Life Changing Ministries, Inc. v. Canopius US Insurance, Inc.
Filing
25
ORDER granting 14 Plaintiff's Motion for Partial Summary Judgment; denying 18 Defendant's Motion for Judgment. Plaintiff is entitled to partial summary judgment on the issue of liability. Signed by Judge James S. Moody, Jr. on 11/28/2016. (LN)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
OCALA DIVISION
LIFE CHANGING MINISTRIES, INC.,
Plaintiff,
v.
Case No: 5:15-cv-59-Oc-30PRL
CANOPIUS US INSURANCE, INC.,
Defendant.
ORDER
Defendant, Canopius US Insurance, Inc., relying on an engineering report, denied
Plaintiff Life Changing Ministries, Inc.’s (“LCM”) sinkhole claim. LCM sued and invoked
neutral evaluation. After the neutral evaluator found sinkhole damage, Canopius paid the
claim. Now both parties seek summary judgment. Because Florida law holds an insurer
confesses judgment when it pays a claim after suit is filed, LCM’s motion (Doc. 14) must
be granted. And because an insurer who makes an incorrect claim determination is liable
for a well-pleaded claim for attorney’s fees, Canopius’s motion (Doc. 18) must be denied.
FACTUAL & PROCEDURAL BACKGROUND
On July 2, 2013, LCM reported a sinkhole to Canopius, its surplus lines insurance
carrier. Canopius hired SDII Global to conduct a subsidence investigation. SDII Global
provided a 69-page report, outlining its thorough investigation and concluding there was
no sinkhole damage. On October 29, 2013, Canopius sent a letter to LCM denying the
sinkhole claim based on SDII’s report.
Then nothing happened for more than a year. On October 31, 2014, LCM’s counsel
filed a Civil Remedy Notice of Insurer Violation (the “CRN”) with the Florida Department
of Financial Services. A CRN is a condition precedent to a bad faith action brought
pursuant to section 624.155, Florida Statutes, and an insurer is provided a 60-day safe
harbor period in which to cure the allegations in a CRN. LCM’s CRN, without specifying
how, alleges Canopius failed to conduct an adequate investigation.
On December 9, 2014—39 days after filing the CRN—LCM’s counsel provided a
competing engineering report to Canopius. 1 The 7-page report from Applied Engineering
& Geosciences (“Applied”) was dated August 20, 2014, or more than two months before
LCM’s counsel filed a CRN. Although Applied conducted additional testing in June 2014,
its report noted that the SDII investigation “appeared to be within the standard of care
exercised by most investigators.” Ultimately, Applied concluded that there was sinkhole
activity at LCM’s property.
On December 30, 2014, Canopius responded to the CRN and denied acting in bad
faith. The following day, LCM sued for breach of contract in state court and invoked
neutral evaluation. LCM demanded Canopius pay attorney’s fees pursuant to section
627.428, Florida Statutes. Canopius timely removed this action to federal court, and moved
for a stay pending the results of the neutral evaluation. This Court granted the stay.
1
There is a non-material discrepancy between the date the Applied report was provided to
Canopius. The cover letter in both LCM and Canopius’s materials are dated December 2, 2014
(Docs. 14-2 and 18-8), but a fax time stamp on the cover letter Canopius provided shows a receipt
date of December 9, 2014. (Doc. 18-8).
2
Florida’s Department of Financial Services appointed Deborah Veasey, P.G., as
neutral evaluator. On September 23, 2015, Ms. Veasey issued her neutral evaluation report,
concluding that sinkhole activity was a contributing factor to the damage at LCM’s
property. Significantly, her reported noted the following:
• Ms. Veasey observed similar damage to the damage SDII reported in September
2013, and noted that “the structure has remained relatively stable since that time.”
• The SDII report “included a typical scope of work meeting the general requirements
of a full sinkhole study,” and Ms. Veasey relied SDII’s data.
• Relying on SDII and Applied’s boring profiles, Ms. Veasey determined there was
sinkhole activity.
• Ms. Veasey’s report included a $30,144.09 replacement cost estimate for abovesurface repairs to Plaintiff’s property, prepared by Paul Davis Restoration.
Canopius, relying on Ms. Veasey’s report, decided to admit coverage and pay
LCM’s claim. On December 29, 2015, Canopius admitted coverage in a letter sent to
LCM’s counsel and counsel for Centerstate Bank of Florida (“Centerstate”), which
acquired LCM’s property in a foreclosure sale. The letter also explained that Canopius was
not subject to Chapter 627 of the Florida Statutes because it is a surplus lines carrier.
On April 15, 2016, Canopius issued a $25,528.91 payment to LCM for the abovesurface damage to the property. Canopius then sent payments totaling $158,458.59 to
Centerstate for sub-surface remediation. After receiving the payment, LCM filed a case
management report on June 6, 2016, re-opening this case. The parties then filed the instant
motions regarding Canopius’s liability and LCM’s entitlement to attorneys’ fees.
3
SUMMARY JUDGMENT STANDARD
Motions for summary judgment should be granted only when “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits,
if any show there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)
(internal quotation marks omitted); Fed. R. Civ. P. 56(c). The existence of some factual
disputes between the litigants will not defeat an otherwise properly supported summary
judgment motion; “the requirement is that there be no genuine issue of material fact.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The substantive law applicable
to the claimed causes of action will identify which facts are material. Id. Throughout this
analysis, the court must examine the evidence in the light most favorable to the nonmovant
and draw all justifiable inferences in its favor. Id. at 255.
Once a party properly makes a summary judgment motion by demonstrating the
absence of a genuine issue of material fact, whether or not accompanied by affidavits, the
nonmoving party must go beyond the pleadings through the use of affidavits, depositions,
answers to interrogatories and admissions on file, and designate specific facts showing that
there is a genuine issue for trial. Celotex, 477 U.S. at 324. The evidence must be
significantly probative to support the claims. Anderson, 477 U.S. at 248–49.
This Court may not decide a genuine factual dispute at the summary judgment stage.
Fernandez v. Bankers Nat’l Life Ins. Co., 906 F.2d 559, 564 (11th Cir. 1990). “[I]f factual
issues are present, the Court must deny the motion and proceed to trial.” Warrior
Tombigbee Transp. Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir. 1983). A dispute
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about a material fact is genuine and summary judgment is inappropriate if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party. Anderson, 477
U.S. at 248; Hoffman v. Allied Corp., 912 F.2d 1379, 1383 (11th Cir.1990). However, there
must exist a conflict in substantial evidence to pose a jury question. Verbraeken v.
Westinghouse Elec. Corp., 881 F.2d 1041, 1045 (11th Cir. 1989).
DISCUSSION
There are two issues before the Court: (1) whether Canopius legally admitted
liability when it paid LCM’s claim following receipt of the neutral evaluator’s report during
litigation, and (2) whether LCM is entitled to collect attorneys’ fees as part of the claim
payment. The answer to both questions is yes, despite this Court’s belief that Canopius did
nothing wrong while handling LCM’s claim.
A. Canopius confessed judgment when it paid LCM’s claim
LCM argues Canopius confessed judgment when it changed course and paid the
sinkhole claim after LCM sued. Canopius, relying on State Farm Florida Ins. Co. v.
Colella, 95 So. 3d 891 (Fla. Dist. Ct. App. 2012), denies it confessed judgment because
LCM was not forced to file suit and failed to establish that Canopius’s engineer was
incorrect. LCM has the better of this argument.
Three days after LCM moved for summary judgment, the Florida Supreme Court in
Johnson v. Omega Ins. Co., 200 So.3d 1207 (Fla. 2016), clarified what constitutes a
confession of judgment. Its clear and unequivocal explanation follows:
Furthermore, it is well settled that the payment of a previously denied claim
following the initiation of an action for recovery, but prior to the issuance of
a final judgment, constitutes the functional equivalent of a confession of
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judgment. See, e.g., Pepper's Steel & Alloys, Inc. v. U.S., 850 So.2d 462, 465
(Fla. 2003) (“[Section 627.428] clearly provides that attorneys' fees shall be
awarded against the insurer when judgment is rendered in favor of an insured.
In Florida, the payment of a settlement claim is the functional equivalent of
a confession of judgment or a verdict in favor of the insured.”) (citation
omitted); Ivey, 774 So.2d at 684–85 (“[W]here an insurer pays policy
proceeds after suit has been filed but before judgment has been rendered, the
payment of the claim constitutes the functional equivalent of a confession of
judgment or verdict in favor of the insured, thereby entitling the insured to
attorney's fees.”); Wollard v. Lloyd's & Cos. of Lloyd's, 439 So.2d 217, 218
(Fla.1983) (“When the insurance company has agreed to settle a disputed
case, it has, in effect, declined to defend its position in the pending suit. Thus,
the payment of the claim is, indeed, the functional equivalent of a confession
of judgment or a verdict in favor of the insured.”); Barreto v. United Servs.
Auto. Ass'n, 82 So.3d 159, 162 (Fla. 4th DCA 2012) (“Here, because the
insurer paid the full amounts claimed only after suit was filed, it essentially
confessed judgment.”) (emphasis supplied); De Leon v. Great Am. Assur.
Co., 78 So.3d 585, 591–92 (Fla. 3d DCA 2011) (“[A]ny success in an action
on an insurance policy, let alone the full payment of the asserted claim,
requires an award of fees.”); Goff v. State Farm Fla. Ins. Co., 999 So.2d 684,
688 (Fla. 2d DCA 2008) (policyholder was entitled to attorney's fees because
the insurer only agreed to grant benefits after the action was filed).
Id. at 1215.
Applying Johnson, the Court has no choice but to conclude Canopius confessed
judgment: (1) Canopius denied LCM’s claim; (2) LCM sued; and (3) Canopius paid LCM’s
claim. Nothing more is required. Canopius’s arguments that LCM was not required to file
suit and that LCM did not prove Canopius’s engineer was incorrect are of no consequence.
LCM’s motion, therefore, must be granted since Canopius confessed judgment.
B. LCM is not barred from collecting attorneys’ fees
Canopius argues LCM is not entitled to attorneys’ fees for two reasons: (1) LCM
pled entitlement to attorneys’ fees under the wrong statute (section 627.428, Florida
Statutes, instead of section 626.9373, Florida Statutes); and (2) Canopius’s claim
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determination was not incorrect. LCM’s response fails to address either issue directly, and,
instead, unhelpfully argues Canopius is estopped from denying (or perhaps waived the
ability to deny that) Chapter 627 applies to it. Neither of Canopius’s arguments are
meritorious, and its motion must be denied.
1. LCM’s pleading the wrong statute does not bar its recovery of fees
The gist of Canopius’s first argument is that LCM did not plead entitlement to fees
under the correct statute and, therefore, is not entitled to fees. Implied in this argument is
the premise that LCM had to plead its entitlement to fees. Canopius’s argument fails
because it rests on this false premise.
Federal procedural law—not Florida substantive law—governs the pleading
requirements of claims for attorneys’ fees. Hilson v. GEICO Gen. Ins. Co., No. 8:11-CV13-MSS-MAP, 2016 WL 3211474, at *2 (M.D. Fla. Mar. 31, 2016). Under the procedural
law of the Eleventh Circuit, a party—even one in a diversity case such as this—need not
plead an entitlement to attorneys’ fees in order to recover them. Capital Asset Research
Corp. v. Finnegan, 216 F.3d 1268, 1270 (11th Cir. 2000); see also Inland Dredging Co. v.
Panama City Port Auth., 406 F. Supp. 2d 1277, 1280 (N.D. Fla. 2005) (explaining, “The
controlling law in this circuit is that, under Rule 54(c), a party may recover attorney's fees
without including in its pleadings a specific demand therefor.”). LCM, therefore, would
have been entitled to recover attorneys’ fees under section 626.9373 regardless of whether
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the statute was referenced in the pleadings. 2 Thus, the Court concludes LCM’s failure to
plead the correct statutory basis of attorneys’ fees is not a bar to its ability to recover fees.
2. Canopius’s claim determination was incorrect under Johnson
Despite having paid the claim, Canopius argues LCM has not shown that SDII’s
conclusions that there was no sinkhole damage was incorrect. Essentially, Canopius argues
there is an unresolved issue of fact as to whether sinkhole damage exists, which means its
claim determination was not proven incorrect as required by Johnson. 3
Canopius, though, misunderstands the effect of its payment—which was a
confession of judgment. An insurer that confesses judgment, the Florida Supreme Court
explained, is required to pay attorney’s fees. Johnson, 200 So.3d at 1215 (quoting Pepper's
Steel & Alloys, Inc., 850 So.2d at 465; Ivey, 774 So.2d at 684–85; De Leon, 78 So.3d at
591–92; and Goff, 999 So.2d at 688). In this sense, a confession of judgment amounts to
an admission that the insurer’s claim determination was incorrect, triggering an insured’s
entitlement to attorneys’ fees.
The Florida Supreme Court did recognize a narrow exception to this rule based on
Colella, 95 So. 3d 891: attorneys’ fees are not to be awarded to an insured who litigates in
2
Even under Florida procedural law, the Court believes LCM’s failure to plead the correct
statute would not have been a bar since “the specific statutory or contractual basis for a claim for
attorney's fees need not be specifically pled, and ... failure to plead the basis of such a claim will
not result in waiver of the claim.” Caufield v. Cantele, 837 So. 2d 371, 378 (Fla. 2002).
3
Canopius raised this argument in response to LCM’s motion for confession of judgment.
But Canopius misunderstands Johnson, in which the Florida Supreme Court only considered
whether a claim was incorrectly denied in connection to entitlement of attorneys’ fees—not the
confession of judgment doctrine. The Court considers this argument as having been raised in
Canopius’s summary judgment motion.
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bad faith. Johnson, 200 So.3d at 1217–18. This exception, though, was specifically limited
to the facts in Colella. Id. (“[T]here is nothing in Colella to imply that an outcome in favor
of the insurance company should apply beyond those facts.”).
The Court is not persuaded the same exception should be applied here because this
case falls somewhere between the facts in Johnson and Colella. Canopius, by all accounts,
hired an engineer that undertook a rigorous and extensive examination to determine if
sinkhole activity existed. In fact, SDII’s testing was more extensive than either Applied’s
testing or that of the neutral evaluator. Canopius rightfully relied on that report before LCM
sued. As such, Canopius cannot be said to have done an inadequate claim investigation, as
in Johnson, or wrongfully denied LCM’s claim.
On the other hand, LCM has more in common with the plaintiff in Colella than in
Johnson. LCM waited nearly a year after Canopius denied the sinkhole claim to hire its
own engineer. After receiving Applied’s report, LCM filed a CRN against Canopius
without disputing the claim determination or providing Canopius Applied’s report. LCM
accused Canopius of conducting an inadequate claim investigation despite its own engineer
finding SDII’s investigation “to be within the standard of care exercised by most
investigators.” LCM waited until two-third of the CRN’s safe harbor period passed before
providing the Applied report, ensuring Canopius would not have time to reinvestigate
during the safe harbor period. LCM then sued before invoking neutral evaluation—the
purpose of which is to avoid unnecessary litigation, State Farm Florida Ins. Co. v.
Buitrago, 100 So.3d 85, 88 (Fla. Dist. Ct. App. 2012). And litigation here would have been
unnecessary since Canopius paid the claim after getting the neutral evaluator’s report. The
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Court, of course, can take this into account when determining the reasonableness of LCM’s
attorneys’ fees.
While LCM’s conduct is troubling, the Court is not persuaded the facts are similar
enough to Colella to warrant a finding that LCM cannot recover fees. First, LCM allowed
the neutral evaluation process to take place, unlike the plaintiff in Colella. Johnson, 200
So.3d at 1217. Most importantly, and also unlike Colella, the neutral evaluator here
determined there was sinkhole damage, meaning Canopius’s engineer apparently reached
an incorrect conclusion. So while clear that LCM did not handle this case with the utmost
good faith, the Court cannot conclude LCM acted in bad faith like the insured in Colella.
CONCLUSION
Canopius’s payment of LCM’s sinkhole claim after LCM sued was a confession of
judgment. The effect of the confession of judgment is that LCM is entitled to an award of
attorneys’ fees, regardless that LCM pled the wrong statute in its complaint. Thus, despite
doing the investigation required by Florida law and rightfully relying on its engineer’s
report, the Court concludes Canopius confessed judgment and LCM can recover fees.
Accordingly, it is ORDERED AND ADJUDGED that:
1.
Plaintiff’s motion (Doc. 14) is GRANTED.
2.
Plaintiff is entitled to partial summary judgment on the issue of liability.
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3.
Defendant’s motion (Doc. 18) is DENIED.
DONE and ORDERED in Tampa, Florida, this 28th day of November, 2016.
Copies furnished to:
Counsel/Parties of Record
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