Defining Occurrence – When Policy Definitions Do Not Apply To All Coverages
September 24, 2020
Johnson v. Omega Ins. Co., 2016 WL 5477795 (Fla. Sept. 29, 2016)
The Florida Supreme Court’s opinion in Johnson v. Omega Ins. Co. is important for two reasons: It modifies the allowable use of a presumption established in Florida’s statutory sinkhole scheme, and it explains, and perhaps broadens what trial courts may consider when deciding whether to award attorneys’ fees under section 627. 428 when a payment is made after suit is filed.
First – the supreme court has narrowed the statutory “presumption of correctness” from the sinkhole statutes in § 627.7073(1)(c)). The statute provides:
The respective findings, opinions, and recommendations of the insurer’s professional engineer or professional geologist as to the cause of distress to the property and the findings, opinions, and recommendations of the insurer’s professional engineer as to land and building stabilization and foundation repair set forth by s. 627.7072 shall be presumed correct.
Johnson made a claim for sinkhole damage; Omega retained a professional engineer to determine the cause of loss; the engineer reported sinkhole was not the cause of damage, and Omega relied on that report to deny the claim. Johnson, without revealing to Omega that she had retained her own engineer who did find sinkhole as the cause of loss, sued Omega. The insurer invoked the neutral evaluation process, and the neutral evaluator sided with Johnson’s engineer. Omega agreed to abide by the decision and paid the claim. Johnson moved for an award of fees under 627.428, asserting the payment after the suit was a confession of judgment. The trial court agreed, and Omega appealed. The Fifth District sided with Omega, finding that Omega had done nothing wrongful, and was entitled to rely on the report of the engineer, whose report “shall be presumed correct.” Johnson petitioned to the supreme court, asserting the decision conflicted with Universal Ins. Co. of North America v. Warfel, 82 So. 3d 47 (Fla. 2012).
In Warfel, the Florida Supreme Court held this statutory “presumption” could not be relied upon, at trial, to shift the burden of proving the cause of loss onto the policyholder. The Court stated, “the presumption applies to the initial claim process and investigation that insurance companies are required to follow in accepting or denying claims.” Id. at 58.
In Johnson v. Omega the insurance carrier indicated that it relied on the opinion of the independent engineer in denying the claim and, therefore, it should not be responsible for attorney’s fees. The Florida Supreme Court rejected the insurer’s argument, that it may rely on the legislative presumption of correctness, once a lawsuit is filed. This begs the question – just what is the purpose of the “presumption of correctness” if it cannot be relied on during the adjustment process?
Second – the supreme court, relying on its opinion in Ivey v. Allstate Ins. Co., 774 So.2d 679, 683–84 (Fla. 2000), rejected Omega’s argument that it should not be liable for fees because it had not “wrongfully” withheld policy benefits, saying:
Section 627.428 provides that an incorrect denial benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient for an insured to recover attorneys’ fees.
The supreme court cited to its Ivey decision, where it held that “it is the incorrect denial of benefits, not the presence of some sinister concept of ‘wrongfulness,’ that generates the basic entitlement to the fees if such denial is incorrect.” This point has been the rule in Florida for decades, so no new rule of law has been announced here.
Payment of a neutral evaluation award, after suit has been filed, is likely to be deemed a confession of judgment, and no reliance on a presumably-correct expert report will save the insurer from fee liability. We expect to see this case applied outside the context of sinkholes and neutral evaluation, into other first-party insurance disputes where there is an insurer payment after suit is filed.
The supreme court appears to recognize that a proper focus in fee liability disputes is any policyholder misconduct. The supreme court recognized the continuing validity, at least in part, of cases where 627.428 fees were denied because the policyholder had engaged in “misleading conduct, or “manipulation” and “foul play.”
For a detailed discussion of the case, please see our article in the Trial Advocate Quarterly at: