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Not so Fast! The Confession of Judgment Doctrine in Dispute-Over-Amount Cases

August 16, 2018

Florida law allows an insured to recover attorney’s fees if the insured prevails in a lawsuit against the insurer for insurance benefits. See § 627.428, Florida Statutes. The plain text of the statute requires a “judgment” against the insurer. In Wollard v. Lloyd’s & Companies of Lloyd’s, 439 So. 2d 217 (Fla. 1983), however, the Florida Supreme Court held that an insurer’s post-suit payment of a claim may be the “functional equivalent of a confession of judgment or a verdict in favor of the insured”, thus, triggering the fee-shifting statute. 

This, predictably, led to a “rush to the courthouse.” Insureds and their attorneys would (and do) file lawsuits for the sole purpose of making a claim for attorney’s fees. Courts, in turn, pushed back against claims for attorney’s fees when the lawsuit was not necessary to force the insurer to adjust or pay the claim. In Hill v. State Farm Florida Ins. Co., 35 So. 3d 956 (Fla. 2d DCA 2010), the Second District Court of Appeal explained:

The law does not provide any general mechanism to impose attorneys’ fees against one party or the other merely because the negotiation process is difficult. It is only when the claims adjusting process breaks down and the parties are no longer working to resolve the claim within the contract, but are actually taking steps that breach the contract, that the insured may be entitled to award fees under section 627.428.

Fast forward to the Florida Supreme Court’s opinion in Johnson v. Omega Ins. Co., 200 So. 3d 1207 (Fla. 2016). That case involved a claim for attorney’s fees following a post-suit payment of a denied sinkhole claim. In Johnson, the Supreme Court held that “an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient for an insured to recover attorney’s fees.” The Court explained it is the “incorrect denial” not some “sinister concept of wrongfulness” that triggers entitlement to attorney’s fees. Based on Johnson, some attorneys have begun to argue that attorney’s fees must be awarded under § 627.428 in every case where the insurer makes a post-suit payment. Recently, two courts have rejected that argument and the reliance on Johnson.

Goldman v. United Services Auto. Ass’n, 244 So. 3d 310 (Fla. 4th DCA 2018), involved a property insurance claim for a plumbing line leak. The insurer investigated the claim and made payment. Without informing the insurer that they disputed the amount of the payment, the insureds sued for breach of contract. The insurer immediately moved to compel appraisal under the insurance policy. When the appraisal came back, the insurer timely paid it. The trial court then granted summary judgment to the insurer.

On appeal, the insureds spent “nearly eight pages of their briefing discussing” Johnson. The Fourth District Court of Appeal rejected the insureds’ reliance on Johnson

In Johnson, the insurer denied the homeowner’s claim in its entirety, leaving the homeowner with few options other than a lawsuit. Here, the insurer valued the loss and paid the claim based on that valuation. The homeowners did not object. Until the filing of the complaint, the insurer was unaware of a disagreement with the damage valuation. Once informed, the insurer demanded appraisal and paid the appraisal.

The Fourth District in Goldman relied largely on Hill. The Fourth District affirmed the denial of attorney’s fees based on the trial court’s finding that “the exact reason the lawsuit was filed” was to “obtain attorneys’ fees for the usual efforts in negotiating an insurance claim.” 

J.P.F.D. Inv. Corp. v. United Specialty Ins. Co., 617CV1415ORL40GJK, 2018 WL 3640829 (M.D. Fla. Aug. 1, 2018) also involved a property insurance claim for water damage. Based on a continuing disagreement, the insurer invoked appraisal under the insurance policy. A week later, the insured served the insurer with a lawsuit it had filed a week or two prior. The court directed the parties to move forward with the appraisal. The insurer timely paid the appraisal award. The insured then filed a motion asking the court to award attorney’s fees under § 627.428. The court denied the motion.

The court distinguished Johnson because Johnson involved a “denial of coverage.” In J.P.F.D. Inv. Corp., the insurer did not deny coverage. Instead, it hired an appraiser before the complaint was filed and formally demanded appraisal prior to being served with the complaint. Under these facts, the court concluded that awarding attorney fees “would not be consistent with the purpose of Section 627.428.” The court noted that “Courts have recognized that confirmation of an appraisal award and an award of attorneys’ fees are not appropriate if the insurer was taking steps to resolve the dispute without court intervention.”

Goldman and J.P.F.D. Inv. Corp. confirms that cases like Hill remain good law, even after Johnson. The courts in Goldman and J.P.F.D. Inv. Corp. appears to limit Johnson to denials of coverage as opposed to disputes over the amount of a loss. With the onslaught of insurance litigation in Florida following Hurricane Irma courts undoubtedly will be presented with claims for attorney’s fees in dispute-over-amount cases where the insurer did not deny coverage. Goldman and J.P.F.D. Inv. Corp. will help push back against those claims where the insurer was working to resolve the claim or did not know of a dispute before the insured filed suit.