A federal court in Florida held that an insured was entitled to attorneys’ fees and costs incurred in defending a declaratory judgment action brought by its insurer even when the insurer eventually settled the underlying lawsuit in favor of the insured. Zurich American Insurance Co. v. Sunshine Freight Carriers, Inc. and Raquel Lizaola, 2016 WL 374932 (M.D. Fla. Feb. 1, 2016).

The underlying lawsuit arose out of an automobile accident caused by the insured’s employee or independent contractor. The insurer defended the insured under a reservation of rights and filed a declaratory judgment action to resolve the coverage issues. The insured filed a counterclaim for breach of contract for failing to provide an unqualified defense in the underlying suit and sought attorneys’ fees pursuant to Florida Statutes. Following the settlement of the underlying lawsuit, the insurer moved to dismiss the declaratory judgment action as moot. The insured filed a motion seeking attorneys’ fees and costs.

The insurer argued that the entire case, including the insured’s counterclaim, should be dismissed as moot; the insured argued that the underlying settlement constituted a confession of judgment by the insurer entitling the insured to attorneys’ fees and costs. The district court found, under Florida law, that the settlement of a third-party lawsuit and dismissal of the related declaratory judgment action as moot constitutes a confession of judgment by an insurer entitling the insured to attorneys’ fees under Florida Statutes.

The court found that the dismissal of the declaratory judgment suit as moot does not prevent the court from considering collateral matters, such as the insured’s fee claim. The court granted the insurer’s motion to dismiss and granted the insured’s motion for attorneys’ fees and costs.