ASSIGNMENT OF BENEFITS PROVISION IN HOMEOWNER’S POLICY IS ENFORCEABLE

Posted on September 7, 2018 by David Adelstein Posted in Assignments, Insurance | Tagged AOB, assignment of benefits, homeowner's insurance, property insurance

When it comes to property insurance claims, particularly those under a homeowner’s insurance policy, an insured will oftentimes assign its benefits under the policy to a restoration contractor. The request for the assignment may likely be prompted by the contractor that does not want to perform the work without the assignment of benefits. The assignment of benefits (also known by the acronym “AOB”) allows the third-party contractor (as the assignee of the insured) to sue the insurer directly for benefits under the policy associated with the restoration work.

Recently, the Fourth District Court of Appeal found enforceable a provision in a homeowner’s insurance policy that stated, “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.” Restoration 1 of Port St. Lucie v. Ark Royal Ins. Co., 43 Fla.L.Weekly D2056a (Fla. 4th DCA 2018). This meant that for the assignment of benefits to be valid, all insureds and the insured’s mortgagee had to sign off on the assignment.

In this case, the restoration contractor got the assignment of benefits signed by the wife-insured, but the assignment was not signed by the husband-insured or the mortgagee. Based on this, the insurer denied payment to the restoration contractor. The restoration contractor sued the insured based on the assignment and the Fourth District affirmed the trial court in dismissing the complaint holding that the language of the assignment of benefits provision in the policy is enforceable (meaning the contractor needed the written consent of all insureds and the mortgagee in order to effectuate a valid assignment).

Regardless of your feelings about assignment of benefits, the language in the homeowner’s policy must be reviewed to ensure compliance with any assignment of benefits language in the policy.

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.

LIABILITY INSURER PRECLUDED FROM INTERVENING IN INSURED’S LAWSUIT

Posted on August 31, 2018 by David Adelstein Posted in Insurance | Tagged employe's liability exclusion, Florida Statute 627.4136, insurance coverage, non-joinder, non-joinder statute, workers compensation

There are cases where I honestly do no fully understand the insurer’s position because it cannot have its cake and eat it too. The recent opinion in Houston Specialty Insurance Company v. Vaughn, 43 Fla. L. Weekly D1828a (Fla. 2d DCA 2018) is one of those cases because on one hand it tried hard to disclaim coverage and on the other hand tried to intervene in the underlying suit where it was not a named party.

This case dealt with a personal injury dispute where a laborer for a pressure washing company fell off of a roof and became a paraplegic. The injured person sued the pressure washing company and its representatives. The company and representatives tendered the case to its general liability insurer and the insurer–although it provided a defense under a reservation of rights—filed a separate action for declaratory relief based on an exclusion in the general liability policy that excluded coverage for the pressure washing company’s employees (because the general liability policy is not a workers compensation policy). This is known as the employer’s liability exclusion that excludes coverage for bodily injury to an employee. The insurer’s declaratory relief action sought a declaration that there was no coverage because the injured laborer was an employee of the pressure washing company. The pressure washing company claimed he was an independent contractor, in which the policy did provide limited coverage pursuant to an endorsement.

The insurer also moved to intervene in the underlying action for the purpose of getting special interrogatories on the verdict form relative to the injured plaintiff’s employment status. The pressure washing company objected because they did NOT want to inflate the damages by having the jury learn that insurance was involved, thereby prejudicing it, particularly if it was determined that there was no insurance coverage. You cannot blame the insured in this instance, particularly because the injured plaintiff was probably all for having the insurer intervene so that the jury learned about the insured’s insurance.

While the trial court granted the motion to intervene, after a number of events occurred (not discussed here), the trial court ultimately dismissed the intervention. The insurer appealed.

The appellate court affirmed the denial / dismissal of the insurer’s intervention in the underlying action. The bottom line is that the insurer was not sued in the underlying action. It could not be sued by the injured plaintiff based on Florida’s non-joinder statute (Florida Statute 627.4136) that would prevent the injured plaintiff from suing the liability insurer directly until it gets a judgment against the insured. Thus, the insurer had no direct and immediate interest in the dispute. Any judgment entered in the case would not be against the insurer—it would be entered against its insured. Further, if the insured obtained a judgment and then sued the insurer, the insurer would not be deprived of appropriate legal defenses.

As the appellate court explained, the insurer’s argument, if accepted, would be to eviscerate Florida’s non-joinder statute:

If the possibility of owing up to the policy limits based upon entry of an adverse judgment [against an insured] was itself a sufficient basis to allow intervention, insurers would be permitted the unhindered and unfettered opportunity to intervene in innumerable tort cases. That is exactly what Houston [insurer] wants; it seeks to interject itself directly into Mr. Vaughn’s [injured plaintiff’s] tort lawsuit. We cannot countenance such a result in light of the legislature’s intent [in Florida’s non-joinder statute] to prevent the introduction of such prejudicial information from being introduced to the jury. After all, courts must continually be concerned that insurance coverage not be introduced to the jury because of its potential to adversely impact the issues of liability and damages.

THE CONTINGENCY FEE MULTIPLIER (FOR INSURANCE COVERAGE DISPUTES)

Posted on August 25, 2018 by David Adelstein Posted in Uncategorized | Tagged contingency fee, contingency fee multiplier, insurance coverage dispute, lodestar, lodestar amount, lodestar figure, property insurance, Rowe factors

The 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 case. Id. 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!).

MEASURE OF DAMAGES IN NEGLIGENT PROCUREMENT OF SURETY BONDS / INSURANCE

Posted on August 19, 2018 by David Adelstein Posted in Insurance, Negligence | Tagged Florida Statute 626.901, negligent procurement, negligent procurement of bonds, negligent procurement of insurance, unauthorized insurer

My broker procured the wrong insurance and I am exposed to a loss. My broker failed to procure proper insurance and I am exposed to a loss. “Where the parties enter into an agreement to procure insurance and there is a negligent failure to do so, an insurance broker may be liable for damages.” The Lexington Club Community Association, Inc. v. Love Madison, Inc., 43 Fla.L.Weekly D1860a (Fla. 4^th DCA 2018). The proper measure of damages in a negligent procurement of insurance claim is “what would have been covered had the insurance been properly obtained.” Id. quoting Gelsomino v. ACE Am. Ins. Co., 207 So.3d 288, 292 (Fla. 4^th DCA 2016). This measure of damages in a negligent procurement of insurance claim is important because it is the measure of damages that dictates recoverable damages under this claim.

In Lexington Club Community Association, Inc., condominium associations hired a contractor to perform post-hurricane repairs. The contractor was required to obtain a performance and payment bond. The contractor obtained bonds from a non-Florida surety (insurance) company that was not authorized to do business in Florida. In doing so, the association paid the contractor’s surety agent $327,915 in premium, of which 10% of this amount went to the agent as commission. The associations thereafter learned the surety was located in Barbados and not licensed in Florida, which raised a red flag, as it should. The associations then sued, among others, the surety agent that procured the bonds and received the commission for negligent procurement of insurance, a declaration that the bond was unenforceable, and unjust enrichment. (Notably, although the surety was sued, it did not respond to the complaint and a default was entered against it.). Ultimately, the associations paid a huge premium for a valueless product, i.e., surety bonds backed by a foreign entity that had no incentive to honor the bonds, particularly since it was not licensed to do business in Florida.

Of importance, the association had no cause to rely on the bonds because it did not incur any damage or issue to actually trigger the application of the bonds, other than wanting a refund in its premium. This meant it was suing the surety agent for the $327,915 in premium that was paid to the surety not licensed to do business in Florida. But, the lack of an actual loss under the bonds is an important consideration when it comes to proving damages. A jury found that any negligence of the surety agent was not a cause of damage to the associations, presumably because the associations had no proven damage under the bonds. Instead, the jury awarded the associations the 10% commission the agent received in procuring the bonds, approximately $32,000, through an unjust enrichment claim. (An analogy would be procuring insurance from a non-Florida entity but not actually having a claim to trigger the insurance coverage. The same rationale would apply.).

Florida Statute s. 626.901 applies when dealing with an unauthorized insurer, which is an insurer not authorized to transact insurance in Florida, such as the surety in this case. Section 626.901(2) provides:

If an unauthorized insurer fails to pay in full or in part any claim or loss within the provisions of any insurance contract which is entered into in violation of this section, any person who knew or reasonably should have known that such contract was entered into in violation of this section and who solicited, negotiated, took application for, or effectuated such insurance contract is liable to the insured for the full amount of the claim or loss not paid.

However, even under s. 626.901, an insurer’s unauthorized policy would still be deemed enforceable in Florida; however, the insurance broker could still be liable for amounts or loss not paid by the insurer. Fla. Stat. s. 626.901. Applied here, the bonds would still be enforceable (irrespective of the surety that actually issued the bonds). But, again, the associations here did not actually incur a loss that would trigger the application of the bonds.