State Farm Florida Insurance Company v. Lime Bay Condominium, Inc.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

STATE FARM FLORIDA INSURANCE COMPANY,
Appellant,

v.

LIME BAY CONDOMINIUM, INC.,
Appellee.

No. 4D13-4802

[ November 18, 2015 ]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit;
Thomas Lynch, IV, Judge; L.T. Case No. 07-005044 CACE (05).

Elizabeth K. Russo of Russo Appellate Firm, P.A., Miami, and Green,
Ackerman & Frost, P.A., Boca Raton, for appellant.

Michael O. Colgan of Katzman Garfinkel, Maitland, for appellee.

BOORAS, TED, Associate Judge.

State Farm Florida Insurance Company (“State Farm”) appeals the final
summary judgment entered in favor of Lime Bay Condominium, Inc. (“Lime
Bay”) in this breach of contract action. We reverse because a genuine
issue of material fact remains as to whether Lime Bay was forced to file
the breach of contract suit.

In October 2005, as a result of Hurricane Wilma, Lime Bay’s
condominiums sustained roof damage and Lime Bay filed a claim with
State Farm. During the loss adjustment process, Lime Bay obtained a
proposal to replace all the condominium buildings’ roofs for approximately
$1.5 million. However, Lime Bay never provided State Farm with any
evidence that the roofs needed to be replaced, only an estimate for
replacement. After several inspections, State Farm determined that the
roofs in question needed to be repaired, not replaced. In September 2006,
after making adjustments for the policy deductible, State Farm paid Lime
Bay $6,940.46 for the roof repairs.

On February 9, 2007, Lime Bay filed a Civil Remedy Notice alerting
State Farm that it intended to file suit. State Farm responded with a
demand for an appraisal pursuant to the appraisal provision in the
insurance contract. Lime Bay responded that it would not participate in
the appraisal process until State Farm provided proof of compliance with
the mediation notification requirements of section 627.7015(2), Florida
Statutes (2012). Section 627.7015(7) provides that the insured is not
required to participate in the appraisal process until the insurer complies
with subsection (2). On March 7, 2007, Lime Bay filed a breach of contract
action against State Farm without first participating in the appraisal
process.

On State Farm’s motion, the trial court ordered the case abated pending
the completion of appraisal. The appraiser issued an award in the amount
of approximately $1.1 million, before deductible. After applying
deductibles and the previous payment, State Farm paid Lime Bay
$608,141.41.

Lime Bay filed a motion to confirm the appraisal award and a motion
for final judgment and attorney’s fees. Lime Bay argued that State Farm’s
payment of the appraisal award after Lime Bay filed suit was a confession
of judgment. State Farm filed a motion for summary judgment. State
Farm argued that Lime Bay was not entitled to a confirmation of the
appraisal award, because the claim had been fully resolved through the
parties’ contractual appraisal process and State Farm had paid the
appraisal award. Therefore, State Farm did not breach the contract.

The trial court denied State Farm’s motion and granted Lime Bay’s
motion. The court found that State Farm failed to prove that it complied
with the mediation notification requirements of section 627.7015 and that
State Farm’s voluntary payment after Lime Bay filed suit was a confession
of judgment as a matter of law.

The standard of review for an order granting summary judgment is de
novo. Jaffer v. Chase Home Fin., LLC, 155 So. 3d 1199, 1201 (Fla. 4th
DCA 2015). “An appellate court must examine the record in the light most
favorable to the non-moving party.” Wolf v. Sam’s E., Inc., 132 So. 3d 305,
307 (Fla. 4th DCA 2014). Summary judgment should be entered only
when there is no genuine issue of material fact. Jaffer, 155 So. 3d at 1201.

To the extent that the trial court’s ruling is based on the interpretation
of a contract, the interpretation is a question of law that an appellate court
will review de novo. Thomas v. Vision I Homeowners Ass’n., 981 So. 2d 1,
2 (Fla. 4th DCA 2007).

In this case, the trial court made a finding that State Farm’s voluntary

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payment of the appraisal award after suit was filed was a confession of
judgment as a matter of law. However, when the insured utilizes the
confession of judgment doctrine, the underlying issue is not when the
insurer paid the claims, but if the insured was forced to litigate in order to
get the insurer to pay the claim. See Clifton v. United Cas. Ins. Co. of Am.,
31 So. 3d 826, 829 (Fla. 2d DCA 2010) (“[T]he confession of judgment rule
will operate only to penalize an insurance company for wrongfully causing
its insured to resort to litigation in order to resolve a conflict with its
insurer when it was within the company’s power to resolve it.”); State Farm
Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 398 (Fla. 5th DCA 2007) (“[C]ourts
generally do not apply the [confession of judgment] doctrine where the
insureds were not forced to sue to receive benefits; applying the doctrine
would encourage unnecessary litigation by rewarding a race to the
courthouse for attorney’s fees even where the insurer was complying with
its obligations under the policy.”) (citing Basik Exps. & Imps., Inc. v.
Preferred Nat’l. Ins. Co., 911 So. 2d 291, 294 (Fla. 4th DCA 2005)).

Similarly, when an insured moves for attorney’s fees, the underlying
issue is whether the suit was filed for a legitimate purpose, and whether
the filing acted as a necessary catalyst to resolve the dispute and force the
insurer to satisfy its obligations under the insurance contract. See Lewis
v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1082 (Fla. 4th DCA
2009) (“Florida’s cases have uniformly held that a section 627.428
attorney’s fee award may be 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.”); Travelers
Indem. Ins Co. of Ill. v. Meadows MRI, LLP, 900 So. 2d 676 (Fla. 4th DCA
2005) (finding that the insured was entitled to attorney’s fees because it
had to hire counsel and eventually resort to formal legal action to resolve
the claim); Goff v. State Farm Fla. Ins. Co., 999 So. 2d 684, 688 (Fla. 2d
DCA 2008) (holding that the insureds were entitled to section 627.428
attorney’s fees because their lawsuit forced State Farm to request an
appraisal and to pay significant additional amounts). However, the timing
of the request for appraisal is not determinative of the insured’s right to
fees. Lewis, 13 So. 3d at 1082.

On appeal, State Farm argues that Lime Bay breached the insurance
contract by filing suit after State Farm invoked the appraisal provision of
the contract policy. The appraisal provision states in pertinent part:

SECTION I

3
 CONDITIONS

4. Appraisal. If we and you disagree on the value of the
property or the amount of loss, either may make written
demand for an appraisal of the loss. In this event, each party
will select a competent and impartial appraiser. Each will
notify the other of the selected appraiser’s identity with 20
days after receipt of the written demand for appraisal.

....

6. Legal Action Against Us. No one may bring legal action
against us under this insurance unless:
a. there has been full compliance with all of the terms of
this insurance . . . .

State Farm argues that the appraisal provision and the section
explaining the prerequisites for legal action should be interpreted together.
Specifically, once State Farm made a written demand for an appraisal,
Lime Bay was required to participate in the appraisal process before filing
suit. We disagree with this interpretation of the contract. The contract
does not clearly require the parties to complete appraisal as a condition
precedent to filing suit.

In the trial court and on appeal, Lime Bay argues that it was not
required to participate in the appraisal process because State Farm failed
to prove that it notified Lime Bay of its right to mediate. As previously
noted, subsection 627.7015(7) states that the insured is not required to
participate in any contractual appraisal process unless the insurer
complies with subsection 627.7015(2) and notifies the insured of its right
to mediation. When State Farm invoked its right to appraisal, Lime Bay
requested proof of State Farm’s compliance with section 627.7015’s,
mediation notification requirements. State Farm filed an affidavit stating
that it complied with subsection 627.7015(2)’s requirements by notifying
Lime Bay of its right to mediate the claim in two different letters in March
and May of 2006.

Lime Bay argues that the notice of mediation contained in these letters
was untimely because subsection 627.7015(2) states that the insurer shall
notify the claimants of their right to participate in the mediation program,
“[a]t the time a first-party claim within the scope of the section is filed.”
Since State Farm’s notice of the right to mediate was not sent until March
2006, five months after Lime Bay filed its claim, Lime Bay argues that
State Farm did not prove that it fully complied with subsection

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627.7015(2). We agree. Despite the March and May 2006 letters, notifying
Lime Bay of its right to mediate any dispute, State Farm did not fully
comply with section 627.7015(2). State Farm failed to prove that it
provided Lime Bay with notification of its right to mediate, at the time Lime
Bay filed its claim.

Along with finding that State Farm did not comply with section
627.7015(2), the trial court found that State Farm’s voluntary payment of
the appraisal award was a confession of judgment. We disagree. Based
on the case law, an insurer’s payment of appraisal award is only a
confession of judgment only if the insured was forced to file the lawsuit to
resolve the claim. See Lorenzo, 969 So. 2d at 398; Clifton, 31 So. 3d at
829.

In Clifton, the Second District held that there was a genuine issue of
material fact as to whether the insured was forced to file suit. 31 So. 3d
at 831. The court explained that the insured generally will be unable to
show that he or she was forced to file suit, if the insurer was not on notice
that the claim or payment was disputed. Id. In that case, the insured
submitted an affidavit asserting that he repeatedly told the insurer that he
was dissatisfied with the claim and the insurer ignored his request for
further payment. The insurer asserted without supporting evidence that
it was wholly unaware of any dispute with the insured until suit was filed.

In Travelers, this court found that, after twenty-two months without
resolution of the claim, the insured was forced to resort to the formal legal
process. 900 So. 2d at 678-79. Travelers took five months to issue
payment based on its own estimates. Id. at 677. There still existed a
significant difference between the two parties’ estimates. After twenty-two
months without a resolution of the claim, Travelers demanded that the
dispute be resolved pursuant to the appraisal provision of the insurance
policy. Before the appraisal process began, the insured sent Travelers a
letter inquiring about the procedures of the appraisal process and about
attorney’s fees. The insured stated that it would file suit for declaratory
judgment if Travelers did not provide a prompt response. When Travelers
did not respond to the inquiry, the insured filed suit. At the time the
insured filed suit, the parties had already begun the appraisal process.

The appraisal resulted in Travelers owing the insured a significant
balance, which Travelers paid. Id. at 677. The insured filed a motion to
confirm the appraisal award and for entry of judgment thereon. The
insured also filed a motion for attorney’s fees. The trial court granted both
motions. Id. at 678. Travelers appealed the award of attorney’s fees. Id.
at 676. This court found that the insured’s involvement of the formal

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judicial system was not unnecessary. Id. at 678. The insured had to hire
counsel throughout the appraisal process. Moreover, Travelers’
participation in the appraisal was most likely affected by the insured’s
representation by counsel and the threat of a pending suit. Id. at 679.

Here, Lime Bay argues that State Farm’s failure to resolve the claim for
eighteen months before Lime Bay filed suit was a breach of contract. State
Farm argues that it properly followed the claims process. The estimates
attached to the March, May, and September 2006 State Farm letters
suggest that State Farm conducted multiple estimates during that time
period. In the May 2006 letter, State Farm’s adjuster, Andy Beale, also
referenced a December 2005 estimate. State Farm submitted an affidavit
from another adjuster, Ana Carrillo, asserting that it was unaware that
Lime Bay disagreed with State Farm’s estimate of the loss until Lime Bay
filed the Civil Remedy Notice. Ms. Carrillo admitted that Lime Bay
submitted an estimate for $1.5 million roof replacement, but claimed Lime
Bay did not provide any proof that the roof needed to be replaced instead
of repaired.

Based on the record, it is unclear whether State Farm’s multiple
estimates were at the insistence of the Lime Bay representatives, who
disputed the amount of loss. Because there was a question as to whether
State Farm knew that Lime Bay disputed the amount of loss, we find that
there is a genuine issue of material fact as to whether Lime Bay was forced
to file suit.

Since we are remanding this case for evidentiary findings, we must
address the trial court’s protective order entered against State Farm’s
discovery requests. The ruling on a motion for protective order is reviewed
for abuse of discretion. See Katzman v. Rediron Fabrication, Inc., 76 So.
3d 1060, 1065 (Fla. 4th DCA 2011). Pursuant to Florida Rule of Civil
Procedure 1.280(c) and upon a motion by a party “from whom discovery is
sought, and for good cause shown, the court in which the action is pending
may make any order to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense that justice
requires . . . .”

We hold that the trial court erred by granting Lime Bay’s motion for
protective order against State Farm’s request for production of documents.
As previously discussed, State Farm’s voluntary payment of the appraisal
award was not an automatic confession of judgment. The issue was
whether Lime Bay was forced to file suit to resolve the dispute with State
Farm. It appears that the court granted Lime Bay’s motion for protective
order on the grounds that State Farm’s payment of the appraisal award

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was automatically a confession of judgment, entitling Lime Bay to a
judgment as a matter of law. In its first request for production, State Farm
requested, among other things, a copy of the communication between Lime
Bay and any public adjuster or contractor hired by Lime Bay. This
information was relevant to the issue of whether Lime Bay continued to
dispute State Farm’s estimate and was forced to file suit to resolve the
claim.

In sum, because there is a genuine issue of fact as to whether Lime Bay
was forced to file suit, we reverse and remand for further proceedings.

Reversed and Remanded.

CIKLIN, C.J., and CONNER, J., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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