Friday, February 12, 2010

Second District Explains When Payment By An Insurer Results In A Confession Of Judgment

In Clifton v. United Casualty Insurance Co. (2D09-971),  the Second District reversed the entry of summary judgment and, more importantly, explained when a confession of judgment is appropriate based upon payment from an insurer after a lawsuit is filed.  After an extensive analysis of the relevant case law, the court stated:
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 suit 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.
Contrary to Clifton's argument here, the Goff opinion does not stand for the proposition that any post-suit payment automatically operates as a confession of judgment. Instead, when considered in its factual context, the Goff opinion held that State Farm's payment operated as a confession of judgment because State Farm was aware that the Goffs disputed the settlement of the claim but it took no steps to resolve that dispute. The Goffs' suit forced State Farm's hand, and thus the suit was "necessary" to obtain policy benefits. The Goff decision is also entirely consistent with the holdings of Myrick, Lewis, Wilson, and Meadows MRI that an insurer that knows of a dispute with its insured, takes no steps to resolve that dispute, and then makes a postsuit payment of additional policy proceeds confesses to judgment by that post-suit payment.
Finally, we reject United Casualty's argument that its payment should not operate as a confession of  judgment because it never denied Clifton's claim. 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. See Sanchez v. Am. Ambassador Cas. Co., 559 So. 2d 344, 346 (Fla. 2d DCA 1990) (holding that when an insurer was aware of its insured's demand for either payment or arbitration and it chose not to respond to the demand until after suit was filed, the insurer's actions amounted to a denial of coverage). While an insurer is clearly not required to pay any sum demanded by an insured to avoid a judgment for breach and award of attorney's fees, an insurer may not simply sit back and ignore its insured's demands for additional payments and then claim that its failure to respond does not operate as a denial of coverage.


Post a Comment