Friday, June 5, 2009

Fourth District: Attorneys Fees Awarded When Draft Complaint Sent to Insurer Prior to Insurer's Appraisal Demand

In Lewis v. Universal Property and Casualty Insurance Co. (4D08-2516), the Fourth District reviewed the circuit's order denying the insured attorneys fees.

The plaintiffs property was damaged during hurricane Wilma and the plaintiff filed a claim with its insurer for a new roof. The insurer stated it would pay for the cost of replacing "one square foot of concrete tile and 120 linear feet of ridge tiles, and that the remainder of the loss was the result of aging, wear and tear, or construction deficiencies."

The insured and insurer participated in a mediation, that resulted in an impasse. After the impasse, on February 13, 2007, the insured retained counsel and the attorney sent a demand letter to the insurer and attached a draft complaint.

After receiving the draft complaint, on February 20, 2007, the insurer demanded appraisal and expressly reserved the right to "deny the claim." On March 7, 2007, the insured filed a lawsuit.

The parties participated in an appraisal [the lawsuit was stayed] and after the appraisal the insurer sought attorneys fees under 627.428(1), Fla. Stat. The court stated:
The purpose behind section 627.428 is . . . to place the insured . . . in the place she would have been if the carrier had seasonably paid the claim or benefits without causing the payee to engage counsel and incur obligations for attorney’s fees.


Florida’s cases have uniformly held that a section 627.428 attorney’s fee award may be appropriate where, following some dispute as to the amount owed by the insurer, the insured files suit and, thereafter, the insurer invokes its right to an appraisal and, as a consequence of the appraisal, the insured recovers substantial additional sums.


There are far fewer cases addressing an insured’s entitlement to fees in the circumstance where suit is filed after the insurer invokes the appraisal process. This was, however, the circumstance in both Travelers Indemnity Insurance Co. of Illinois v. Meadows MRI, LLP, 900 So. 2d 676 (Fla. 4th DCA 2005), and Federated National Insurance Co. v. Esposito, 937 So. 2d 199 (Fla. 4th DCA 2006). The decisions in these cases plainly indicate that whether suit is filed before or after the invocation of the appraisal process is not determinative of the insured’s right to fees; rather, the right to fees turns upon whether the filing of the suit served a legitimate purpose.


In distinguishing Meadows, the Esposito court noted, among other things, that, in Meadows, there was a coverage dispute and the declaratory judgment action was necessary to proceed with the appraisal process.


We believe that the instant case is more akin to Meadows and that the insureds were entitled to fees. Here, more than a year after the loss, the insurer was taking the position that the bulk of the damage to the roof was not covered and indicating to the insured that it intended to take no further action and was “closing [its] file.” The insureds thus invoked their right to mediation under the insurance contract. When this failed to resolve the dispute, the insureds hired counsel and threatened suit, sending the insurer a draft complaint, stating a claim for breach of contract. Only after the insureds’ counsel sent the letter and draft complaint did the insurer invoke its right to an appraisal and, even in invoking such right, the insured asserted it was retaining the right to deny the claim.


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