The ability to recover extra-contractual damages such as attorneys’ fees, costs and interest in insurance coverage cases varies widely in jurisdictions nationwide. The Southern District of Florida’s recent decision in Sands on the Ocean addresses the recovery of attorneys’ fees and prejudgment interest in an appraisal context in Florida. In Florida, a statute generally provides for recovery of attorneys’ fees where an insured prevails in a lawsuit against an insurer, but it remains unclear whether such a recovery is available when an insured receives an appraisal award. If merely obtaining an appraisal award on a disputed claim entitles an insured to attorneys’ fees, this can result in the filing of premature, preemptive lawsuits by insureds for the purpose of recovering attorneys’ fees and interest. In this case, the court awarded attorneys’ fees, without performing an analysis of whether the lawsuit was premature, but did not award prejudgment interest.
In Sands on the Ocean Condominium Association, Inc. v. QBE Ins. Corp, 2012 U.S. Dist. LEXIS 177380 (S.D. Fla., Dec. 13, 2012), the Plaintiff, a condominium association, sustained property damage due to Hurricane Frances. The Plaintiff and the insurer (“QBE”) disagreed on the amount of the loss. The Plaintiff filed suit before either party demanded appraisal. Four months later, QBE filed a motion to compel appraisal of the loss. The court ordered appraisal and stayed the case pending the conclusion of appraisal. The appraisal resulted in a $1,937,989.53 award to the insured. QBE paid Plaintiff $931,596.53, which reflected a reduction of the appraisal award for specific items (hurricane deductible, prior payments, additional fire alarm system costs beyond the ordinance and code policy provision). Plaintiff moved to lift the stay and confirm the appraisal award.
It appears that QBE’s challenge to Plaintiff’s recovery of attorneys’ fees was based upon the insurer’s view that suit was filed in a premature fashion. In short, the claim could have been resolved through appraisal and without litigation. The court did not conduct an in-depth analysis of whether the Plaintiff’s suit was “reasonably necessary” to compel payment by QBE. Rather, it generally concluded that the Plaintiff, as the prevailing party, is entitled to attorneys’ fees. This appears to be in part due to QBE’s three-year delay in challenging the court’s earlier order confirming the appraisal award as appropriate. In addition, after concluding that it would not disturb the appraisal award confirmation, the court ruled that it was equally appropriate to enter final judgment for Plaintiff and that Plaintiff is entitled to attorneys’ fees as the prevailing party. The Court also found that the Plaintiff, as the prevailing party, is entitled to costs pursuant to F.R.C.P. 54(d)(1).
With respect to prejudgment interest, it is not uncommon for an insured to seek interest from the date of loss. The court identified the legal standard under Florida law for the prejudgment interest issue, which requires courts to examine the contract of insurance to “determine the date from which coverage payment is due, as well as when interest is due on the amounts payable.” In this case, the Plaintiff argued that QBE did not pay the entire amount of the appraisal award within the policy-mandated thirty-day deadline, which ran from the date of the filing of an appraisal award, and therefore Plaintiff is entitled to prejudgment interest from the date of loss. The court disagreed. First, the court determined that QBE’s deductions for the hurricane deductible and prior payments did not constitute a failure to pay the “entire” amount of the appraisal award. The court emphasized that the explicit appraisal award language contemplated such deductions. Second, the court rejected the validity of the line of cases relied upon by Plaintiff which hold that prejudgment interest should be calculated from the date of loss when the insurer denied liability for loss under the policy. See, e.g., Independent Fire Ins. Co. v. Lugassy, 593 So. 2d 570 (Fla. Dist. Ct. App. 1992). The court relied upon more recent cases generally finding that the insured was not entitled to prejudgment interest where appraisal award payments are made in a timely manner. See, e.g., Green v. Citizens Prop. Ins. Corp., 59 So.3d 1227, 1228 (Fla. Dist. Ct. App. 2011); Buckley Tower Condo., Inc. v. QBE Ins. Corp., 395 F. App’x 659, 665 (11th Cir. 2010). In so doing, the court recognized the plain language of the policy controlled the award of prejudgment interest, and essentially determined that the Lugassy line of cases is no longer good law.