Those handling property insurance claims in Florida are no doubt aware of the risk that a court may require an insurer to pay an insured’s attorneys fees. Florida’s attorney fee statute provides a strong inducement for insureds and their attorneys to file suit sooner rather than later with the hopes of obtaining entitlement to an award of attorneys fees. Section 627.428 Attorneys Fees, Fla. Stat., provides in part:
(1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named . . . insured . . . under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured . . . a reasonable sum as fees or compensation for the insured’s . . . attorney prosecuting the suit in which the recovery is had.
Florida courts have held that an insurer’s post suit payment to an insured constitutes a “functional equivalent of a confession of judgment” which satisfies the requirement of a “judgment or decree.” See Wollard v. Lloyd’s & Cos. of Lloyd’s, 439 So. 2d 217, 219 (Fla. 1983).
However, the inquiry is not that simple as there is a second issue the court must consider when asked to make an award of attorneys fees where there has been a “confession of judgment.” Specifically, the court must also determine whether “. . . the insured was forced to litigate in order to get the insurer to pay the claim.” See State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So. 3d 932 (Fla. 4th DCA 2016).
In State Farm Florida Insurance Company v. Lorenzo, 969 So. 2d 393, 398 (Fla. 5th DCA 2007) Florida’s Fifth District stated that allowing an award of attorneys fees pursuant to the “confession of judgment” doctrine where an insured was not forced to sue to obtain payment “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.”
Many attorneys representing policy holders still “race to the courthouse” to file suit with the hopes of triggering entitlement to attorneys fees rather than complying with post loss obligations or demands for appraisal. Those filing premature suits may undermine their ability to obtain an award of attorneys fees.
For example, Roland Bernal, Esq. of our Vero Beach office, recently obtained a Summary Judgment in favor of State Farm in St. Lucie County Circuit Court. The insureds had reported a loss involving damages caused by water. Coverage was conceded, payment issued for the undisputed amount of loss less deductible and appraisal was invoked. The insureds then filed suit instead of complying with the pre-suit demand for appraisal. After the suit was filed, Plaintiffs agreed to proceed with the appraisal and stay the litigation pending resolution of the appraisal. The appraisal resulted in an award of additional costs of repair which were paid timely. Plaintiffs subsequently declined to dismiss the matter and State Farm moved forward with a Motion for Summary Judgment arguing that the suit was premature when filed in light of the pre-suit demand for appraisal and was moot given the resolution of the appraisal. State Farm’s Motion for Summary Judgment was granted. More importantly, Plaintiffs were denied an award of attorneys fees despite the post suit payment of the appraisal award because Plaintiffs could not establish that they were forced to litigate in order to get the insurer to pay the claim. In sum, the suit was premature when filed and moot once the appraisal award was paid.
Appraisal can often serve as an expeditious means of resolution of disputes over the amount of a covered loss as well as a providing a degree of protection from exposure to attorneys fees particularly where a policy holder files suit without complying with a demand for appraisal. However, insurers should be cautioned about utilizing appraisals where the policy holder has served a Civil Remedy Notice of Insurer Violation. For example, recent Florida District Court opinions, such as Cammarata v. State Farm, 152 So. 3d 606 (Fla. 4th DCA 2014) significantly undermine the advantages of appraisal. Let us know if you would like to discuss these issues further.