June 16th, 2017

Be Our Guest or “At Our Request”? : Interpreting the Additional Payment/Supplementary Payment Provisions in Requesting Attorney’s Fees and Costs

By, Molly Chafe Brockmeyer, Esq.

The Florida Supreme Court is currently reviewing the issue of whether the policy language “all investigative and legal costs incurred by us” and “all reasonable costs incurred by an insured at our request” allows for an insurer to be added to a cost judgment pursuant to section 768.79, Florida Statutes, the offer of judgment statute. See Order Accepting Jurisdiction, Government Employees Ins. Co. v. Macedo, No. SC16-935 (Fla. Oct. 19, 2016)(certifying as direct conflict and express and direct conflict).

In Government Employees Insurance Company v. Macedo, GEICO challenged a final judgment in an automobile insurance case holding it liable for a plaintiff’s attorney fees and costs after GEICO had rejected, on behalf its insured defendant, a $50,000 settlement proposal made by the plaintiff pursuant to section 768.79, Florida Statutes.  190 So. 3d 1155, 1156 (Fla. 1st DCA 2016), review granted (Oct. 19, 2016).  Plaintiff succeeded in obtaining a jury verdict in her favor, receiving more than four times the amount of the proposal. Id. The plaintiff then added GEICO to the judgment pursuant to section 627.4136(4), Florida Statutes, and sought taxable fees and costs pursuant to the offer of judgment statute. Id. The trial court added GEICO to the judgment, making GEICO jointly and severally liable with its insured. Id.

The First District Court of Appeal, upholding its decision in New Hampshire Indemnity Company v. Gray, 177 So. 3d 56 (Fla. 1st DCA 2015), stated that GEICO’s policy with the insured gave it the sole right to litigate and settle claims, and thus contractually obligated it to pay for “all investigative and legal costs incurred by us” and “all reasonable costs incurred by an insured at our request.” Id. at 1156. The court further stated that the policy did not provide a definition of legal or other costs, nor exclude, for example, costs and fees awarded to a plaintiff driver pursuant to the offer of judgment statute. Id. Further the court restated its holding in Gray:

[U]nder insurance policies such as the one here, insurers enjoy the sole right to settle or litigate claims against their insureds; therefore, choosing to litigate is no different than a request … to do so. Any such expression, or request, necessarily encompasses incurring litigation costs, which may mean not only the insurer’s litigation costs, but also those incurred by the opposing party should that party prevail. It is the insurer’s choice to litigate—a decision only it can make—that results in these costs being incurred; thus, “those expenses [are] incurred at the insurer’s request.”

Id. at 1156-57, (quoting Gray, 177 So. 3d at 63 (internal citation omitted)).

However, the court, in certifying conflict to the Florida Supreme Court, recognized the conflict with the Second District’s opinion in Steele v. Kinsey, which held that the same language was unambiguous and that the words at issue here, “reasonable expenses incurred at our request,” can only mean that the insurer must request the product or service that incurs the expense. 801 So. 2d 297, 300 (Fla. 2d DCA 2001).

On October 19, 2016, the Florida Supreme Court accepted jurisdiction. The appeal is perfected as of January 24, 2017, and the Court has dispensed with Oral Argument.

May 16th, 2017

“Mend the Hold”

By, Alex Brockmeyer, Esq.

“Mend the hold.” The phrase originates from wrestling parlance where it meant “to get a better grip (hold) on your opponent.” Harbor Ins. Co. v. Continental Bank Corp., 922 F. 2d 357, 362 (7th Cir. 1990). The first appearance of the phrase in a judicial opinion occurred in a case where the Supreme Court held a party in a contract suit could not justify its nonperformance with a defense it did not raise prior to the commencement of litigation:

[w]here a party gives a reason for his conduct and decision touching any thing involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to mend his hold. He is estopped from doing it by a settled principle of law.

Railway Co. v. McCarthy, 96 U.S. 258, 267-68 (1877). Estoppel and waiver form the underlying basis for this doctrine, which at its most basic level precludes a party from changing its defense to performance of a contract in the middle of litigation. E.g. Baquero v. Lancet Indem. Risk Retention Group, Inc., 2013 WL 5237740, *6 (S.D. Fla. Sept. 17, 2013) (citing Harbor Ins. Co. v. Continental Bank Corp., 922 F. 2d 357, 362-65 (7th Cir. 1990)).

The “mend the hold” doctrine is particularly suited for insurance disputes where an insurer changes its reason for denying a claim. Id. In fact, some commentators have observed that courts have expressed a willingness to apply the “mend the hold” doctrine out of “an intolerance for insurers to adjust legal positions like chameleons adjust their color.” Michael Laurato, Mending the Hold in Florida: Getting a Better Grip on an Old Insurance Doctrine, 4 FLA. A&M U. L. REV. 73, 74 (2009) (citing Eugene R. Anderson & Nadia V. Holober, Preventing Inconsistencies in Litigation With a Spotlight on Insurance Coverage Litigation: The Doctrines of Judicial Estoppel, Equitable Estoppel, Quasi-Estoppel, Collateral Estoppel, “Mend the Hold,” “Fraud on the Court,” and Judicial and Evidentiary Admissions, 4 CONN. INS. L.J. 589, 692 (1997-98)).

Application of the doctrine has yielded two approaches. Robert Stikoff, “Mend the Hold” and Erie: Why an Obscure Contracts Doctrine Should Control in Federal Diversity Cases, 65 U. CHI. L. REV. 1059, 1059-60 (1998). The minority approach precludes a party from changing its position during litigation from its pre-suit position absent a good faith justification for the change in position. Id. at 1062-71. The majority approach limits the nonperforming party’s defenses in litigation to those provided pre-suit at the time it refused to perform. Id.

Florida follows a version of the majority approach. To apply the “mend the hold” doctrine in Florida, it appears that a party to contract must prove: (1) the insured detrimentally relied on the insurer’s conduct; and (2) the insurer had sufficient information at the time of its initial denial to have waived the additional defense it seeks to assert during litigation. Trovillion Const. & Development, Inc. v. Mid-Continent Cas. Co., 2014 WL 201678, *9 (M.D. Fla. Jan. 17, 2014); Square at Key Biscayne Condo. Ass’n, Inc. v. Scottsdale Ins. Co., 2014 WL 11946882, *4 (S.D. Fla. Dec. 15, 2014); Baquero, 2013 WL 5237740 at *6 Principal Life Ins. Co. v. Alvarez, 2011 WL 4102327, *6-7 (S.D. Fla. Sept. 14, 2011). Application of this doctrine also appears to be limited to instances where an insurer seeks a forfeiture of the policy as opposed to invoking a policy exclusion. Square at Key Biscayne, 2014 WL 11946882 at *4. The conclusion reached by these courts stems from Florida’s intermediate appellate courts utilizing estoppel and waiver principles in determining whether to permit insurers to engage in the very conduct prohibited by the “mend the hold doctrine.” See Salcedo v. Asociacion Cubana, Inc., 368 So. 2d 1337, 1339 (Fla. 3d DCA 1979) (citing McCarthy, 96 U.S. at 268); see also American States Ins. Co. v. McGuire, 510 So. 2d 1227 (Fla. 1st DCA 1987); Six L’s Packing Co., Inc. v. Fla. Farm Bureau Mut. Ins. Co., 268 So. 2d 560 (Fla. 4th DCA 1972).

As such, it appears the “mend the hold” doctrine has limited applicability. One such area where the doctrine seems particularly applicable is where an insurer attempts to invoke a condition precedent—such as a proof of loss or prompt notice of a loss—during litigation after not raising the issue pre-suit. Allstate Floridian Ins. Co. v. Farmer, 104 So. 3d 1242, 1246-50 (Fla. 5th DCA 2012). Failure to comply with a condition precedent results in a forfeiture of the policy. Id. at 1249-50. An insurer will certainly be able to raise these conditional defenses pre-suit and would know of an insured’s failure to comply with any condition precedent set forth in the policy. Finally, the insured’s detrimental reliance on its insurer’s failure to raise the condition precedent is easy: the insured relies on the insurer’s failure to raise the condition precedent pre-suit in determining its ability to file suit.

 

 

 

 

 

 

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