It seems axiomatic that when an insured has to institute litigation against its insurance company to determine whether or not insurance coverage exists, and insurance coverage is found to exists, the insured should be entitled to attorney’s fees pursuant to Section 627.428, Fla. Stat.  However, as seen by a recent Federal Court decision, such is not always the case.

    In Mizner Tower Condominium Assoc., Inc. v. QBE Ins. Corp. 2008 WL 151414 (S.D.Fla. Jan. 15, 2008), the court determined that an insured is not entitled to attorneys fees and costs when a “judgment” does not result in payment of wrongfully denied benefits.

    In Mizner, the insurer conditionally extended a commercial residential policy to the condominium association.  Continuation of coverage (beyond a date certain) was based upon the condominium association’s completion of certain loss prevention conditions.  Prior to the date certain, the insured condominium association complied with the notice requirements and informed the insurance company that the required loss prevention measures had been satisfactorily completed.

    However, nearly three months after the date certain, the insured association notified the insurer that seven of the condominium’s shutters might not be in compliance with the insured’s underwriting requirements.  The insured asked the insurance company to inspect the shutters and make a determination whether the insurance policy was still valid in light of the shutters.  In response, the insurer stated that the continuing insurance coverage had been conditioned upon the insured’s representation that the loss prevention conditions were completed, and stated “the Association’s coverage could be jeopardized due to a material misrepresentation.”  The insurer took no further action, and apparently did not make a site visit to inspect the shutters or make any determination as to the validity of the policy.  

    The insured, over the next few weeks, repeatedly asked the insurance company to instruct whether or not the insurer still provided hurricane coverage, and threatened to file a declaratory judgment action if it received no response.  Ultimately, a little over a month after notifying the insurer about the problem shutters, the insured filed the dec action to establish coverage.  

    Eight days after the dec action was filed, the insurance company sent correspondence to the insured which confirmed that hurricane coverage would remain “in full force and effect for the remainder of the current policy period.”   Shortly thereafter, the insurance company filed a motion to dismiss/motion for summary judgment.  The Trial court determined (1) it was undisputed that the insured sought judicial determination that the policy was valid and enforceable; (2) the insurance company provided the  insured with written confirmation that the policy was valid and enforceable; and (3) summary judgment was appropriate.   

    The insured disagreed, stating the insurance company’s confirmation of a valid and enforceable policy–which came after suit was filed–operated as a confession of judgment, entitling the insured to attorney’s fees pursuant to Section 627.428, Fla. Stat.  The court held that attorney’s fees were not available under the facts of the case:

“The Court is unaware of, and the [insured] has not provided any, legal basis for awarding fees pursuant to the above Section in a case where a judgment does not result in payment of wrongfully denied benefits.  The [insured] seeks to apply this Section to any claim between an insured and an insurance company where the insurer prevails regardless of whether or not an insurer has wrongfully withheld payment of a valid claim for benefits.  I decline to extend this Section’s reach so far.”