A Florida federal court recently ruled that third-party beneficiaries under an insurance contract were not entitled to attorney fees under Fla. Stat. § 627.428 where they were not named in the insurance contract. In Conyers et al. v. Balboa Insurance Company, 2012 U.S. Dist. LEXIS 42340 (M.D. Fla., Mar. 26, 2013) (Hernandez Covington, J.), the plaintiffs’ mortgage lender initiated foreclosure proceedings against them. While the foreclosure proceedings were pending, the plaintiffs notified the defendant insurer of alleged sinkhole damage to the property. The relevant policy was a lender-placed hazard insurance policy under which the lender was identified as the named insured and the plaintiffs were identified solely as the “borrowers.” The insurer denied the plaintiffs’ claim and plaintiffs brought suit asserting third-party beneficiary standing to enforce the provisions of the policy.
Thereafter, the insurer moved for summary judgment arguing that (1) due to the foreclosure proceedings, the plaintiffs had been divested of all interest in the property, (2) the plaintiffs were not named insureds or additional insureds under the policy, (3) the plaintiffs had no residual available to them as the borrowers under the subject policy and (4) the plaintiffs were not entitled to attorney fees under Section 627.428, Florida Statutes. The Conyers court rejected the insurer’s first three arguments. First, the court explained that, in Florida, a party’s insurable interest relates to its actual economic interest in the subject property at the time of the loss and, therefore, the subsequent foreclosure proceeding did not extinguish such an interest unless the underlying debt was discharged in full. Second, the court held that the plaintiffs had standing to proceed against the insurer under a third-party beneficiary theory because, under Florida law, an insurance company’s promise to pay the extent of a loss may be enforced by a third-party beneficiary even if he or she possesses no policy in his or her name. Third, the court held that, given the plaintiffs’ third-party beneficiary theory, the insurer’s residual amounts argument was inapplicable.
The Conyers court next considered whether the plaintiffs were entitled to attorney fees under Section 627.428, Florida Statutes. Section 627.428 provides, in relevant part, as follows:
Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court . . . shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.
In granting the insurer’s motion for summary judgment on the attorney fees issue, the court strictly construed Section 627.428 and concluded that only a named insured, an omnibus insured, a named beneficiary or an express assignee of an insured’s contractual insurance rights may receive attorney fees under the statute. In reaching this decision, the court considered disparate Florida case law regarding whether the entitlement to attorney fees under Section 627.428 can be decided at the summary judgment stage. Compare Fawkes v. Balboa Ins. Co., 2012 U.S. Dist. LEXIS 20715 (M.D. Fla. Feb. 17, 2012) (declining to rule on issue of entitlement of attorney fees at summary judgment stage); Kelly v. Balboa Ins. Co., 2012 U.S. Dist. LEXIS 86463 (M.D. Fla. May 29, 2012) (declining to award attorney fees to third-party beneficiary plaintiff seeking to enforce promise of insurance company to pay mortgagee); State Farm v. Kambara, 667 So. 2d 831, 833 (Fla. 4th DCA 1996) (concluding that claimant under medical payment coverage party could be third-party beneficiary for purpose of standing and “omnibus insured” for purpose of entitlement to attorney fees under section 627.428). The court found the Fawkes and Kambara cases distinguishable from the facts before it because the subject policy: (1) did not provide the plaintiffs with any direct benefit of coverage; (2) did not contain the equivalent of medical payment provisions and (3) did not contemplate any direct payment to the borrower. Consequently, although the plaintiffs had standing as third-party beneficiaries, they were not entitled to attorney fees under Section 627.428.