the middle because if the surety pays the obligee because of 
that dispute, the surety looks to the principal for reimbursement.  In the present 
case, the principal paid the obligee when the amount owed was determined by the 
arbitration so that the surety was not in reality involved.  To hold that the surety 
had an obligation to pay before the arbitration determined the amount the principal 
owed would either deny the principal the right to contest the amount owed through 
the arbitration or require that the surety pay the amount that the obligee demands 
(which in this case was at one point $8 million dollars) or be in bad faith.  If the 
surety paid the inflated amount, then the surety would have great risk of not being 
successful in obtaining reimbursement from a solvent principal.  The principal 
would assert that the surety had been a volunteer. 
 
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For all of the foregoing reasons, I would answer the certified question in the 
negative and in conformity with the Legislature’s answer, which is that an obligee 
is not an insured under section 624.155(1). 
 
Finally, in answer to the third certified question, I believe that Judge Hurley 
was precisely correct in stating: 
 
Plaintiffs argue that there has, in fact, been a finding of liability 
against the sureties under the performance bond, and an assessment of 
damages.  Plaintiffs cite the arbitration panel’s ruling that “[t]he 
Surety is bound to this award to the extent that its principal is 
obligated under the award and its defenses are denied.”  However, 
plaintiffs have misinterpreted the panel’s decision.  The arbitrators’ 
finding that Walbridge was partially liable for breach of the 
construction contract did not constitute a finding that the sureties had 
breached their obligations under the separate performance bond.  A 
sensible reading of the decision indicates that the sureties would be 
liable for the damages assessed against Walbridge only if Walbridge 
was unable or unwilling to pay the award.  But the sureties already 
owed a contractual duty, under paragraph 6.1 of the performance 
bond, to correct defective work performed by the contractor in the 
event of a contractor default.  The panel did not impose any liability 
on the sureties that did not already exist under the terms of the 
performance bond. 
 
Conceivably, had the arbitration panel ruled that the sureties 
had breached the contract and were liable for a sum certain, then, and 
only then, would plaintiffs be able to state a claim for bad-faith claims 
handling against the sureties.  Since there has been no underlying 
judicial finding that the sureties in-fact failed to perform their 
obligations under the bond, nor have the sureties tendered payment for 
a claim or entered into a settlement agreement with the principal or 
the obligees, plaintiffs cannot demonstrate that the conditions 
precedent to a bad-faith refusal-to-settle claim have been satisfied. 
 
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Order at 19-20.  I believe that the majority is incorrect in answering this certified 
question differently than did Judge Hurley.  I also conclude that Judge Hurley was 
correct in respect to his answer to the issue of res judicata. 
BELL, J., concurs. 
 
 
 
Certified Question of Law from the United States Court of Appeals for the 
Eleventh Circuit - Case No. 03-13540 
 
Philip M. Burlington of Philip M. Burlington, P.A., Jeffrey M. Liggio and Richard 
Benrubi of Liggio, Benrubi and Williams, P.A., West Palm Beach, Florida, 
 
 
for Appellant 
 
Lee Craig and Veronica D. Vellines of Butler, Pappas, Weihmuller, Katz and 
Craig, LLP, Tampa, Florida, 
 
 
for Appellee 
 
Stephen A. Marino, Jr. of Ver Ploeg and Lumpkin, P.A., Miami, Florida, on behalf 
of the Academy of Florida Trial Lawyers; E.A. “Seth” Mills, Jr. and Brett D. 
Divers of Mills, Paskert, Divers, P.A., Tampa, Florida, on behalf of the Surety 
Association of America; and Bruce G. Alexander and Ronald E. Crescenzo of 
Boose, Casey, Ciklin, Lubitz, Martens, McBane and O’Connell, West Palm Beach, 
Florida, on behalf of Florida AGC Council, Inc., Florida Transportation Builders’ 
Association, Inc., and Associated Builders and Contractors of Florida, 
 
 
for Amicus Curiae 
 
 
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