sunEthics

Attorney's fee award to insured is not a "covered claim" that FIGA is responsible for, per Florida Supreme Court.  [Added 1/23/12]

    Resolving conflict among District Courts of Appeal, the Florida Supreme Court concluded that an attorney's fee award to an insured under Fla.Stat. sec. 627.428(1) (2008) is not a covered claim under section 631.54(3) that the Florida Insurance Guaranty Association ("FIGA") must pay.

    Insured's house sustained hurricane damage.  Insured filed suit against Insurer to compel an appraisal under the policy.  She later filed a motion to confirm the appraisal award and for an award of attorney's fees pursuant to section 627.428.  Insurer became insolvent, and FIGA ultimately paid the claim.  Relying in part on Florida Ins. Guaranty Ass'n v. Soto, 979 So.2d 964 (Fla. 3d DCA 2008), the trial court ruled that under section 631.57(1) the fee award was a covered claim that existed before Insurer's insolvency and thus FIGA was responsible for paying it.  On appeal the Second DCA reversed and certified conflict with Soto.  Florida Ins. Guaranty Ass'n v. Petty, 44 So.3d 1191 (Fla. 2d DCA 2010).

    The Florida Supreme Court approved Petty and disapproved Soto.  The purpose of the fee award provision of section 627.428 is to discourage insurers from contesting legitimate claims and to reimburse insureds for the attorney's fees that they incur when they must enforce their policies in court against the insurer.  Under section 631.57(1)(a), FIGA is "obligated to the extent of covered claims existing" prior to an insurer's insolvency.  Reviewing the statutory definition of "covered claim," the Court stated that "a covered claim must meet two distinct requirements:  (1) it must arise, or originate, from an insurance policy and (2) it must be within the coverage of, or be included within the risks taken on and losses protected against in, an insurance policy."  (Footnote omitted.)

    The Court pointed out that Insured's "underlying policy does not expressly provide coverage for her section 627.428(1) fee award."  Furthermore, the Court rejected Insured's contention that the fee award "is implied covered by her underlying policy because Florida law subjects every Florida insurance policy to section 627.428(1)."  Even though section 627.428 is an implicit part of the policy, it is not part of the policy's coverage.  "There is a clear difference between an obligation to pay fees that is imposed by operation of law upon a party due to its behavior under the insurance contract and an obligation imposed upon a party by an express provision for which the party contracted.  Section 627.428(1) imposes the obligation to pay a fee award upon an insurer that has wrongfully contested an insured's valid claim.  It does not alter the coverage provisions of the insurance contract itself."  (Footnote omitted.)  Petty v. Florida Ins. Guaranty Ass'n, __ So.3d ___ (Fla., No. SC10-2097, 1/19/2012).

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