Shane Smith | Property Insurance Coverage Law Blog | June 15, 2019
A recent Florida 4th District Court of Appeal decision, Bryant v. Geovera Specialty Insurance Company,1 addressed the issue of whether an insurance carrier’s payment of an appraisal award above a sublimit constituted a “confession of judgment.”
The purpose of the confession of judgment doctrine, which allows an insured to seek statutory attorney fees, is to prevent insured parties from needing to resort to litigation to collect benefits to which they are entitled under their insurance contracts.
In this case, the insureds suffered damage to their residence due to a pipe leak. Their surplus lines homeowners’ insurance policy from GeoVera Specialty Insurance Company (“GeoVera”) contained an endorsement with a $5,000 sublimit for mold and a $1,000 combined sublimit for a covered loss caused by water seepage or leakage that occurs over a period of 14 days or more. After the loss, the insureds spent $6,600 on emergency water-remediation services. A few weeks later, the insureds reported the loss to their insurance carrier, GeoVera. Two days later, the adjuster inspected the property and issued a repair estimate of $21,372.31, allocating $3,597.11 as subject to the ensuing water loss endorsement and $17,775.20 as subject to the mold endorsement. GeoVera paid the insureds $6,000 due to the policy’s sublimits.
The insureds filed suit against GeoVera asserting three causes of action: (1) breach of contract; (2) petition for appraisal and (3) statutory bad faith in violation of section 624.155, Florida Statutes. The insureds argued the sublimits did not apply. GeoVera moved to stay the claims for breach of contract and petition for appraisal and to abate the bad faith claim. The trial court entered an agreed order, staying the case, pending an appraisal. The order required, in part, that the appraisal award would include an itemization of any damages coming within the leakage sublimit, any damages coming within the mold sublimit, and any covered damages that did not fall within those sublimits.
The appraisal award itemized the following damages: $30,963.62 for “dwelling,” $14,477.99 for “mold” and $6,600 for “EMS.” The appraisal award did not identify any damages subject to the $1,000 leakage sublimit.
GeoVera paid $29,963.62 to the insureds and $6,600 to the water mitigation company for the EMS. The total amount paid was the balance due under the appraisal award after deducting the $6,000 prior payment and $5,000 mold sublimit.
GeoVera filed a motion for summary judgment arguing it was not liable for breach of contract or bad faith, in part, because the insureds never disputed GeoVera’s adjustment of the loss pre-suit. (GeoVera also sought a summary judgment ruling that the insureds failed to comply with GeoVera’s demand for a sworn proof of loss. That issue will not be addressed in this blog post.)
The court granted final summary judgment in favor of GeoVera. The insureds appealed and argued GeoVera’s payment of the appraisal award constituted a confession that it breached the policy by erroneously invoking the $1,000 leakage sublimit.
The appellate court agreed, holding that GeoVera’s payment of the appraisal award demonstrated an abandonment of its pre-suit coverage position that the claim was subject to the sublimit for long-term water leakage:2
GeoVera’s response to the claim invoked coverage defenses. And there was a pre-suit refusal by the insurer to pay a portion of the claim—that is, any amount of water damage (aside from mold) that exceeded the $ 1,000 leakage sublimit. By invoking the $ 1,000 leakage sublimit, GeoVera raised a coverage issue that only a court could resolve. This coverage issue went beyond a mere dispute about the valuation of the loss, so the insureds could not have simply invoked the policy’s appraisal provision before filing suit.
Because GeoVera invoked the $1,000 leakage sublimit to deny coverage for a portion of the claim, it was of no consequence whether the insureds notified GeoVera pre-suit that they were disputing GeoVera’s coverage position or damage valuation. Once GeoVera incorrectly invoked the $ 1,000 leakage sublimit and notified the insureds that it would not pay any non-mold-related water damage above that amount, GeoVera committed an anticipatory breach of the policy and created an immediate right of action for the insureds, even though GeoVera’s repudiation took place before the time prescribed for the promised performance under the policy’s loss-payment provision. See Peachtree Cas. Ins. Co. v. Walden, 759 So.2d 7, 8 (Fla. 5th DCA 2000) (holding that an insurer’s notice that it would no longer pay benefits constituted an anticipatory breach of its agreement to provide those benefits).
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1 Bryant v. Geovera Specialty Ins. Co., No. 4D18-189, 2019 WL 2017972 (Fla. 4th DCA May 8, 2019).
2 Id. at *5.