10 Fla. L. Weekly Supp. 550a
Insurance — Life — Attorney’s fees — Attorney is entitled to pre-suit fees where insurer had already unequivocally denied coverage and reiterated denial prior to attorney’s involvement — Contingency risk multiplier — Where accidental death benefit of elderly insured, who had several serious health conditions for which he took blood thinning agent and who died due to loss of blood following surgery for leg fracture, excluded coverage if death was contributed to by sickness or its medical or surgical treatment, attorneys could not mitigate risk of non-recovery, standard 40% fee contract would not adequately compensate attorneys, risk was substantial and success was unlikely at outset, and attorneys could not have predicted that claims adjuster would cause insurer to concede case by admitting that insurer had repeatedly violated fair claims standards, multiplier of 2.5 is appropriate — Appropriate market rates for attorneys determined — Time spent to obtain entitlement to attorney’s fees is compensable — Costs, including witness fee of attorney’s fees expert, awarded
SARAH SCHWARTZMAN, Plaintiff, vs. AAA LIFE INSURANCE COMPANY, Defendant. County Court, 15th Judicial Circuit in and for Palm Beach County, Civil Division. Case No. 2002cc015727 RH. May 28, 2003. Final Judgment. May 28, 2003. Cory J. Ciklin, Judge. Counsel: Diego C. Asencio, Diego C. Asencio, P.A., North Palm Beach, and Robert L. Saylor, West Palm Beach, for Plaintiff. Kenneth W. Moffet, North Palm Beach, for Defendant.
ORDER ON PLAINTIFF’S MOTION TOTAX ATTORNEYS’ FEES AND COSTS WITH INTEREST
THIS CAUSE came to be heard April 25, 2003 on the Plaintiff’s Motion to Tax Attorneys’ Fees and Costs with Interest. The parties were able to agree on most of the facts. AAA LIFE INSURANCE COMPANY agreed to Plaintiff’s entitlement to fees, to a market rate for attorney Diego C. Asencio of $300.00 per hour and to a multiplier of 2.0. The sole issues left for the court’s determination were: 1) whether attorney Robert Saylor was entitled to any time for pre-suit work done after AAA LIFE INSURANCE COMPANY denied coverage, 2) whether the multiplier should be 2.0 or higher, 3) the amount of time reasonably and necessarily expended by attorney Robert Saylor, if any, 4) the amount of time reasonably and necessarily expended by attorney Diego C. Asencio, 5) the market rate for attorney Robert Saylor, and 6) the reasonable taxable costs for the underlying dispute and for the fees issues.
The Court heard the live testimony of Bill Bone (the expert witness for the Plaintiff) as well as the deposition testimony of Steve Phillips (the expert witness for the Defendant). The court heard live testimony from Diego C. Asencio (co-counsel for the Plaintiffs) and Robert Saylor (co-counsel for the Plaintiffs). The court also considered the deposition testimony of Sherry Young, the insurer’s corporate representative taken on December 5, 2002.
The court received into evidence billing records, contingency contract, and the resume of Mr. Saylor. The court also received into evidence documents on the issues in the underlying dispute.
Having duly considered all of the evidence admitted at the attorney fee hearing, together with the arguments of counsel, the court makes the following findings of fact and conclusions of law:FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. THE UNDERLYING COVERAGE DISPUTE
Seventy-six (76) year old Marvin Schwartzman, the husband of the Plaintiff, SARA SCHWARTZMAN, sustained a serious leg fracture when he fell on March 6, 2000 while getting out of a car. This fall led to an ambulance trip to St. Mary’s Hospital where Mr. Schwartzman was admitted for twenty-four (24) days. On March 9, 2000 surgeons encountered complications operating on the fracture to Mr. Schwartzman’s leg. Unfortunately, Mr. Schwartzman died March 30, 2000. The death certificate listed the causes of death as:
Cerebrovascular accident
Myocardial infarction
Anemia
Diabetes
June 14, 2000 MRS. SCHWARTZMAN filed a claim with AAA LIFE INSURANCE COMPANY for its $25,000 accidental death benefit for the death of her husband. She listed the cause of death on the proof of loss as “a cerebro vascular accident” which is commonly known as a “stroke.” When the claim was not paid, MRS. SCHWARTZMAN retained an attorney in Buffalo, New York, David P. Marcus September 15, 2000. After an exchange of letters, records and calls, AAA LIFE INSURANCE COMPANY wrote a January 29, 2001 letter to Mr. Marcus stating “we have determined that the claim is not payable.” Mr. Marcus promptly complained that the January 29, 2001 denial letter did not give a proper explanation for the denial of the claim and that the claim should be reevaluated. AAA LIFE INSURANCE COMPANY wrote back on April 6, 2001 reasserting its coverage denial without giving much of any explanation for its coverage position.
MRS. SCHWARTZMAN later retained attorney Robert Saylor to investigate both the life insurance claim as well as a possible medical malpractice action. On July 10, 2001 Mr. Saylor wrote to AAA LIFE INSURANCE COMPANY asserting that its denial letter of January 29, 2001 failed to comply with Florida law as it did not provide a detailed explanation1. Mr. Saylor then attempted to associate attorney Clark Smith on both the life insurance claim and the medical malpractice claim. However, legal research located by Mr. Saylor showed that it would be very difficult to recover the death benefit. Specifically, there was an exclusion in the AAA LIFE INSURANCE COMPANY policy which provided:
We will not pay a benefit for a loss which is caused by, results from, or is contributed to by:
(5) sickness or its medical or surgical treatment. . .
Citing the unfavorable case law, attorney Clark Smith promptly turned down this life insurance case in writing.
Nevertheless, Mr. Saylor sought the advice of attorney Diego C. Asencio. Mr. Asencio found even more reasons to believe this was a high risk case. Mr. Asencio found that the case involved a master policy issued in Washington DC to the American Automobile Association. MRS. SCHWARTZMAN only had a certificate of group insurance on that master policy; not a Florida issued policy. Her certificate contained the disclaimer required by Florida Statutes:
The benefits of the policy providing your coverage are governed primarily by the law of a state other than Florida.
Mr. Asencio understood that, as a group insurer, AAA LIFE INSURANCE COMPANY was not subject to attorneys’ fees under Section 627.428, Florida Statutes. Thus, even if the full $25,000 death benefit was recovered, obtaining attorneys fees was at best problematic. The only way that fees might be available under Florida Statutes was through a creative argument fashioned by Mr. Asencio. Mr. Asencio planned to argue that the policy was actually “group health insurance” and that fees were available under Section 627.6698, Florida Statutes. That argument, however, hinged entirely on the definition of “group heath insurance” contained in Section 624.603, Florida Statutes which states that it includes “insurance on human beings against. . .death by accident or accidental means.”
The risk of non-recovery on the fees was further enhanced by the fact that both under Section 627.428, Florida Statutes and Section 627.6689, Florida Statutes, no claim for fees is allowed “prior to expiration of 60 days after proof of the claim was duly filed with the insurer.” In this case there was an issue as to whether the proof of loss filed by MRS. SCHWARTZMAN would be considered sufficient to have triggered the sixty (60) days.
Mr. Asencio recognized that it would be best to allow the insurer another sixty (60) days to reconsider the claim based upon his theory that there was a continuous chain of causal events leading directly from Mr. Schwartzman’s fall in getting out of the car. In other words, Mr. Asencio sought to show that the death was as a direct result of that accidental fall2. However, if the life insurance claim were fully paid prior to the filing of suit, then Mr. Asencio would not have been entitled to claim any fee. Florida Life Ins. Co. v. Fickes, 613 So.2d 501 (Fla. 5th DCA 1993).
Notwithstanding these risks, Mr. Asencio persuaded Mr. Saylor to proceed on MRS. SCHWARTZMAN’s case as co-counsel under his pure contingency form contract (providing for court awarded fees only) replacing Mr. Saylor’s standard Florida bar contract which would have allowed for a percentage or a court awarded fee, whichever was larger. Both lawyers testified Mr. Asencio’s pure contingency fee contract was used to seek the maximum multiplier. Both lawyers testified that success appeared highly unlikely at the outset. Mr. Bone opined that MRS. SCHWARTZMAN would have been unable to secure competent counsel without the maximum multiplier. Mr. Saylor said MRS. SCHWARTZMAN was elderly, retired and lived on social security.
2. FILING OF SUIT AND SUBSEQUENT SETTLEMENT
AAA LIFE INSURANCE COMPANY paid MRS. SCHWARTZMAN the death benefit of $25,000 on May 28, 2002 without interest. Mr. Asencio filed the action on filed July 9, 2002 solely for the interest3. Attorney Kenneth Moffet was assigned the defense of the case. When Mr. Moffet and Mr. Asencio first spoke, Mr. Moffet revealed that he was well aware of the fact that attorneys’ fees were not available against insurers who issue a group insurance certificate based on an out of state master policy. Mr. Asencio disclosed his plan to continue to seek fees. However, that did not produce a settlement.
The case proceeded without any prospect of settlement until the deposition of the person with the most knowledge4. AAA LIFE INSURANCE COMPANY produced its claims adjuster Sherry Young at that deposition on December 5, 2002. During the deposition Ms. Young candidly admitted that AAA LIFE INSURANCE COMPANY failed to handle the claim in accordance with fair claim standards and practices. Specifically, she candidly admitted to unacceptable delays in responding to claims, failures to act upon communications, failures to document claims file activities, failures to notify the insured promptly of claims decisions, and failures to promptly explain the basis of the decision to deny the claim. Ms. Young also candidly admitted that she had been in favor of paying the claim from the outset but that her superiors at AAA LIFE INSURANCE COMPANY required her to write what she considered to be unacceptable denial letters. She fully acknowledged that the letters were not acceptable because they failed to properly explain the denial.
The same day of the deposition Mr. Asencio prepared a civil remedy notice of insurer violation form to activate his client’s right to pursue a civil remedy action against AAA LIFE INSURANCE COMPANY for the unfair claim settlement practices5. This allowed AAA LIFE INSURANCE COMPANY sixty (60) days within which to “correct the circumstances.” See Section 624.155(2)(d), Florida Statutes. AAA LIFE INSURANCE COMPANY offered to pay MRS. SCHWARTZMAN $5,000 in interest on December 16, 2002. It also conceded entitlement to attorneys fees notwithstanding that Mr. Moffet was aware of the difficulty Mr. Asencio might have with his theory on fees. Mr. Moffet correctly judged that the risk of a future bad faith action outweighed contesting entitlement to attorneys’ fees since failure to concede those fees prevented a “full cure” of bad faith.
3. WHETHER MR. SAYLOR SHOULD GET ANY “PRE-SUIT” FEES
AAA LIFE INSURANCE COMPANY argues that Mr. Saylor should not receive any pre-suit attorneys’ fees. This argument is primarily based upon Rosado v. USF&G, 606 So.2d 628 (Fla. 3d DCA 1982). AAA LIFE INSURANCE COMPANY argues that pre-suit fees are not available unless there is unreasonable conduct on the part of the insurer which necessitates action by an attorney. Additionally, it is argued Mr. Saylor failed to produce his original standard Florida bar contract with Ms. Schwartzman. First, bad faith is not an issue on an award of attorneys’ fees. INA v. Lexow, 602 So.2d 528 (Fla. 1992); Ivey v. Allstate, 774 So.2d 679 (Fla. 2000). Secondly, a fee agreement can be modified up to the time that a verdict is reached. Lugassy v. Independent Fire Ins. Co., 636 So.2d 1332 (Fla. 1994). Lastly, the evidence in this action clearly shows that coverage was unequivocally denied on January 29, 2001 and the denial was reasserted again on April 6, 2001. This was not a case where the insurer was handling the claim at its very initial stages by the time Mr. Saylor got involved. The claim had been pending since June 14, 2000 when MRS. SCHWARTZMAN filed her first proof of loss. The court finds that Mr. Saylor is entitled to the pre-suit fees.
4. APPROPRIATE CONTINGENCY RISK MULTIPLIER
A multiplier in the appropriate amount should be awarded when factually supported. Speer v. Mason, 769 So.2d 1102 (Fla. 4th DCA 2000). The multiplier must be based on the risk at the outset even if risk went down. J.E. Stack v. Lewis, 641 So.2d 969 (Fla. 1st DCA 1994). The expert for AAA LIFE INSURANCE COMPANY, Steve Phillips opined that the risk at the outset was “about even.” However, cross examination revealed Mr. Phillips did not fully understand all of the risks evaluated by Mr. Asencio at the outset. The expert for MS. SCHWARTZMAN, Bill Bone, testified that the risk was extremely high and that only the maximum multiplier would be appropriate in this case. Both Mr. Saylor and Mr. Asencio testified the case was extremely high risk giving detailed reasons for their opinions.
Moreover, a letter received into evidence from Mr. Clark Smith showed that he considered this life insurance case far too risky to file. The contemporaneous billing statement of Mr. Asencio also listed the risk of non-recovery as “unlikely” based upon the wording of the exclusion in the policy. Specifically, Mr. Asencio was concerned about the wording which excluded coverage when the death was “contributed to by” by “sickness.” Mr. Schwartzman was elderly, had several serious health conditions and he was on the blood thinning agent coumadin. One of the reasons that he died when he went into surgery was that he lost five (5) pints of blood.
Mr. Asencio and Mr. Saylor agreed that this case would involve medical causation issues. Since Mr. Saylor had more experience in handling medical malpractice issues, it was agreed he would be required to handle all of the medical proof in the case. This could have involved several doctor depositions from treating physicians. It was also contemplated that AAA LIFE INSURANCE COMPANY would retain its own expert to testify that Mr. Schwartzman’s sicknesses contributed to his death. MRS. SCHWARTZMAN not only faced owing her insurer for taxable costs if she lost (which could have included huge medical expert fees) but a proposal for settlement could also have created a huge exposure for defense attorneys’ fees. See U.S. Security Ins. Co. v. Cahuasqui, 760 So.2d 1101 (Fla. 3d DCA 2000). Mr. Asencio’s contemporaneous billing statements show that he was aware of those risks and that those risks were fully explained to MRS. SCHWARTZMAN before she authorized the case to proceed.
The court hereby finds that a multiplier is necessary on a case like this one in order to attract competent counsel. The court finds that both Mr. Saylor and Mr. Asencio could not mitigate the risk of non-recovery. MS. SCHWARTZMAN could not afford to pay attorneys’ fees. A standard fee contract 40% share of the $25,000 could not adequately compensate the two attorneys on this case. Clearly, the risk was substantial at the outset. The court finds that success was unlikely based on the facts known at the outset. There was no way that Mr. Asencio could have been sure that AAA LIFE INSURANCE COMPANY would not fight this case to the bitter end. Certainly the case was quite defensible on coverage and the claim for fees was even more problematic. Not even defense counsel Mr. Moffet could have predicted that Ms. Young would so candidly admit that AAA LIFE INSURANCE COMPANY had repeatedly violated fair claim standards.
The Supreme Court approved a 2.6 multiplier in State Farm Fire & Cas. Co. v. Palma, 555 So.2d 836 (Fla. 1990) in which the issue was simply whether a thermography bill was a medically necessary expense. Based on the above findings of fact, this court concludes that the maximum multiplier of 2.5 is appropriate in this case.
5. MARKET RATE FOR PLAINTIFF’S ATTORNEYS
In determining the market rate for the attorneys’ fees in this case, the court must consider the market rate for the hourly fees charged in the Palm Beach County area by lawyers of reasonably comparable skill, experience and reputation performing similar services as those performed by Plaintiffs’ counsel.
Mr. Asencio has been board certified in civil trial law since 1989, has been in practice for nearly twenty (20) years and has acquired expertise in insurance litigation. He is well known for his seminars and publications on insurance. The defense has conceded that $300 per hour is a reasonable hourly rate for him.
Mr. Saylor has been in practice even longer than Mr. Asencio having been admitted to the Florida bar in 1971. He has extensive experience in contested civil actions. Mr. Bone testified that the market rate for Mr. Saylor in his opinion, however, should be $250 per hour. Although Mr. Saylor has all of the experience to be a board certified civil trial lawyer, the fact that he has not obtained certification caused Mr. Bone to find a lower market rate.
The court finds that the market rate for the hourly fees charged in the Palm Beach County area by lawyers of reasonably comparable skill, experience and reputation performing similar services as those performed by Plaintiffs’ counsel ranges between $250 per hour to $400 per hour. $250 per hour for Mr. Saylor is within the range of fees charged in the community for similar work.
In Labaton v. Mellert, 772 So.2d 622 (Fla. 4th DCA 2000) the 4th District Court of Appeals upheld an award of attorneys fees based on an hourly rate of $400.00 per hour in a difficult slip and fall case. The attorneys in this case enjoyed comparable skill, experience and reputation to attorney Scott A. DiSalvo in Labaton. The court is aware of numerous comparable attorneys in the Palm Beach County area whose market rate is more than $250 per hour. The court agrees that $250 per hour is an appropriate market rate.
6. TIME AND LABOR REQUIRED TO PROPERLY PERFORM THE SERVICES
The court finds that 46.20 hours spent by attorney Diego C. Asencio up to when AAA LIFE INSURANCE COMPANY agreed to pay his client’s death benefit was reasonably and necessarily spent. The court finds that 20.45 hours spent by attorney Robert Saylor to be reasonable and necessary. The court also finds that AAA LIFE INSURANCE COMPANY denied entitlement to attorneys fees to Mr. Saylor. Thus, the time spent by Mr. Asencio from the date of the deposition (April 14, 2003) during which it was clear that entitlement to attorneys fees was denied is also compensable. State Farm v. Palma, 629 So.2d 830 (Fla. 1993) (fees are available when insurer contests entitlement). The court finds that an additional 7.10 hours for Mr. Asencio were reasonable with regard to obtaining entitlement to attorneys’ fees for his co-counsel Mr. Saylor.
7. EXPERT WITNESS FEES AND TAXABLE COSTS
Plaintiff is seeking as a cost the expert witness fees charged by Mr. Bone under to Section 92.231, Florida Statutes. Mr. Asencio agreed to pay Mr. Bone $350 per hour. Mr. Bone testified that he expended 6.5 hours including his time in preparing and testifying. This was less time that Mr. Phillips spent up to the time of his deposition. Mr. Bone also testified that he fully expected to be paid regardless of the outcome of the hearing. Accordingly, the court awards the 6.5 hours at $350.00 per hour. The court awards these fees to Plaintiff as a cost. See Stokus v. Phillips, 651 So.2d 1244 (Fla. 2d DCA 1995); Mangel v. Bob Dance Dodge, Inc., 739 So.2d 720 (Fla. 5th DCA 1999)(expert witness taxed as cost under Section 92.231, Florida Statutes). Thus, Plaintiff shall receive $2,100.00 for Mr. Bone’s fees.
The court also awards the costs for the underlying coverage matter in the amount of $1,633.05. Those costs are as follows:
06/30/02 $200.00 Clerk of Court Filing fee
06/30/02 $15.00 Dept. Insurance Service fee
04/01/02 $186.05 IKON copy service Medical Records Copies
01/07/03 $65.00 Esquire Hearing 11/01/02
02/07/03 $502.00 Esquire Video taping deposition
02/07/03 $765.00 Esquire Deposition Sherry Young
The court also awards the costs incurred by Plaintiff in pursuit of the attorneys’ fees. The sole cost, besides the expert witness fee above, is the cost of a copy of Mr. Phillips’ deposition in the amount of $329.00. The court finds that it was reasonably necessary for Mr. Asencio to have a copy of that deposition for the fee hearing.
8. PREJUDGMENT INTEREST ON THE FEES AND COSTS
Plaintiff is entitled to prejudgment interest on attorneys’ fees and costs from the date AAA LIFE INSURANCE COMPANY agreed to their entitlement to attorneys’ fees and costs. Prejudgment interest on attorneys’ fees includes prejudgment amounts in a merged total, with post-judgment interest then accruing on the merged total. See Quality Engineering Installation v. Higley South, Inc., 670 So. 2d 929 (Fla. 1996). The parties agree that AAA LIFE INSURANCE COMPANY conceded entitlement to fees and costs on December 16, 2002 as to Mr. Asencio.
The Plaintiff has agreed to have the court apply the 6% interest rate which went into effect on December 31, 2002. Thus, prejudgment interest on attorneys fees shall accrue interest at the rate of 6% from December 16, 2001. Likewise, prejudgment interest on the costs from the underlying dispute will accrue at the rate of 9% from December 16, 2001. However, no prejudgment interest will be awarded on Mr. Saylor’s attorneys fees nor Mr. Bone’s expert witness fees awarded as costs nor for the costs incurred in the pursuit of the attorneys fees as their entitlement was in dispute.
Based on the above, the court finds and it is ORDERED AND ADJUDGED that the reasonable attorneys fees, costs and interest in this case are as follows:
A. Attorney time of 46.20 hours for Mr. Asencio (number of hours reasonably and necessarily expended for client) X $300.00 per hour (reasonable hourly rate) = $13,860.00 (Loadstar) X 2.5 (Contingency Risk Multiplier) = $34,650.00 total attorneys fees.
B. Attorney time of 20.45 hours for Mr. Saylor (number of hours reasonably and necessarily expended) X $250.00 per hour (reasonable hourly rate) = $5,112.50 (Loadstar) X 2.5 (Contingency Risk Multiplier) = $12,781.25 total attorneys fees.
C. Attorney time of 7.10 hours for Mr. Asencio (number of hours reasonably and necessarily expended for Mr. Saylor’s fees) X $300.00 per hour (reasonable hourly rate) = $2,130.00 (Loadstar) X 2.5 (Contingency Risk Multiplier) = $5,325.00 total attorneys fees.
D. $1,633.05 total taxable costs on underlying dispute.
E. $2,100.00 cost of expert witness fees for Mr. Bone.
F. $329.00 total costs of reasonably spent in pursuit of the attorneys’ fees (deposition of Mr. Phillips).
G. Total fees and costs of $36,283.05 (A & D) shall accrue 6% interest from December 16, 2002 to May 28, 2003. The per diem rate of interest is $5.96 ($36,283.05 X .06 ö 365). The total amount of that interest is $971.48 for 163 days. Thus, the fees costs and interest total $37,254.53.
H. Adding together the sum of (G) $37,254.53 in attorneys fees, costs and interest together with (B) $12,781.25 total attorneys fees for Mr. Saylor, C) $5,325.00 total additional attorneys fees for Mr. Asencio, (E) $2,100.00 in expert witness fees for Mr. Bone, and (F) $329.00 total costs reasonably spent in pursuit of the attorneys’ fees, results in a total combined figure of $57,789.78 upon which judgment shall be entered and which shall bear interest at the rate of interest of 6%.
__________________
1It is an unfair claim settlement practice for an insurer to fail to “promptly provide a reasonable explanation in writing to the insured of the basis in the insurance policy, in relation to the facts or applicable law, for denial of a claim” under Section 626.9541(1)(i)(3)(f) , Florida Statutes.
2Ultimately Mr. Asencio’s fears were realized when AAA LIFE INSURANCE COMPANY paid the death benefit directly to his client on May 28, 2002 within the sixty (60) days requiring him to employ a “back-up plan” of demanding interest pursuant to Section 627.4615, Florida Statutes.
3AAA LIFE INSURANCE COMPANY failed to pay interest after Mr. Asencio provided it with a copy of Section 627.4615, Florida Statutes which requires interest on claims for life insurance to be included from date of “due proof.”
4The deposition was noticed pursuant to Fla. R. Civ. P. 1.310(b)(6) under which AAA LIFE INSURANCE COMPANY was required to produce a corporate representative.
5MRS. SCHWARTZMAN would still have been required to prevail on coverage before bringing a bad faith action since there can be no bad faith without coverage. See Hessley v. Travelers Indemnity Co., 468 So.2d 457 (Fla. 3d DCA 1985) rev. den. 478 So.2d 53 (Fla. 1985).
__________________
FINAL JUDGMENT
Pursuant to the attorney fee hearing held in this matter and the order on attorneys fees and costs rendered in this action,
IT IS ORDERED AND ADJUDGED that the Plaintiff, SARAH SCHWARTZMAN, recover from the Defendant, AAA LIFE INSURANCE COMPANY, the sum of $57,789.78 with 6% interest as provided in F.S. §55.03, for which sums let execution issue.
* * *
