You’re in good hands. Your insurer is on your side, because it’s like a good neighbor. Some companies live up to their slogans, but some use promises to induce Floridians to entrust their livelihoods and businesses to companies offering liability insurance.

When the paperwork is signed and the premiums are paid, it’s all smiles and handshakes. But if the small business owner is a few days late on a premium payment, or makes a mistake on the policy application, coverage is terminated. But what happens if the insurance company makes a mistake?

Florida law has long recognized an insurance company’s fiduciary obligation to protect its policyholder from a judgment exceeding the limits of the policy. Since at least 1938, Florida courts have clearly expressed that an insurer must act honestly and in good faith toward the insured. The reasoning is simple: An insurance company writes a contract that gives it complete control over the defense and settlement of a claim against the policyholder, and must therefore use “the same degree of diligence as a person of ordinary care and prudence should exercise in the management of his own business.”

The insurance company insists that it make the decisions, so Florida law requires that it do so while acting in the best interest of its insured. If the insurance company makes a mistake, and the result is a liability judgment against the policyholder, the law places the responsibility for the judgment on the insurance company, not the small business.

Unsurprisingly, the insurance industry doesn’t appreciate the value of holding it to Florida’s good faith standards. Every year a bill is sponsored seeking to either reduce or eliminate the insurance industry’s exposure for acting in bad faith (acting in bad faith is another way of saying that the insurer failed to act in good faith). Last session, a far-reaching bill was introduced that reduced or eliminated the insurance industry’s responsibility for the consequences of its mistakes and failures, not just in terms of liability claims but on all types of insurance coverage. That bill did not survive. This session, which starts in January 2012, another such bill will likely be filed. And consumer groups across the state will likely rally to oppose it.

The question that gets lost in the political debate is: What happens to the judgment that results from the insurance company’s failure to settle a liability claim, if the insurance company isn’t held accountable for its mistakes? The individual or small business must pay it. If the small business can’t afford the judgment, it can be shut down or pushed into bankruptcy. And it doesn’t even get back the premiums it paid to the insurance company that was supposed to protect it.

The insurance companies complain that they cannot settle claims because the personal injury lawyers trick them. Should your banker or investment advisor be excused from watching over your life’s savings because the Ponzi-schemer was crafty? And the courts have repeatedly found in favor of the insurance companies when they were deprived of a reasonable opportunity to settle the liability claim, so there’s little validity to that complaint.

The insurance companies argue that small businesses should buy more insurance coverage. In other words, pay much higher premiums so that even if the insurance company fails to settle a claim when it reasonably should have, the policyholder (after being dragged through years of litigation and a trial) will have paid for enough insurance coverage to hide the insurer’s mistake in not settling. In a time of widespread economic pressure, it seems a poor response for insurance companies to say “pay me enough for coverage so that I can’t ever make a big enough mistake to violate my fiduciary duty to you or your business.”

Florida’s legislature has serious economic and budget issues to address. Lawmakers shouldn’t be asked to invest time and resources on a bill that does nothing more than forgive the insurance industry when it makes mistakes, at the expense of the individuals and small businesses of Florida.

Stephen A. Marino, Jr. is a shareholder at the Miami-based law firm Ver Ploeg & Lumpkin, P.A., which has been representing businesses and individuals in coverage and bad faith disputes with their insurance companies since 1995.