Mohnkern v. Professional Insurance

MARTIN, J., delivered the opinion of the court, in which JORDAN, D.J., joined. BATCHELDER, J. (pp. 163-69), delivered a separate dissenting opinion.

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

Plaintiff Janet Mohnkern brought suit claiming she was owed attorneys’ fees under Florida law by defendant The Professional Insurance Company. The district court granted the defendant’s motion for summary judgment, and Mohnkern now appeals that decision. We now AFFIRM.

I.

The district court adequately recited the convoluted facts of this case:

This is one of a number of satellite cases spawned by the litigation in Liberte Capital Group et al v. Capwill, Case No. 5:99 CV 818 (N.D.Ohio) and involving the viatical insurance industry.1
It is undisputed that the Professional Insurance Company ... (“PIC”) issued a life insurance policy, Policy No. 2063622M, to Broderick J. Blacknell (“Blacknell”), a Florida resident, in the amount of $100,000. However, Blaek-nell’s health problems and attendant medical bills led to him selling his policy in return for a sum less than the policy limits.
In November 1998, Janet E. Mohn-kern (“Mohnkern”) invested $100,000 with Alpha Capital Group (“Alpha”), which solicited investors for placements in viatical settlements. Mohnkern’s funds were placed in escrow with Viatical Escrow Services, LLC (“VES”) until she was placed [ ] in the Blacknell policy. On March 9, 1999, Mohnkern was assigned the Blacknell policy in exchange for $49,995.00 of her initial $100,000 investment. The remainder of Mohn-kern’s investment was placed in another policy and is not at issue in this litigation. The assignment of the Blacknell policy to Mohnkern was recorded by PIC in April 1999 noting the “Approval of Absolute Assignment with Janet E. Mohnkern.” (Amended Compl., Ex. B.)

In April 1999, Alpha and a company called Liberte Capital Group, another viatical settlement firm, commenced an action in federal district court against their escrow agent, James A. Capwill, alleging that Capwill misappropriated funds it held in escrow for Alpha and Liberte. The district court appointed a Receiver, and instructed the Receiver “to satisfy the claims of creditors, including investors and other parties, in the order of legal priority....” See Liberte Capital Group, LLC v. Capwill, 99 Fed.Appx. 627, 628-29 (6th *159Cir.2004). The district court expanded the Receiver’s duties on November 9, 1999, “to cover all interests in any and all insurance policies funded by investors which Liberte Capital, LLC or Alpha Capital, LLC contacted, which are or were in the name of James A. Capwill, Capwill & Co., CWN Group or any other name, either as nominee owner or as trustee ... for the purpose of managing and administering insurance policies in which one of the foregoing either is named as owner, beneficiary or Trustee, including, but is not limited to death claims....” It is undisputed that the Blacknell Policy was listed by name, and included, in the district court’s order establishing a Receivership.

The district court summarized the remaining facts as follows:

Blacknell passed away on November 14, 2000. Due to difficulties in ascertaining information about the location of Blacknell’s death, it was not until October 1, 2001, that Alpha’s escrow agent, NorthEast Escrow Services, LLC (“NES”), forwarded the certified death certificate and a copy of the policy assignment to Mohnkern. Approximately ten days later, Mohnkern submitted her claim to PIC on the Blacknell policy. The claim form indicates it was received on October 12, 2001 by Retirement Accounts, Inc., and forwarded to PIC and received by them on November 2, 2001.
In investigating the claim, PIC determined that Mohnkern was not the named beneficiary to the policy which required, in part, that Blacknell’s estate sign off on the claim. By letter dated November 12, 2001, PIC advised Mohn-kern that it needed certain documentation in order to proceed with the processing of her claim. PIC states, and Mohnkern does not dispute, that PIC received the requested documentation from her on November 26, 2001.
By early January 2002, PIC stood ready to pay the policy proceeds to Mohnkern. On January 3, 2002, PIC emailed Mohnkern that it was waiting to hear from NES on the status of the premium payments and wanted clarification from Mohnkern as to whom premium payment refunds were to be returned. On January 4, 2002, PIC received an email from NES and responded to NES as follows:
Hi Lynn,
Thank you for your e-mail. I authorized payment of the policy proceeds to Janet Mohnkern this morning. If you believe this decision is incorrect please let me know as soon as possible. I have not received confirmation yet as to when the check will go out but I’m assuming a few days. I will let Janet Mohnkern know as soon as I receive confirmation. My decision was based on the collateral assignment. The only remaining information I needed from you was on the premium refund. I believe that premiums were paid for a few months following the date of death. Janet Mohnkern believes that the premium refund should go to her, but I wanted to get your agreement on that issue prior to returning premiums to Janet. Do you agree that any excess premium payments should go to Janet Mohnkern and not to NorthEast Escrow Services? Thank you very much for your help with this matter.
Scott Holman
GE Financial Assurance.

Later that same day, NES advised PIC of the following:

Dear Scott:
Have been directed by the Federal Court-appointed Receiver, Mr. William Wuliger to express our concern over the payment of this death bene*160fit. I understand that this death claim has been in the process for many months, but it is Mr. Wuliger’s position that the court must okay the payment of this benefit. Mr. Wuliger is putting a motion before the court today for direction.
Will forward to you, by mail, a letter explaining the situation along with the motion from court appointing Mr. Wuliger the Receiver and NorthEast Escrow Services as the court-appointed escrow agent over Alpha Capital Group. We then ask for your patience. Will forward to you the motion as who is to be paid, as soon as receive it.
Unfortunately, this policy is wrapped up in the receivership (of Alpha Capital Group) and Mrs. Mohn-kern does not know the decision by Mr. Wuliger to allow the court to decide
Thank you.
Lynn Day
Operations.
PIC advised Mohnkern of these developments on January 6, 2002. The Receiver filed his motion on the Blacknell death benefit in the Liberte action on January 7, 2002 and it was approved by the Court on January 10, 2002. In accordance with the directive in the Court order, PIC payed the proceeds from the Blacknell policy to NES, the escrow company utilized by the Receiver and at the Court’s direction, NES placed the monies in a segregated account.
Mohnkern filed this litigation on March 8, 2002, in the Middle District of Florida and it was subsequently transferred to [the Northern District of Ohio] on April 19, 2002. Following unsuccessful settlement discussions, this Court stayed the case sub judice, until Mohn-kern intervened in the Liberte action regarding her contractual rights. Subsequent to a fairness hearing on the method of distribution regarding the Alpha investors, Mohnkern’s motion for release and distribution of the Blacknell proceeds was dismissed. On Appeal, the Sixth Circuit reversed and remanded “for a hearing as to the ownership of the Blacknell Policy proceeds, consistent with Mohnkern’s due process rights.” Liberte Capital Group, LLC v. Capwill, 421 F.3d 377, 385 (6th Cir.2005).
After remand, in December 2005, Mohnkern and the Receiver resolved the contractual dispute and Mohnkern received $105,000 in return for settlement of her contractual claim. Upon notification of that settlement, the Court lifted the stay in the present lawsuit. Mohn-kern sets forth four causes of action in her amended complaint as follows: (1) that Defendant’s failure or delay in payment was a violation of Florida statute §§ 624.155 and 627.421; (2) that Defendant acted unreasonably and in violation of Plaintiffs statutory rights; (3) that Defendant has an absolute statutory obligation to pay her [attorneys’] fees and interest in accordance with Florida law; and (4) declaratory relief in regards to Plaintiffs entitlement to [attorneys’] fees and interest under Florida law.

The district court went on to hold that the principal inquiry was whether Mohn-kern was due attorneys’ fees under Florida statute § 627.421. The lower court held that “taking into consideration PIC’s action and responses to the Receiver and Court order, to award attorneys’ fees ..., in this instance, would be to penalize an insurer when it was without power to resolve the conflict and would be contrary to the intent of the statute.”

II.

This Court reviews de novo a district court’s grant of summary iudg*161ment. Hardesty v. Hamburg Twp., 461 F.3d 646, 650 (6th Cir.2006). Summary judgment is proper where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the district court must construe all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The central issue is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

1. Attorneys’ Fees

Mohnkern argues that because she was forced to litigate in order to receive payment under the Blacknell policy, the statute is automatically triggered, and PIC must pay her attorneys’ fees under the statute. PIC argues that in order for attorneys’ fees to be awarded under § 627.428, the insurer must wrongly deny paying a benefit, causing the insured to resort to litigation. Here, it was the Receiver’s action and the resulting court order that halted PIC from paying the proceeds of the Blacknell policy to Mohnkern. According to PIC, it never denied the benefit and was without power to resolve Mohnkern’s claim.

The Florida statute at issue reads in relevant part that “[u]pon rendition of a judgment ... against an insurer and in favor of any ... named beneficiary under a policy, the trial court ... shall adjudge ... in favor of the ... beneficiary a reasonable sum as fees or compensation for the ... Beneficiary’s attorney....” Fla. Stat. § 627.428. Florida courts have held that a settlement “is the functional equivalent of ... a verdict in favor of. the insured.” Wollard v. Lloyd’s & Cos. Of Lloyds, 439 So.2d 217, 218-19 (Fla.1983). And, as the Eleventh Circuit has recognized, an insured may recover attorneys’ fees under § 627.428 when reaching a settlement. See United States v. Pepper’s Steel & Alloys, Inc., 289 F.3d 741, 742 (11th Cir.2002).

The issue we must decide is simple: does the Florida statute automatically award attorneys’ fees upon a successful outcome by the beneficiary/insured? Or does the statute require the insurer to have wrongfully caused the insured/beneficiary to resort to litigation before attorneys’ fees can be awarded?

The purpose behind § 627.428 is to place the insured or beneficiary in the place she would have been if the carrier had seasonably paid the claim or benefits without causing the payee to engage counsel and incur attorneys’ fees. As the Florida Supreme Court said in Ins. Co. of N. Am. v. Lexow, 602 So.2d 528, 531 (Fla.1992):

Florida courts have consistently held that the purpose of section 627.428 and its predecessor is to discourage the contesting of valid claims against insurance companies and to reimburse successful insureds for their [attorneys’] fees when they are compelled to defend or sue to enforce their insurance contracts. Clay v. Prudential Ins. Co. of America, 617 So.2d 433, 436 (Fla.App.Ct.1993).

The district court correctly relied on Government Employees Ins. Co. (GEICO) v. Battaglia, 503 So.2d 358, 360 (Fla.1987).2 *162The Battaglia court held that GEICO could not be penalized for a trial court’s order staying arbitration that had the effect of delaying the payment of Battaglia’s claim, and causing Battaglia to resort to litigation. The Florida court stated that “[t]he purpose of section 627.428 is to penalize a carrier for wrongfully causing its insured to resort to litigation to resolve a conflict when it was reasonably within the carrier’s power to do so. When the claim is one that the carrier reasonably can expect to be resolved by a court, rather than by itself, then section 627.428 does not generate a punitive fee.” 503 So.2d at 360 (internal citations omitted).

The facts show that Mohnkern was compelled to sue to enforce her rights under the Blacknell policy, thereby fitting within the language of the statute. However, PIC did not contest her valid claim, nor did it ever truly deny her claim. PIC acted pursuant to a court order when it paid the Blacknell proceeds into the Receiver’s escrow account instead of to Mohnkern. PIC never wrongfully caused Mohnkern to resort to litigation, rather PIC was forced to abide by the district court’s order. If PIC had refused to follow the district court’s order and paid Mohnkern instead of the receiver, it would have risked being held in contempt by the district court. It was the Receiver and the district court which compelled Mohnkern to intervene in the Liberte action to assert her contractual rights under the Blacknell policy. And under Battaglia, because PIC was without power to resolve Mohnkern’s claim in the face of the district court’s order, § 627.428 does not apply. Id. Accordingly, we AFFIRM the district court’s grant of PIC’s motion for summary judgment.

2. Statutory Interest

Mohnkern also argues the district court erred in denying her claim for interest under Florida Statute § 627.4615. Even though Mohnkern raised it in her motion for summary judgment, the district court did not address her claim for interest in its order granting PIC summary judgment.

Mohnkern argues that under § 627.4615,3 where a beneficiary is ulti*163mately determined to be entitled to insurance policy proceeds, the insurance carrier is statutorily liable for interest from the date the insurer receives written due proof of the death of the insured persons. Here, Mohnkern argues she was entitled to interest from November 2, 2001, through the date she received her settlement on December 5, 2005, a period of four years and one month. According to the statute, she was entitled to an annual interest rate of at least 8 percent.

PIC argues that it paid the proceeds of the Blacknell policy, along with the applicable interest under § 627.4615, to the Receiver. Those funds were kept in a segregated interest-bearing account by the escrow agent. Yet, as PIC points out, Mohnkern received $105,000 in her settlement with the receiver, which apparently represents only $5,000 in interest. PIC states that it paid over $8,600 in interest to the Receiver, not including the interest garnered in the interest-bearing account. According to PIC, because it paid the applicable interest under the statute, it is not liable for additional interest simply because Mohnkern was not able to recover more money from the Receiver.

We find that PIC’s argument has the most merit. It paid the policy proceeds plus statutory interest to the Receiver pursuant to a valid court order. It is not clear what else PIC could have done. To compel them to pay interest again would be penalizing them for following a court order, and making them pay double interest on the death benefit. Mohnkern cites no cases, and we do not find any, that would require PIC to pay interest after it abided by a court order and paid the benefit plus interest to the Receiver. All of the cases relied on by Mohnkern involve the denial and non-payment of a death benefit. Here, the benefit was paid, just not to Mohnkern. The fact that Mohnkern was then unable to recoup all of the interest paid by PIC was not due to any wrongful denial of benefit by PIC. Accordingly, the district court’s denial of Mohnkern’s claim for interest under § 627.4615 is AFFIRMED.

III.

Based on the foregoing, we AFFIRM the district court’s denial of Mohnkern’s motion for partial summary judgment and grant of PIC’s motion for summary judgment.

. Generally, a viatical settlement is the sale of a life insurance policy by the policy owner before the policy matures. Such a sale, usually at a price discounted from the face amount of the policy but in excess of the premiums paid or current cash surrender value, provides the seller an immediate cash settlement. And the buyer is entitled to the death benefit upon the death of the original policy owner.

. As the district court accurately pointed out, Florida courts have denied attorneys' fees in numerous situations where an insured/beneficiary was ultimately successful in litigating against an insurance company:

*162[Attorneys’] fees have ... been denied in instances where the initial denial of claim was based upon erroneous information provided by the insured. Liberty National Life Ins. Co. v. Bailey, 944 So.2d 1028, 1030 (Fla.2006) (rejecting imposition of strict liability under 627.428 where a valid claim is not submitted). Where the insurer had paid over $1 million dollars in claims, was in the process of adjusting remaining claims and delays in payments were due to insured's failure to provide timely information with supporting documentation, the insured was not entitled to [attorneys’] fees absent of showing of incorrectly denied benefits. Tristar Lodging v. Arch Speciality Insurance Co., 434 F.Supp.2d 1286, 1300 (M.D.Fla.2006) (noting difference between existence of a bona fide dispute and mere possibility of a dispute as crucial in determining whether payments by insured are treated as confessions of judgment), aff'd, 215 Fed.Appx. 879 (11th Cir.2007). Additionally, [attorneys’] fees have been denied where the insurer could not reasonably be expected to resolve factual and legal issues and the conflict was forced into court. Crotts v. Bankers and Shippers Ins. Co. of New York, 476 So.2d 1357, 1359 (Fla.1985) (factual issue involved conflicting claims to insurance proceeds and legal questions revolved around applicability of Florida statute which exempted disability payments from legal process). See also Time Ins. Co. v. Arnold, 319 So.2d 638, 639 (Fla.1975); Equitable Life Assurance Soc.’y of U.S. v. Nichols, 84 So.2d 500, 502 (Fla.1956) (under predecessor statute no [attorneys'] fees absent wrongful conduct by insurer).

. Section 627.4615 Fla. Stat. (2005) provides as follows:

Interest payable on death claim payments:

When a policy provides for payment of its proceeds in a lump sum upon the death of the insured, the payment must include in*163terest, at an annual rate equal to or greater than the Moody's Corporate Bond Yield Average-Monthly Average Corporate as of the day the claim was received, from the date the insurer receives written due proof of death of the insured. If the method of calculating such index is substantially changed from the method of calculation in use on January 1, 1993, the rate must not be less than 8 percent.