The recent opinion in the property insurance coverage dispute, Bryant v. Geovera Specialty Ins. Co., 44 Fla.L.Weekly D1232a (Fla. 4thDCA 2019), discusses the doctrine known as an insurer’s “confession of judgment.” In this case, an insured suffered water damage from a pipe leak. The insurer paid the insured $6,000 because of sublimits in the property insurance policy. There was a $5,000 sublimit for mold and a $1,000 sublimit for water leakage that occurs over a period of 14 days or more. The insured sued the insurer for covered water damage arguing that the sublimits did not apply.
After the lawsuit was filed, an agreed order was entered that stayed the case pending an appraisal. The appraisal award did not apply the $1,000 sublimit to the water damage from the pipe leak and segregated out damage for mold. (The insurer already paid the mold sublimit). The insurer ended up paying the appraisal award for the water damage caused by the pipe leak after deducting its pre-lawsuit sublimit payment. The insurer paid the award and did NOT challenge the application of the $1,000 sublimit in court, although it could have since coverage issues are decided by courts.
An issue became whether the insurer’s post-lawsuit payment of the appraisal award above the $1,000 sublimit constituted an insurer’s confession of judgment.
“[I]t is well settled that the payment of a previously denied claim following the initiation of an action for recovery, but prior to the issuance of a final judgment, constitutes the functional equivalent of a confession of judgment.” Johnson v. Omega Ins. Co., 200 So. 3d 1207, 1215 (Fla. 2016). The confession-of-judgment doctrine “applies where the insurer has denied benefits the insured was entitled to, forcing the insured to file suit, resulting in the insurer’s change of heart and payment before judgment.” State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007).
The confession-of-judgment doctrine is limited to situations where the filing of the lawsuit “acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.” See, e.g., State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So. 3d 932, 935 (Fla. 4th DCA 2016). However, “[i]t 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.” Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000). Thus, “an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient” to constitute a confession of judgment and to allow the insured to recover attorney’s fees.
An attorney’s fees award is also appropriate “where, following some dispute as to the amount owed by the insurer, the insured files suit and, thereafter, the insurer invokes its right to an appraisal and, as a consequence of the appraisal, the insured recovers substantial additional sums.” Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009).
Even after Johnson, not all post-suit payments by an insurer will constitute a confession of judgment. We recently held that where an insurer valued a loss, issued payment, and was unaware of the insured’s disagreement with the damage valuation until the filing of the complaint, the insurer’s timely payment of an appraisal award during the litigation did not constitute a confession that the insurer breached the insurance policy. See Goldman v. United Servs. Auto. Ass’n, 244 So. 3d 310, 311-12 (Fla. 4th DCA 2018).
Here, the appellate court held the insurer’s payment of the post-lawsuit appraisal award constituted a confession of judgment that it incorrectly denied benefits by invoking the $1,000 leakage sublimit. Once the insurer invoked the sublimits, it raised a coverage issue that only a court could decide and [t]his coverage issue went beyond a mere dispute about the valuation of the loss, so the insureds could not have simply invoked the policy’s appraisal provision before filing suit.” Bryant, supra. (“Under Johnson, “[o]nce 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.” Here, the insurer’s payment of the appraisal award…demonstrated that GeoVera [insurer] had abandoned its pre-suit coverage position that the claim was subject to the $1,000 sublimit for long-term water leakage.”) (internal citation omitted)
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