Florida Insurance Law Blog : Florida Insurance Lawyer & Attorney : Mark Nation Law Firm : Orlando, Longwood, Gainesville

In Rabbit Hill Homeowners Assoc., Inc. v. Cory, The First District Court of appeal recognized that in certain circumstances, a party's failure to plead entitlement to attorney's fees is not always fatal.

The Court held there can be a waiver of the waiver of fees.

The First DCA noted "the record contains competent substantial evidence to support the trial court's finding that the appellant recognized and acquiesced to appellees' claim for attorney's fees and, accordingly, waived its right to insist that the claim be set forth in a pleading."

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On March 27, 2008 the Florida Supreme Court quashed three more First DCA "Valued Policy Law" cases which had been decided pursuant to Mierzwa v. Florida Windstorm Underwriting Ass'n, 877 So. 2d 774 (Fla. 4th DCA 2004).  The Mierzwa court had interpreted the VPL in such a way that a total loss required payment of the policy's face amount, regardless of liability and causation: "[T]he VPL provides that any liability of a casualty insurer where a covered peril is involved in a total loss must be for the face amount rather than pro rata with other coverages." Id. at 776.  

Soon after, a legislative fix followed.  Then, 2007, the Florida Supreme Court stepped in and expressly disapproved of Mierzwa's interpretation of the VPL.  In Fla. Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815 (Fla. 2007), the supreme court held the prior version of the VPL was intended only to set the valuation of the insured property.  The court also determined that the VPL did not intend for an insurer to pay for the total loss if a covered peril caused part of the total loss. 

In Citizens Property Insurance Corp. v. Dancy, Citizens Property Insurance Corp. v. Ueberschaer, and State Farm Florida Insurance Company v. Ondis, the First DCA had determined the VPL required a carrier to pay the face amount of the policy when the structure was deemed a total loss, but the damage was caused in part by a covered peril and in part by an excluded peril.  The supreme court referenced its recent decision in Cox, and quashed the First Districts opinions and remanded the cases for reconsideration in light of Cox. 

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The Martin County Circuit Court recently decided that an insurer did not waive the "binding appraisal" provision of its policy by disputing coverage and by not requiring appraisal until after suit was filed.  Further, although the claim involved a hurricane claim, the court determined that waiver under Section 627.7015 did not apply, since the policy at issue was surplus lines insurance (technically, an "insurance company was not involved--the coverage was provided by underwriters at Lloyds).

The Order was issued in Banat Investment Corporation v. Certain Interested Underwriters at Lloyd's, in the Circuit Court, 19th Judicial Circuit in and for Martin County, Case No. 432007CA191, on January 11, 2008.

The insured was the owner of an apartment complex in Martin County, Florida.   In exchange for premiums paid by the insured, underwriters at Lloyds issued policies of commercial property insurance covering the complex. After successive hurricanes caused damages, the insured filed suit because it could not reach an agreement with the insurer on the amount of damages related to the second hurricane.  After service, and without filing an answer to the complaint, the insurer demanded an appraisal, as provided for in the policies of insurance.

In response to the demand, the insured claimed appraisal was not appropriate because: the insurer waived appraisal because the insurer repudiate the contract (relieving the insured of all obligations under the policy, including appraisal); the action involves coverage disputes, which were for the court to decide; the insurer's delay in requesting an appraisal amounted to a waiver; appraisal was impractical because substantial repairs had been made; the insured was prejudiced by the delay in demanding appraisal because suit was already filed; and appraisal was barred by application of Florida Statute section 627.7015 since the insured failed to promptly inform the insured of the option to mediate the loss under that statute.

The court found the insurer did not repudiate the insurance contract because it had partially satisfied the claim under the insurance policy (and in fact paid the undisputed portion of the claim).  The court also noted the dispute involved the "dollar value of covered losses," an issue appropriate for appraisal.  The court found none of the insurer's activities were inconsistent with a demand for appraisal, since it didn't even answer the complaint but instead demanded appraisal.

A significant factor in the opinion is based upon the defendant's status as an "insurer."  Lloyds is comprised of members of a regulated market known as the "London Market," in which individuals offer their personal capital to underwrite insurance risks in exchange for a premium. Specifically, the court noted Lloyds sells only "surplus lines" insurance coverage, a type of insurance which insures risks which are not commonly insurable in the primary commercial market.

Normally, we see that an insurer's failure to comply with Florida Statute Section 627.7015 bars enforcement of the appraisal provision when the insurer fails to notify the insured under the statute.  However, in this case, the court noted that Florida Statute section 627.021(2)(e) specifically states that chapter 627 does not apply to surplus lines insurance.  Additionally, in this case, the Florida Department of Insurance (which is responsible for implementing the mediation program under Florida Statute section 627.7015), advised the court via affidavit and memorandum in evidence, that surplus lines insurers are exempt from the requirements of that statute, but may participate in the program voluntarily.

Ultimately, the court deemed there was no waiver and Section 627.7015 did not bar the insurer's demand for appraisal.

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When insureds are forced to sue their insurance company in order to receive benefits (not attorneys fees and costs), any payment of insurance policy proceeds by the insurance company should act as a confession of judgment, entitling the insured to properly pled attorney's fees.

In Jerkins v. USF & G Specialty Ins. Co., 2008 WL 678667, 33 Fla. L. Weekly D763 (Fla. 5th DCA March 14, 2008), the insureds sustained damage to their home due to Hurricane Charlie.  The insurance company's claims adjuster determined that the insureds sustained only $715.60 property damage due to the hurricane.  This claim was less than the insurance policy's deductible, and the insurance company made no payment on the claim.

Six months later, the insureds filed a breach of contract action against the insurance company.  The insurance company filed a motion to dismiss or abate the insured's suit in favor of appraisal, in accordance with the insurance policy, which provided, in pertinent part: "If you and we fail to agree on the amount of loss, either may ... Demand an appraisal of the loss...."

After the motion to dismiss was filed, the parties actually went forward with the appraisal process.  The appraisers determined the insureds actual loss was $9,084.29.  The insurance company paid the entire appraisal amount, minus the deductible.

Following payment, the insureds filed a motion for attorney's fee and costs pursuant to Section 627.428, Fla. Stat.  In their motion, the insureds maintained that the insurance company's payment constituted a "confession of judgment," entitling the insureds to attorney's fees.   However, in its opposition to the motion for attorney's fees, the insurance company argued that the insureds were not entitled to attorney's fees because the parties' dispute was resolved through appraisal, not litigation.  After a hearing, the trial court denied the motion for attorney's fees, citing Federated National Insurance Co. v. Esposito, 937 So.2d 199 (Fla. 4th DCA 2006), in support of its decision.

The Fifth DCA determined that generally, payment made after a suit is filed operates as a confession of judgment.  The court claimed it was neither reasonable nor just to allow an insurance company to avoid statutory attorneys fees by simply paying insurance proceeds at some point after suit is filed but before final judgment is entered, likening voluntary payment of the insurer to the equivalent of a confession of judgment.  

The court cited its previous analysis of the confession of judgment doctrine as it relates to section 627.428, in State Farm Florida Insurance Co. v. Lorenzo, 969 So.2d 393, 397-98 (Fla. 5th DCA 2007), where the court determined the confession of judgment doctrine turned on the policy underlying section 627.428: discouraging insurers from contesting valid claims and reimbursing insureds for attorney's fees when they must sue to receive the benefits owed to them.   The court also noted the doctrine is generally not applied where the insureds were not forced to sue the insurance company to receive benefits, because otherwise applying the doctrine would encourage unnecessary litigation by rewarding a race to the courthouse for attorney's fees even where the insurer was complying with its obligations under the policy.

The court further reiterated that while Florida law does hold that payments are treated as confessions of judgment where an insurer first disputes the claim and then settles, "the existence of a bona fide dispute and not the mere possibility of a dispute, is a crucial condition precedent to such a holding."

The court determined the sixth month time lapse between claim and lawsuit, combined with the significant difference in the value of the damages, met the confession of judgment doctrine's standards.

Interestingly, the court commented that if the insurance company's policy contained a mandatory arbitration or appraisal provision, the insureds would not be entitled to attorney's fees under section 627.428.  Since the appraisal clause was permissive, the court did not see appraisal as a condition precedent to filing suit (and therefore recovering attorneys fees under the confession of judgment doctrine).  

Significantly, the court distinguished Federal National Insurance Company v. Esposito, 937 So.2d 199 (Fla. 4th DCA 2006), which the trial court relied upon to deny the insured's motion for attorney's fees and costs.  In Esposito, the insured invoked the appraisal process to settle a dispute she had with her insurance company over the value of hurricane damage to a structure.  Through the appraisal process, the parties agreed upon a value of the damage and the insurer paid the appraisal award in full.  Only after the appraisal process was well underway did the insured file an action seeking to confirm the appraisal award and attorney's fees. The Esposito court held that the trial court erred in confirming the appraisal award and entering judgment in favor of the insured because the parties settled their dispute without litigation.  The court determined the Esposito lawsuit was solely filed to obtain fees, not to settle a dispute. 

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