June 5th, 2017

Insurer Fails in Attempt to Escape Its Obligation to Pay An Insureds Attorneys’ Fees Under §627.428, Florida Statutes

By, Justin M. Thomas, Esq.

In W&J Group Enterprises, Inc. v. Houston Specialty Ins. Co., the insureds, W&J, appealed an order denying their motion for attorney’s fees under section 627.428, Florida Statutes, following a settlement that was comprised of $650,000.00 payment from the insurer and $3,000.00 paid by the insured.  2017 WL 1279045 (11th Cir. April 6, 2017) (Unpublished).  Florida has extended the statutory entitlement to attorney’s fees under section 627.428, Florida Statutes, to apply beyond the obtaining of a judgment by an insured against an insurer. Such entitlement also applies under a theory referred to as the “confession of judgment rule” which arises based on the conduct of an insurer prior to a judgment.  See Wollard v. Lloyd’s & Cos. of Lloyd’s, 439 So.2d 217, 218-19 (Fla. 1983).

Though Wollard involved a first-party coverage dispute, Florida’s intermediate appellate courts have expanded the “confession of judgment rule” to the third-party context.  E.g., Mercury Ins. Co. of Fla. v. Cooper, 919 So. 2d 491 (Fla. 3rd DCA 2005); Unterlack v. Westport Ins. Co., 901 So.2d 387 (Fla. 4th DCA 2005); O’Malley v. Nationwide Mut. Fire Ins. Co., 890 So.2d 1163 (Fla. 4th DCA 2004).  CooperUnterlack and O’Malley all stand for the principle that when an insurer settles a third-party liability claim, which is contrary to the coverage position taken by the insurer against its insured, the result amounts to a confession of judgment sufficient to trigger the operation of entitlement under §627.428, Fla. Stat., for the insureds to recover their attorneys’ fees.

Interestingly, in the face of the foregoing decisions, the insurer, Houston Specialty Ins. Co. (“HSIC”), advanced the position that the court’s use of the word unilateral in Cooper was to be viewed in such a manner as to limit the confession of judgment theory to only those circumstances when it is solely the insurer who contributes to the settlement.  W&J Group at 2.  The court recognized HSIC’s position as inconsistent with the progeny of cases recognizing confessions of judgment in the third-party context.  Id.  The crux of the court’s holding was twofold.  First, an insured’s contribution to the settlement was so infinitesimal that it was insufficient to meaningfully constitute a basis to depart from the sound reasoning in Cooper, Untlerlack and O’MalleyId. at 3.  Second, to take HSIC’s position all the way through to its logical conclusion would require that the insured reject the facially reasonable settlement for purposes of preserving its rights under section 627.428, Florida Statutes.  Id.  Such a requirement, as the Court recognized, flies directly in the face of the intent of the statute and the policy concerns that have been previously discussed by the Florida Supreme Court.  Id.  After all, the instant statute exists to provide an avenue to level the playing field between insurers and insureds.

The takeaway seems to leave a sense of the pro-policy holder stance that has long been recognized in Florida jurisprudence.  Notably, however, one cannot help but wonder what effect that this decision will have on settlement positioning in the frequent dynamic of liability actions with the commonly filed companion coverage litigation.

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