Lead Opinion
This case is before the Court to review the decision of the Fifth District Court of Appeal in Omega Insurance Co. v. Johnson, — So.3d —,
FACTUAL & PROCEDURAL BACKGROUND
Section 627.428, Florida Statutes, outlines the provision under which an insured may recover attorney’s fees incurred as a result of recovering on a valid claim for insurance benefits. See § 627.428, Fla. Stat. (2015). Today we address the interpretation of section 627.428, and we begin with a review of the actual text of the statute:
(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 or omnibus insured or the named beneficiary 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 or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.
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(3) When so awarded, compensation or fees of the attorney shall be included in the judgment or decree rendered in the case. "
§ 627.428, Fla." Stat. (2015).
Florida law also includes several statutory provisions which specifically address claims for sinkhole damage, commonly referred to as the “sinkhole statutes.” In part, the sinkhole statutes require insurers to provide policyholders the option of paying an additional premium for sinkhole coverage. § 627.706(l)(b), Fla. Stat. (2015). In this context, a sinkhole is described as “a .landform created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater.” § 627.706(2)(h), Fla. Stat. Sinkhole “activity” is defined as a “settlement or systematic weakening of the earth supporting the covered building” resulting from “contemporaneous movement or raveling of soils, sediments, or rock materials into subterranean voids.” § 627.706(2)©, Fla. Stat. An insurer may require an inspection of the property pri- or to issuing a policy which provides sinkhole coverage benefits. § 627.706(l)(b), Fla. Stat. Upon submission of a claim for sinkhole damage, a professional engineer or geologist selected exclusively by the insurer.may examine the property to determine whether a
If the insured disputes whether the insurance company’s report is correct, the sinkhole statutes also provide for a neutral evaluation procedure. § 627.7074, Fla. Stat. (2015). Neutral evaluation is mandatory if requested by either party, section 627.7074(4), Fla. Stat. (2015), but the insurer bears the cost for the neutral evaluation. § 627.7074(6), Fla. Stat. Court proceedings are stayed pending the completion ■ of any neutral evaluation. § 627.7074(10), Fla. Stat. Once the neutral evaluation is completed, the neutral evaluator prepares an independent report to address whether there was damage to the insured property caused by sinkhole activity, and an estimated cost for repairs. § 627.7074(12), Fla. Stat. Significantly, the results of the neutral, independent evaluation are not binding in any subsequent legal proceedings, § 627.7074(4), Fla. Stat.
At the time of the events material to this case, Johnson was covered under a homeowner’s insurance policy issued by Omega, which included sinkhole coverage. On January 13, 2010, Johnson filed a claim with Omega to recover damages resulting from conditions which Johnson believed to be sinkhole activity. Specifically, Omega was alerted that there were cracks in the walls, as well as separations between the walls and ceilings of the kitchen, dinette, bathrooms, family room, bedrooms, foyer, windows, and garage of Johnson’s home. Cracks were additionally found in the closets and floorboards. The extent of the cracking was such that several of the doors inside the home were difficult to open. As a result, Johnson was forced to hire a drywall company to repair the cracks in the drywall and a carpenter to reset the doors. The fireplace and kitchen cabinets were also displaced by separation, and cracks were additionally observed on the exterior walls of the home and driveway. Moreover, in the utility room, a sag was observed along the top of the cabinet that housed Johnson’s washing machine and dryer. As a result, Johnson had been unable to perform routine maintenance on these appliances because the sag prevented these appliances from being moved.
Omega selected and retained Rimkus Consulting Group to perform an initial sinkhole investigation. After performing three Standard Penetration Test.borings, Rimkus concluded that there was no sinkhole activity present on Johnson’s property. Although Rimkus conceded that the property was damaged, it attributed the damage to causes that were not covered under the policy, such. as volumetric changes of clay-based soil underlying the site, concrete shrinkage, and defective construction processes. As the insurance company’s, initial report, these conclusions received the initial statutory presumption of correctness pursuant to section 627.7073(l)(c). Based on its report, Omega totally denied Johnson’s claim for insurance coverage.
Upon receiving the denial of benefits from Omega to cover potentially hundreds of thousands of dollars in damages to her home, Johnson retained the law firm of Corless Barfield Trial Group. Corless Barfield in turn retained a local expert, Bay Area Sinkhole Investigation & Civil
Johnson also incurred the additional expert fee expense of $15,000 to retain BASIC. With the expenses looming larger and larger, Johnson attempted to save her rapidly dilapidating home and filed a legal action against Omega for breach of contract. In her complaint, Johnson requested the benefits to which she was entitled under her policy, along with the accompanying attorney’s fees, under section 627.428. During the discovery process, Omega considered the BASIC report, which had found sinkhole damage on Johnson’s property. Thereafter, Omega continued to refuse payment and proceeded to request a neutral evaluation process pursuant to section 627.7074. The parties agreed to stay litigation pending the results of the neutral evaluation.
Omega continued to reject the BASIC opinions and failed to pay any policy benefits. Instead, Omega hired WRS Consulting Engineers (WRS) to perform an additional evaluation. Following the WRS investigation, WRS agreed with BASIC that sinkhole activity was present on Johnson’s property. Based on the extensive damage observed, the WRS engineer recommended grouting, underpinning, and remediation programs to stabilize the land and home, as well as repairs to the foundation. The total cost of repairs was estimated to be in excess of $200,000. After this second .adverse report, Omega finally advised Johnson that it would abide by the WRS evaluation report and provide payment for the damages pursuant to section 627.707(5)(b). Johnson was additionally advised that payment for the damages to her property was conditioned upon her executing, a contract with. a remediation . company, In cooperation with that condition, Johnson entered into a contract with Foundation Services for building stabilization and foundation, repairs. The cost of these repairs totaled $213,465.
Following Omega’s acceptance of the WRS evaluation report and tender of payment to Johnson, Omega filed an Answer and Affirmative Defenses, in which Omega finally admitted that: (1) sinkhole damage was covered under the policy; (2) Johnson had applied for benefits to cover her sinkhole damage; (3) Omega had denied that claim; (4) sinkhole damage was, in fact, the cause of the damage; and (5) Johnson was therefore entitled to benefits to cover the damages. Johnson subsequently filed a motion for confession of judgment and a motion for attorney’s fees, costs, and interest, contending that Omega’s admissions amounted to a confession of judgment. Omega then changed its position and countered that Johnson had failed to provide adequate notice of the dispute, suggesting that Johnson was manipulating the dispute. Further, Omega asserted that Johnson was absolutely required to show that Omega had acted wrongfully or in bad faith to be eligible, for any fees under section 627.428. Johnson, however, argued that the only facts necessary .to recover fees under section 627.428 were those facts which were already admitted by Omega: that Johnson had properly reported sinkhole damage and made a claim for benefits, Omega denied the claim, and
Before determining the motion for attorney’s fees, the trial court scheduled a full hearing. After hearing the parties’ arguments, the trial court rejected Omega’s contention that Johnson was abusing Florida law under section 627.428, and determined that the admissions of record constituted a confession of judgment:
THE COURT: I can’t find that there was a race to the courthouse here or that there was no real dispute. Of course, there was a real dispute. The policyholder made a claim, the claim was denied.- They think that their property was damaged. The insurance company hired somebody of their own choosing, and, based on that, they said, any damage you may have is excluded, and we don’t owe you a nickel. And it wasn’t until after suit was brought that it turned out that, yes, we do owe you some money, and they agreed to pay it. That amounts to a confession of judgment, and you didn’t have to race to the courthouse. There’s no indication that you were doing that.
(Emphasis supplied.) Therefore, the trial court granted Johnson’s motion for confession of judgment and attorney’s fees, and thereafter entered an order for Omega to pay attorney’s fees, taxable costs, and prejudgment interest to continue to accrue at the statutory interest rate until paid in full.
Omega subsequently sought review in the Fifth District Court of Appeal.' From the beginning of its opinion, the district court below framed the issue before it with the presumption that section 627.428 requires some type of bad faith conduct on the part of the insurance company before fees can be awarded. See Johnson, — So.3d -,
Johnson claims that it does not matter whether Omega wrongfully withheld the policy benefits and forced her to file suit. The simple facts asserted by Johnson are that Omega denied her claim, she filed suit, and Omega paid the policy benefits thereafter. Johnson argues that is all she must show to entitle her to fees under the statute. The trial court was persuaded by Johnson’s argument and rendered the order awarding fees that we now review. Analyses of section 627.428 and the confession of judgment doctrine reveal that Omega is correct, not Johnson.
Id. Relying primarily on State Farm Florida Insurance Co. v. Colella, 95 So.3d 891 (Fla. 2d DCA 2012), the district court reasoned that the confession of judgment doctrine is only applicable when the insurance provider wrongfully forces an insured to pursue litigation to obtain proceeds. Johnson, — So.3d -,
This review follows.
ANALYSIS
Statutory Presumption of Correctness
This question presents a pure question of law and is, therefore, subject to de novo review. See Jackson-Shaw Co. v. Jacksonville Aviation Auth.,
In Warfel, we considered the proper application of an insurance statute in the sinkhole claim context. See
- On appeal, the issue before this Court was whether the presumption of correctness afforded to the insurer-engineer report during the initial claim process in section 627.7073(l)(c) extended to trial proceedings. See id. at 51. There, we examined both the plain language and legislative history of section 627.7073(l)(c). With respect to the plain wording of the statute itself, this Court recognized that when the Legislature intends to incorporate a burden-shifting provision into a statute, overwhelming precedent indicates that it does so explicitly. See id. at 58. However, no such explicit language exists in section 627.7073(l)(c). See id. We thus concluded that to apply such a presumption absent direction in the statute would render section 627.7073(l)(c) unconstitutional. Id. After a review of the legislative history of the statute, the Court likewise concluded that “the legislation is specifically designed to protect the public during the claims process,” not the insurance company during litigation. Id. at 62 (emphasis supplied). “If at all,” we explained, “the statutory plan is designed to require that insurance companies have expert reports in the [initial] claims process before denying a request for benefits.” Id. at 63 (emphasis supplied). Ultimately, we held
• Notwithstanding our explicit holding in Warfel, the Fifth District in the case below applied the presumption in 627.7073(l)(c) to the litigation between Johnson and Omega. Johnson, — So.3d -,
Given that we explicitly declined to extend the statutory presumption of correctness in the sinkhole statutes to the trial process, it is clear that the court below acted in conflict with our decision in Warfel when it extended the presumption of correctness to the initial insurance company report, which was incorrect, during litigation and placed a burden on Johnson to further rebut it. The court below and Omega mistakenly blur the lines between the reliance on reports of insurance company experts made during the initial claims process pursuant.to the sinkhole statutes and the attorney’s fees to which insureds are entitled under section 627.428 when the insured prevails. Consistent with Warfel, we reiterate that the initial claims process in the sinkhole statutes does not supersede or justify an incorrect denial of benefits under section 627.428. We thus hold that the presumption of correctness granted to the insurer’s investigative report in section 627.7073(l)(c) of the sinkhole statutes is only applicable to the sinkhole initial claims process, and does not continue to apply during the trial stage. Nor does it preclude an award of attorney’s fees under section 627.428 when an insured ultimately prevails by recovering benefits.
Johnson’s Entitlement to Fees
We next address the conflict between the case below and Ivey. Specifically, the reasoning in the case below indicates that there is confusion in the Fifth District as to whether a recovery of attorney’s fees under section-627.428, Florida Statutes, requires bad faith or malicious conduct on the part of the insurance -carrier as a prerequisite for such an award. Because the precedent in this area of law clearly rejects a bad faith or maliciousness requirement and the court below relied' on distinguishable jurisprudence, we decline to construct an additional hurdle of bad faith for insureds to overcome. Therefore, consistent with the opinions of this Court and others, we make abundantly clear today that in the context of section 627.428, a denial of benefits simply means an incorrect denial.
Generally, the custom in American law is that each party is responsible for his or her own attorney’s fees, regardless of the outcome of the action. See State Farm Fire & Cas. Co. v. Palma,
Moreover, we have held that the bad faith or degree of “wrongfulness” of the insurance company is not relevant to a recovery of attorney’s fees under section 627.428. See Ivey,
The need for fee and cost reimbursement in the realm of insurance litigation is deeply rooted in public policy. Namely, the Legislature recognized that it was essential to “level the playing field” between the economically-advantaged and sophisticated insurance companies and the individual citizen. Ivey,
We directly addressed the issue of whether a wrongful denial of benefits in the context of section 627.428 encompasses a requirement of bad faith conduct in Ivey. The insured in Ivey applied for personal injury protection benefits after having been hit by a car that was insured by Allstate Insurance Company.
Observing- that the Third District was wrong, however,- this Court accepted jurisdiction and addressed the burden of insureds under the provisions 'in section 627.428 and the confession of judgment doctrine. There, we flatly rejected the notion that some type of bad faith -or menacing conduct was required for an insurer to have acted “wrongfully” under section 627.428. Id. at 684. Rather, we clearly set forth that the existence of a dispute between the insurer and the policyholder coupled with a favorable judgment or payment without judgment for the insured is what justifies an award of attorney’s fees. Id. In other words, a “wrongful” denial in this context means an incorrect denial, not one made in bad faith. As we said in Ivey, “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.” Id. (emphasis supplied).
Notwithstanding our rejection of the bad faith requirement in Ivey, the court below and Omega continue to assert that Omega must have acted in bad faith or maliciously to allow Johnson to recover fees under section 627.428. This position, however, ignores clear binding legal precedent to the contrary. The language in Ivey makes clear that the insurer’s intentions do not factor into a policyholder’s recovery of fees; it is the fact that the denial of benefits was ultimately incorrect that triggers the statute. Here, the facts are undisputed that Johnson submitted a claim, Omega denied that claim, Johnson filed an action seeking recovery, and Omega subsequently conceded that it had incorrectly denied the benefits based on an inaccurate report. These facts alone warrant an award of attorney’s fees to Johnson under section 627.428.
In avoiding our holding in Ivey, the court below primarily relies on an incorrect interpretation of Colella,
While the initial facts of Colella may appear similar to those in the current case, a full picture of the events that occurred in Colella separate the case from Johnson’s situation here. As in this case, Colella also involved an insured who made a claim for sinkhole damages.
The questionable conduct by the insured did not end there. Following State Farm’s payment of the claim, Colella moved for partial summary judgment, contending that the payment of the proceeds and the letter conceding her entitlement to those benefits constituted a confession of judgment. Id. She further alleged a claim under section 626.9541(1), Florida Statutes (2006), or Florida’s Unfair Insurance Trade Practice Act, in which wrongfulness or bad faith is an issue. Id. In addition, Colella alleged that State Farm acted in “bad faith” as defined in section 624.11, Florida Statutes (2006). Id. Under these counts, Colella made several unfounded accusations against State Farm, including that it issued unusable checks, conspired with the first engineer to certify a false report, and improperly sought a neutral evaluation. Id. Moreover, in spite of her allegation that State Farm refused to pay her damages, the record revealed that State Farm had in fact offered to pay Colella’s attorneys fees and costs prior to the filing of the amended complaint. Id. at 896. Ultimately, the district court concluded that Colella’s complaint offered many legal conclusions with little to no factual detail to support them, and thus held there was no breach of contract under these facts. Id.
Although the Colella court expressed that it considered the insurer’s compliance with the sinkhole statutes, the full context
Contrary to the understanding of the court below and Omega, Colella does not support a requirement of bad faith or malicious conduct under section 627.428. The manipulation and foul play by the insured evinced in Colella is simply not present in the case below.
Unlike Colella, Johnson did nothing to indicate that she was acting improperly or in bad faith. In fact, were it not for Johnson’s action in obtaining an independent evaluator, she would have been denied hundreds of thousands of dollars in benefits due to an apparently inadequate and incorrect investigation performed by and on behalf of Omega. If anything, Johnson was the one who made steps to correct a wrongful situation. All inspectors here, including an independent expert, had the full cooperation of Johnson and not only performed a full investigation, but admittedly performed a more thorough investigation than that originally performed by the insurance company’s expert. Johnson did not present her dispute with frivolous claims; she proceeded with cold, hard facts. We therefore cannot endorse the Fifth District’s reasoning that the outcome in Colella is justified in the case at hand.
The court below similarly relies upon several cases in attempt to support its assertion that the “wrongful” denial of a claim required by section 627.428 must be accompanied by the insurer’s bad faith; yet, a review of the facts of these cases also indicate that it was the policyholder’s misleading conduct — not the insurer’s— that was relevant to an award of attorney’s fees. See State Farm Fla. Ins. Co. v. Lorenzo,
As we have discussed, the overwhelming case law on the subject dictates that both Omega and the court below were incorrect on the question of attorney’s fees. Once an insurer has incorrectly denied benefits and the policyholder files an action in dispute of that denial, the insurer cannot then abandon its position without repercussion. To allow the insurer to backtrack after the legal action has been filed without consequence would “essentially eliminate the insurer’s burden of investigating a claim.” Ivey,
We cannot, as the court below held and Omega requests here, discourage insureds from seeking to correct the incorrect denials of valid claims and allow insurers to deny benefits to which insureds are entitled without ramifications, Johnson proceeded with the only action that a non-expert claimant in conflict with a major insurance company could take: she retained counsel and. thus obtained access to an independent expert. After performing a more thorough investigation than that of the insurance carrier, the independent expert did find sinkhole damage and confirmed that Johnson was right. These findings led to the hiring of a neutral evaluator, who also performed a more thorough investigation than Omega’s initial evaluator, and ultimately confirmed that Johnson’s claim for sinkhole damage was incorrectly denied. We will not punish Johnson for actively seeking a solution to the immense financial burden placed on her and the very real property damage to her home. Thus, consistent with our decision in Ivey, we hold that a recovery for attorney’s fees under section 627.428 requires an incorrect denial of benefits by the insurance company, not a bad faith denial.
CONCLUSION
In-light of the express and direct conflict between the decision below and our decisions in Warfel and Ivey, we quash the decision below and remand to the trial court for further proceedings Consistent with this opinion.
It is so ordered.
Notes
. There has been no change in section 627.428, Florida Statutes, since the year litigation was initiated.
. Since the issuance of the decision below, the Fifth District has similarly denied attorney’s fees to a claimant who was originally denied coverage by his insurer, but received benefits after filing suit. Explorer Ins. Co. v. Cajusma, et. al., No. 5D14-2608,
Dissenting Opinion
dissenting.
Because I conclude that the decision of the Fifth District in Omega Insurance Co. v. Johnson, — So.3d -,
Johnson and Warfel both deal with the same statutory presumption, but they address the application of that presumption in different contexts. In Johnson, the Fifth District addressed “whether Omega wrongfully withheld policy benefits to its insured, Kathy Johnson, after she filed a claim for sinkhole damage under the policy Omega issued to her, thereby forcing her to file suit to collect her policy benefits.” Johnson, — So.3d -,
Warfel — in contrast to Johnson — considered the insurer’s assertion of the statutory presumption at trial. We held in War-fel that “because the sinkhole statutes do not apply to the litigation context, the trial court’s application of section 90.804 to section 627.7073(l)(c) and the treatment of this statute as evidentiary in nature in this case was incorrect.” Warfel,
Warfel thus concluded that the statutory presumption does not apply at trial, but Johnson did not apply the presumption in the context of trial proceedings. Rather, in determining whether Omega’s conduct forced Johnson to file suit, Johnson applied the presumption to “the initial claim process and investigation,” which Warfel expressly recognized is the proper context for application of the presumption. Warfel does not suggest that the statutory neutral evaluation process is excluded from the pre-litigation context in which the presumption is applicable. Nothing in Warfel addresses the application of the confession of judgment doctrine as a basis to award fees under section 627.428. And both cases are in agreement that the presumption is not an evidentiary presumption. Warfel thus provides no basis for the Court to exercise conflict jurisdiction over Johnson.
Nor does Johnson expressly and directly conflict with Ivey. The two cases deal with dissimilar statutory schemes. As explained previously, Johnson addressed whether Omega wrongfully withheld sinkhole policy benefits due to Johnson and thereby forced her to file suit to collect her policy benefits, and the Fifth District held that application of the confession of judgment doctrine as a basis to award fees under section 627.428 was error in the context of the statutory process established for the investigation and neutral evaluation of sinkhole claims. Johnson, — So.3d -,
In contrast, this Court in Ivey addressed the insurer’s burden of investigating and paying a claim under the requirements of Florida’s no-fault insurance scheme — specifically, the requirement to pay benefits within thirty days after receipt of notice of the claim — in conjunction with section 627.428. Ivey,
under PIP law, the focus is outcome-oriented. If a dispute arises between an insurer and an insured, and judgment is entered in favor of the insured, he or she is entitled to attorney’s fees. 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.
Id. Ivey concluded that the “wrongfulness” of an insurer’s denial of a PIP claim is irrelevant when determining whether an insured is entitled to attorney’s fees under section 627.428. Id. In contrast, Johnson concluded that in the context of the specific statutory process established for the investigation and neutral evaluation of sinkhole claims that the wrongfulness or unreasonableness of an insurer’s denial of a sinkhole claim is relevant when determining whether an insured is entitled to attorney’s fees under section 627.428. Although Ivey held that the insurer’s “payment after suit was filed operates as a
This Court lacks jurisdiction under the Florida Constitution to review Johnson. Accordingly, I dissent.