Bischel

Stephen Bischel sued Fire Insurance Exchange (Exchange) for breach of cont act and insurance bad faith stemming from a claim under his homeowners insurance policy for damage to the boat dock adjacent to his home. Exchange paid policy benefits to rebuild the dock to its preloss condition, but refused to pay additional benefits to rebuild the dock to upgraded municipal code standards. The trial court, sitting without a jury, ruled in favor of Bischel on the contract claim, concluding Exchange should have paid to demolish and rebuild the dock to the new code standards. The trial court also held Exchange owed Bischel $21,000 in costs and attorney fees as bad faith damages and $25,000 in punitive damages. Exchange appeals.

Facts

In 1985, Bischel purchased a house in the Coronado Cays and added a boat dock to the property. He contacted Duane Anderson to obtain homeowner’s insurance coverage for his home and dock. Agent Tom Flynn took over the account in 1986. When Bischel contacted Flynn and asked if the amount of coverage on the dock—$59,000—was adequate, Flynn said it was.

In July 1988, Bischel noticed damage to the inside part of the dock. He contacted the company that…