In Clifton v. United Casualty Insurance Company of America, ____ So.3d ____ (Fla. 2nd DCA February 12, 2010), Clifton sustained damage to his home due to Hurricane Charlie. Clifton notified United, his homeowners insurer, of the loss and United inspected the home. United made a payment for what it considered the compensable damage.
Clifton states that he them complained numerous times to United and to his insurance agent that the payment was inadequate. After his complaints were ignored, Clifton filed suit against United for breach of contract.
United then moved for appraisal which the trial court ordered. The appraisal resulted in an award for $18,744.24. United paid this amount and Clifton then moved for attorneys fees. United moved for summary judgment and filed a response to the motion for attorneys fees. United argued that it was not responsible for those fees because it had not wrongfully withheld any insurance benefits. United claimed – with no record evidence to support it – that it was unaware that Clifton was dissatisfied with its prior payments. In response to the motion for summary judgment Clifton filed an affidavit outlining his repeated attempts to notify both United and his agent that the prior payment was insufficient. The trial court granted United’s summary judgment and denied Clifton’s motion for attorneys fees.
On appeal, the 2nd DCA noted the general rule is that “when an insurer pays additional policy proceeds after suit is filed, ‘it has, in effect, declined to defend its position in the pending suit. Thus, the payment of the claim is, indeed, the functional equivalent of a confession of judgment or a verdict in favor or the insured.”
However, the 2nd DCA noted that “the confession of judgment rule is not absolute.” After surveying several cases on the issue, the Court stated that:
“What can be gleaned from these cases is that an insurer that is aware of a dispute with its insured cannot simply ignore that dispute, wait until the insured files suite to demand appraisal, pay any subsequent appraisal award, and then maintain that the payment does not constitute a confession of judgment as a matter of law. On the other hand, if an insurer is not on notice that the claim or payment is disputed, the insured generally will be unable to show that he or she was ‘forced’ to file suit, and a subsequent post-suit payment by the insurer may not constitute a confession of judgment. While this does not mean that the insured is required to invoke the appraisal clause prior to suit, it does mean that the insured must, at a minimum, clearly notify his or her insurer in a timely fashion of his or her dissatisfaction with the amounts paid.”
In conclusion, the Court held that:
“When an insurer is aware that an insured disputes the settlement of a claim and the insurer fails to respond in any fashion to the insured’s demands for further action, that failure has the legal effect of denying coverage.
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“If Clifton’s version of the facts is correct, United Casualty’s payment operates as a confession of judgment, and it is not entitled to summary judgment in its favor. If United Casualty’s version of the facts is correct, then it may be entitled to summary judgment. In either case, genuine issues of material fact precluded entry of summary judgment in favor of either party at the time of the summary judgment hearing.”