On April 15, 2015, the Florida Supreme Court accepted review of Omega Insurance Co. v. Johnson, No. 5D13-1701, 2014 WL 4375189 (Fla. 5th DCA Sept. 5, 2014), which found that an insured was not entitled to an award of attorneys’ fees under section 627.428, Florida Statutes and the confession of judgment doctrine based on an insurer’s post-suit tender of policy benefits for a sinkhole claim after the insurer initially denied the claim. See Johnson v. Omega Ins. Co., No. SC14-2124.
Omega Insurance Co. issued to Kathy Johnson a homeowner’s policy that contained a provision for sinkhole damage coverage. When Johnson noticed structural damage to her home, she filed an insurance claim with Omega, asserting that the damage was caused by sinkhole activity on the property. Omega investigated the claim in accordance with chapter 627 by retaining a professional engineering and geology firm to conduct testing. The firm’s report concluded that sinkhole activity was not a cause of the damage to Johnson’s property. Based on the report, Omega denied Johnson’s claim. Instead of availing herself of the right to participate in a neutral evaluation program, Johnson retained a civil engineering firm to evaluate the cause of the damage to her home. Johnson’s firm found that sinkhole activity did cause the structural damage.
Johnson then filed suit against Omega for failing to pay her policy benefits. Upon motion by Omega, the trial court stayed the litigation to allow a neutral evaluation to take place. The neutral evaluation report agreed with the report issued by Johnson’s firm. Upon receipt of the report, Omega paid the policy benefits. Johnson then moved for an award of attorneys’ fees under section 627.428, Florida Statutes which provides that “[u]pon the rendition of a judgment or decree . . . against an insurer and in favor of any named . . . insured . . . under a policy or contract executed by the insurer, the trial court . . . shall” award the insured its reasonable attorneys’ fees. Based upon the confession of judgment doctrine, which equates an insurer’s tender of policy benefits or a settlement agreement with a “judgment” under § 627.428, the trial court granted the motion.
Omega appealed and the Fifth District reversed, finding that Omega’s initial denial was not wrongful or unreasonable. The Court’s conclusion was buttressed by several facts: (1) Omega complied with its statutory obligations under chapter 627 by retaining an engineer to identify the cause of loss and issue a report; (2) The report, which is presumed correct by statute, found that sinkhole activity was not the cause of the damage; (3) Before filing suit, Johnson failed to present her countervailing report to Omega, failed to at least notify Omega that she disagreed with its report or failed to further attempt to discuss her claim with Omega.
This article will be updated once the Court decides this case.