THE CONTINGENCY FEE MULTIPLIER (FOR INSURANCE COVERAGE DISPUTES)

shutterstock_531182533The contingency fee multiplier: a potential incentive for taking a case on contingency, such as an insurance coverage dispute, where the insured sues his/her/its insurer on a contingency fee basis.

 

In a recent property insurance coverage dispute, Citizens Property Ins. Corp. v. Agosta, 43 Fla.L.Weekly, D1934b (Fla. 3d DCA 2018), the trial court awarded the insured’s counsel a contingency fee multiplier of two times the amount of reasonable attorney’s fees.  The insurer appealed. The Third District affirmed the contingency fee multiplier.

 

Of interest, on appeal—which is reviewed under an abuse of discretion standard of appellate review–the Third District analyzed the state of Florida law on contingency fee multipliers.

 

To begin with, Florida has adopted the lodestar approach for determining reasonable attorney’s fees based on the following factors to consider (known the Rowe factors based on the Florida Supreme Court case):

 

(1) The time and labor required, the novelty and difficulty of the question involved, and the skill requisite to perform the legal service properly.

(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer.

(3) The fee customarily charged in the locality for similar legal services.

(4) The amount involved and the results obtained.

(5) The time limitations imposed by the client or by the circumstances.

(6) The nature and length of the professional relationship with the client.

(7) The experience, reputation, and ability of the lawyer or lawyers performing the services.

(8) Whether the fee is fixed or contingent.

 Agosta citing Florida Patient’s Compensation Fund v. Rowe, 473 So.2d 1145 (Fla. 1985).   

 

Based on the consideration of these factors, the trial court determines through an evidentiary hearing a reasonable hourly rate to multiply by a number of reasonable hours expended in the litigation.  This is referred to as the lodestar amount or lodestar figure.  However, the court may add to this lodestar amount by tacking on a contingency fee multiplier.  For example, assume the trial court found 100 reasonable hours were incurred at the reasonable hourly rate of $300.  This would result in an attorney’s fees award of $30,000.  But, with the contingency fee multiplier, the trial court can add to this.  A multiplier of 2 would result in an attorney’s fees award of $60,000, hence the incentive for moving for the multiplier. 

 

In determining whether to add a contingency fee multiplier, the trial court must consider competent, substantial evidence in the record (offered at the evidentiary hearing) of these three factors:

 

(1) whether the relevant market requires a contingency fee multiplier to obtain competent counsel;

(2) whether the attorney was able to mitigate the risk of nonpayment in any way; and

(3) whether any of the factors set forth in Rowe are applicable [the factors mentioned above], especially, the amount involved, the results obtained, and the type of fee arrangement between the attorney and his client.

 

Agosta citing Standard Guarantee Ins. Co. v. Quanstrom, 555 So.2d 828 (Fla. 1990)

 

 

There has been a debate as to whether the contingency fee multiplier only applies in rare and exceptional circumstances.  The Florida Supreme Court (hopefully) put this issue to bed rejecting the argument that the contingency fee multiplier only applies in rare and exceptional circumstances.  Agosta citing Joyce v. Federated National Ins. Co., 228 So.3d 1122 (Fla. 2017). 

 

Just as important, and perhaps the most important to me, the Florida Supreme Court held that a “fee multiplier ‘is properly analyzed through the same lens as the attorney when making the decision to take the case,’ as it ‘is intended to incentivize the attorney to take a potentially difficult or complex case.’”  Id. quoting Joyce, 228 So.3d at 1133. This is important because the complexity of a case is not determined at looking at a case in hindsight based on the actual outcome of the case, but looking at a case through the same lens as the attorney at the time the decision is made to handle the caseId. citing Joyce

 

The Florida Supreme Court also stated that the first contingency fee multiplier factor—the relevant market factor—is based on whether there are attorneys in the relevant market who have the skills to effectively handle the case and would have taken the case absent the availability of a contingency fee multiplier.  Id. citing Joyce.

 

Finally, the Florida Supreme Court stated that the third contingency fee multiplier factor that considers the results obtained is not based on the amount of recovery, even a recovery not exceptionally large—“the Florida Supreme Court held that the trial court correctly analyze the ‘outcome’ of that case when it found that ‘[a]lthough the amount involved [$23,500] was ‘not exceptionally large,’ it was material to the Joyces [plaintiffs].”  Id. quoting Joyce, 228 So.3d at 1125.

 

The contingency fee multiplier adds incentive to handle certain insurance coverage disputes on contingency.  If a multiplier is obtained, it definitely rewards the risk of taking a case on contingency (and certainly one of the reasons I explore such contingency fee options!). 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

STATUTORY BAD FAITH AND AN INSURED’S 60-DAY NOTICE TO CURE

shutterstock_262750391A recent case came out in favor of an insured and against a first-party property insurer in the triggering of a statutory bad faith action.   Florida’s Fifth District Court of Appeal in Demase v. State Farm Florida Insurance Company, 43 Fla. L. Weekly D679a (Fla. 5th DCA 2018) held that if an insurer pays a claim after the 60-day notice to cure period provided by Florida Statute s. 624.155(3), this “constitutes a determination of an insurer’s liability for coverage and extent of damages under section 624.155(1)(b) even when there is no underlying action.” 

 

Before a statutory bad faith claim is brought, an insured must file a Civil Remedy Notice giving the insurer written notice of the violation and 60 days to cure the claimed violation. 

 

There are three requirements to sue for a statutory bad faith claim: “1) a determination of the insurer’s liability for coverage; (2) a determination of the extent of the insured’s damages; and (3) the required notice is filed pursuant to section 624.155(3).”    The third requirement is the filing of the Civil Remedy Notice pursuant to s. 624.155 giving the insurer a safe harbor to cure the claimed violation.

 

The first and second requirement are oftentimes determined in litigation, arbitration, or settlement in a coverage lawsuit against an insurer.  However, as this court demonstrates, that does not always have to be the case.  If the insurer pays a claim outside of the 60-day cure period, this establishes (1) a determination of the insurer’s liability for coverage and (2) a determination of the extent of the insured’s damages.  In other words, if an insurer is going to pay a claim, they really need to think carefully about doing so within the 60-day statutory bad faith cure period. Paying afterwards supports the first two requirements of a statutory bad faith claim.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

BAD FAITH IN THE CONTEXT OF PROPERTY INSURANCE CLAIMS (WEBINAR)

Recently, I participated in a national webinar involving insurance bad faith in the property insurance context.  My section of the webinar dealt with the elements and burden of proof in demonstrating bad faith by an insurer in various jurisdictions.  If you are dealing with a property insurance claim, or believe there may have been bad faith by the insurer, make sure you are working with counsel equipped to handle the jurisdictional nuances in advising you of your rights and proving such a claim.

 

Download (PDF, 248KB)

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CGL INSURER’S DUTY TO DEFEND INSURED DURING PRE-SUIT 558 PROCESS: MAYBE?

shutterstock_287900015In earlier postings, I discussed the issue of whether Florida Statutes Chapter 558′s pre-suit construction defects process triggers a CGL insurer’s duty to defend.  The issue was whether Florida’s 558 pre-suit notice of a construction defect and repair process met the definition of “suit” within a standard CGL policy.

 

A standard CGL policy defines the term “suit” as:

 

“Suit” means a civil proceeding in which damages because of “bodily injury,” “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

 

The Florida Supreme Court in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 42 Fla. L. Weekly S960b (2017) held that Florida’s 558 process is an “alternative dispute resolution proceeding” within the definition of suit in a CGL policy.  However,  since it falls within an “alternative dispute resolution proceeding,” the insurer’s consent is required to invoke its duty to defend its insured during this pre-suit process.  This is especially true since a recipient’s participation in the pre-suit 558 process is voluntary and not mandatory and this process does not produce any binding results.

 

Accordingly, an insured-contractor or subcontractor that receives a 558 notice of a construction defect should absolutely tender the notice to its CGL insurer.  No doubt about it.  In doing so, the insured should inquire and perhaps encourage the insurer to participate in the process and defend the insured’s interests.  If the insurer is not willing to participate in this process, this does not mean the insured should refuse too.  Rather, the insured simply needs to recognize that it will be responsible for its own fees and costs in doing so.  The insurer’s consent is required to invoke its duty to defend the insured during this process.

 

This opinion, unfortunately, doesn’t provide a whole lot of value (in my opinion) because if an insurer does not consent to participating in the process and defending its insured, it puts the insured in a position where it may be better off being sued where the insurer will now defend it and engage the consultants to investigate the claimed defects.  Many insurers, however, will capitalize on the 558 process by providing a defense to its insured as opposed to simply waiting for the inevitable construction defect lawsuit.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.