SIGNIFICANCE:

A carrier’s payment of an appraisal award after a lawsuit is filed is not an automatic confession of judgment entitling an insured to summary judgment where there is a question of material fact of whether the insured was forced to file suit to recover insurance proceeds.

FACTS:

The insured, Lime Bay Condominium, filed a claim with State Farm after its buildings’ roofs were damaged from a hurricane in October 2005.

The insured got an estimate to replace all the buildings’ roofs and shared it with the carrier. The insured never gave the carrier any documents showing that the roofs actually needed to be replaced. The carrier determined that the roofs needed to be repaired, not replaced, and paid the insured for the roof repairs in September 2006.

In February 2007, the insured filed a Civil Remedy Notice (CRN). The carrier then demanded appraisal pursuant to the Policy. Instead of proceeding to appraisal, the insured requested proof that the carrier had complied with the notice of mediation requirements of § 627.7015(2). The insured argued that the notice of their right to mediation was not timely because the notice was sent in March 2006, 5 months after the claim was filed.

The insured contended that the carrier knew of the dispute of whether the roofs needed to be repaired or replaced shortly after the claim was made and therefore the notice of mediation should have been sent then, not 5 months later. The insured contended that the carrier knew of the dispute because it kept changing the amount of its estimates, the carrier never responded to the insured’s request for the names of contractors that would do the repairs at the price estimated by the carrier, and the deposition testimony of the carrier’s employee showed there was a dispute. The carrier contended that it was not aware of any dispute until the CRN was filed.

Less than a month later, on March 7, 2007, without participating in the appraisal process, the insured sued the carrier for breach of contract for failing to replace the roof.

On the carrier’s motion, the trial court abated the litigation and compelled appraisal. After appraisal, the carrier made a supplemental payment of $608,141.41 to the insured. This represented the appraisal award, minus the prior payment and minus the deductible.

The insured filed a motion for final judgment and attorneys’ fees on the basis that the carrier’s payment of the appraisal award after suit was filed was a confession of judgment entitling the insured to a judgment as a matter of law. The carrier filed an affidavit providing that it complied with the mediation notification requirements in § 627.7015(2) by notifying the insured of its right to mediate the claim in correspondence on March 2006 and May 2006.

The trial court found that the carrier did not prove it notified the insured of its right to mediate in compliance with § 627.7015. The trial court held that the carrier’s voluntary payment of the appraisal award after the lawsuit constituted a confession of judgment and the court entered final summary judgment in favor of insured and awarded attorneys’ fees.

ISSUE:

Was the insured forced to file suit to obtain policy benefits and to resolve the dispute of whether repair or replacement of the buildings’ roofs were needed?

ANALYSIS:

Subsection 627.7015(7) provides that an insured is not required to participate in any contractual appraisal unless the carrier notifies the policyholder of its right to participate in the mediation program, in compliance with subsection 627.7015(2). The notice requirement does not ripen until the carrier is put on notice that there is a dispute relating to a material issue of fact (e.g. replacement or repair of the roofs). See 627.7015(9).

The question of whether a mediation notice was timely must be resolved before determining whether the insured was forced to file suit and whether there was a confession of judgment as a matter of law.

When an insured uses the confession of judgment doctrine, the issue is whether the insured was forced to litigate to receive insurance benefits, not whether the carrier paid insurance benefits after the lawsuit was filed. In the context of appraisal, the timing of the appraisal request (whether before or after suit) does not determine whether or not the insured has a right to fees and a carrier’s payment of an appraisal award after a lawsuit is not an automatic confession of judgment.

Here, there was a dispute of material fact as to when the carrier was put on notice of the dispute regarding the need for replacement, rather than repair. This led to a question of whether the notice of mediation letter sent 5 months after the claim was timely under subsection 627.7015(2). Thus a question of material fact of whether the insured was forced to file suit to recover insurance proceeds existed. Because of the issue of material fact, the Court reversed summary judgment for the insured and remanded the case for evidentiary findings.