Florida is a hotbed for insurance claims, from run-of-the mill auto accidents to pervasive construction defects to post-hurricane business interruptions, and everything in between. Insurance companies are likely to deny many of those claims—whether or not that denial is proper—hoping that their policyholders will be unwilling to spend the time and money required to demonstrate coverage. But with its new decision in Johnson v. Omega Insurance Company, the Florida Supreme Court reminds policyholders that they have a powerful tool against improper denials of coverage—the awarding of attorney’s fees.
The policyholder in Johnson filed a claim under her homeowners’ insurance to recover damages resulting from a sinkhole, but her insurer denied coverage. The policyholder retained a lawyer and an expert, and filed suit against the insurer. In the face of competing expert reports, the insurer requested a neutral evaluation process and a stay of litigation. As part of the neutral evaluation, another expert agreed that the damage was caused by a sinkhole. The insurer then finally admitted that the policyholder was entitled to coverage.
Based on the insurer’s admission, the policyholder was awarded attorney’s fees and costs under Section 627.428, Florida Statutes. The insurer argued that a policyholder can only recover attorney’s fees if he or she proves a “wrongful denial” by the insurer—meaning an improper denial that rises to the level of bad faith. But the Florida Supreme Court made it “abundantly clear” that a “wrongful” denial of benefits simply means an incorrect denial. In other words, a policyholder is not required to prove bad faith to recover attorney’s fees.
In some ways, the Johnson decision is just a straightforward application of Section 627.428 and existing Florida law. But the decision also has much broader implications. The award of fees did not take place after a trial. It took place following alternative dispute resolution proceedings and the insurer’s admission of coverage. The court observed that the intent of the statute is to “make an already financially burdened insured whole again, and to also discourage insurance companies from withholding benefits on valid claims.” Therefore, the statute applies to any fees incurred by the policyholder, from the filing of a complaint through the insurer’s payment of a previously denied claim, whether the insurer pays voluntarily or under a judgment. The statute is also broad enough to encompass expert fees and other costs related to the coverage dispute. “Without this approach, we would leave the insured to foot the bill not only for attorney’s fees, but also for experts to overcome the denial, which would render insurance payments insufficient to cover the loss.”
While denials of coverage are par for the course, insurers should think twice about improper denials in Florida. And because Florida provides policyholders an avenue to actually be made whole for a loss, they should not hesitate to vindicate their rights against an improper denial.