A Florida appellate court recently held that an insured’s decision to file a lawsuit without first providing a sinkhole activity report to its insurer precluded recovery of attorneys’ fees when the insurer eventually accepted coverage after receiving the report in discovery. Omega Ins. Co. v. Johnson, 2014 WL 4375189 (Fla. 5th DCA Sept. 5, 2014).

An insured made a claim under his homeowners’ policy for sinkhole damage. As per Florida statutes, if an admitted insurance carrier engages a professional engineer or geologist to render a report regarding the cause of damage in a sinkhole loss claim, the report shall be presumed correct. The insurer commissioned a professional engineer and geology firm to conduct testing and issue a report relating to the insured’s sinkhole loss claim. The report concluded that sinkhole activity was not a cause of the damage to the insured’s property. Based on the report, the insurer denied the claim. The insured retained its own professional engineer, concluding that sinkhole activity was a cause of damage to the insured’s property. The insured, however, did not provide this report to the insurer, but instead filed a lawsuit against the insurer for breach of contract. During discovery, the insured revealed the report for the first time. After a neutral evaluation of the conflicting reports, the insurer accepted coverage and tendered policy benefits. The insured filed a motion for confession of judgment and attorneys’ fees. The trial court grated the motion, concluding that the insurer confessed judgment when it paid the claim, thus rendering it liable for attorneys’ fees under Florida law. The insurer appealed.

The appellate court reversed and remanded. The appellate court held that, while a wrongful or unreasonable denial of benefits that forces the insured to file a lawsuit may lead to an attorneys’ fees award under Florida law, the insurer did not unreasonably deny the claim by relying on its presumptively-correct expert report. The appellate court noted that the insured’s decision to file a lawsuit, rather than present its report to the insurer or even notify the insurer that it disagreed with the insurer’s report, precluded an award of attorneys’ fees.