19 Fla. L. Weekly Supp. 534a

Online Reference: FLWSUPP 1907ROMEInsurance — Personal injury protection — Attorney’s fees — Confession of judgment — Where insurer’s payment of claim was not unilateral decision catalyzed by initiated suit but was instead prompted by medical provider’s filing of second demand letter rectifying defect in first demand letter and by provider’s representations that it would not seek attorney’s fees if insurer paid claim pursuant to second demand letter, trial court erred in finding that payment constituted confession of judgment entitling provider to award of attorney’s fees

USAA CASUALTY INSURANCE COMPANY, Appellant, v. AMERICAN MRI, LLC, (a/a/o John Romero), Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami Dade County. Case No. 10-308 AP. L.C. Case No. 08-2558 SP 23 (04). March 19, 2012. On appeal from the November 6, 2009 Order Granting Plaintiff’s Motion for Entitlement to Attorney Fees and Costs Due to Defendant’s Confession of Judgment and the June 29, 2010 Final Judgment on Plaintiff’s Attorney’s Fees and Costs and Order Granting Plaintiff’s Motion to Tax Attorney’s Fees & Costs. Counsel: Douglas H. Stein, for Appellant. Marlene S. Reiss, for Appellee.

(Before BERNSTEIN and MARIN, JJ.¹)

(MARIN, Judge.) The case before this Appellate Court arises from the lower court’s order finding Plaintiff/Appellee American MRI, LLC was entitled to attorney’s fees and costs as well as the Final Judgment entered by the lower court awarding attorney’s fees and costs. The trial court determined that Appellee was entitled to attorney’s fees under the “confession of judgment” rule of section 627.428 of the Florida Statutes. See § 627.428, Fla. Stat. (1982). Appellant now challenges the trial court’s conclusion that there was a confession of judgment, and that Appellee was entitled to attorney’s fees and costs.

Appellee American MRI, LLC is the assignee of benefits of a PIP insurance policy issued by Appellant USAA Casualty Insurance Company. Appellee provided medical services to the policyholder, was assigned the benefits of the policy, and sent a demand letter to Appellant on May 1, 2007 in accordance with section 627.736(11) of the Florida Statutes. See § 627.736(11), Fla. Stat. (2007). Appellant responded on May 16, 2007, acknowledging that it received the demand letter, but asserted that the demand letter was deficient and failed to comply with Section 627.736(11).

Appellee filed suit on January 16, 2008 after Appellant did not pay Appellee’s claim based on the May 1, 2007 demand letter. In response to the complaint, Appellant filed an answer with affirmative defenses, including a defense that Appellee failed to comply with statutory conditions precedent, again referencing section 627.736(11) of the Florida Statutes. Later, Appellant moved for summary judgment based on this defense, and specifically asserted that Appellee did not mail its demand letter to the designated recipient.

In response to Appellant’s Motion for Summary Judgment, Appellee requested the trial court stay and abate the action so that it could cure the alleged defect in its first demand letter by sending a second demand letter to the proper recipient. On April 17, 2009, prior to the trial court ruling on Appellee’s Motion for Stay and Abatement, and prior to receiving leave from the trial court to do so, Appellee sent Appellant its second demand letter. On May 6, 2009, the trial court held that Appellee’s first demand letter sufficiently complied with § 627.736(11), but deferred ruling on a separate issue — whether the letter demanded the proper amount. On May 26, 2009, Appellant attempted to stipulate to Appellee’s Motion for Stay and Abatement. The next day, May 27, 2009, which was the thirtieth day after receiving Appellee’s second demand letter, Appellant paid Appellee the amount requested by the second demand letter.

On September 9, 2009, Appellee filed a Motion for entitlement to attorney fees and costs pursuant to section 627.428 of the Florida Statutes. On November 6, 2009, the trial court held that Appellant’s payment was the equivalent of a confession of judgment, and granted Appellee’s motion for entitlement to attorney’s fees pursuant to Section 627.428. On June 29, 2010, the trial court entered a Final Judgment awarding attorney’s fees and costs. Appellant now appeals the trial court’s orders granting Appellee’s entitlement and award of attorney’s fees and costs, claiming its payment was not a confession of judgment, and that Appellee was not entitled to attorney’s fees.Standard of Review

The issue presented is whether the trial court properly applied Section 627.428 of the Florida Statutes and the “confession of judgment” rule to the particular circumstances of this case. See § 627.428, Fla. Stat. (1982). As the proper application of a statute is an issue of law, this Court’s review is de novo. Jerkins v. USF & G Specialty Ins. Co., 982 So. 2d 15, 16 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D763a] (held that a trial court’s interpretation of Section 627.428 regarding a confession of judgment was to be reviewed de novo).Confession of Judgment

The issue before this Appellate Court is whether Appellant’s payment to Appellee constituted a confession of judgment under Section 627.428 that would entitle Appellee to attorney’s fees and costs. See § 627.428, Fla. Stat. (1982). Section 627.428 provides a statutory basis to award attorney’s fees to an insured or medical provider who prevails at trial, or on appeal, against an insurer:

Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.

Id.

The purpose of Section 627.428 is to “discourage insurance companies from contesting valid claims, and to reimburse insureds for their attorney’s fees incurred when they must enforce in court their contract with the insurance company.” Pepper’s Steel & Alloys, Inc. v. United States, 850 So. 2d 462, 465 (Fla. 2003) [28 Fla. L. Weekly S455a] (citing Bell v. U.S.B. Acquisition Co., 734 So. 2d 403, 411 n.10 (Fla.1999) [24 Fla. L. Weekly S220a]).

Since the language of the statute only allows for attorney’s fees awards when a judgment is entered, Florida courts also recognize a corresponding principle, called the “confession of judgment” rule. See Wollard v. Lloyd’s & Companies of Lloyd’s, 439 So. 2d 217, 218 (Fla. 1983). This rule allows a court to apply Section 627.428 in certain instances where an insurer effectuates payment prior to a court entering a judgment. Id. The purpose of this “confession of judgment” rule, which allows a court to grant attorney’s fees under Section 627.428, is to dissuade insurance companies from forcing insureds or medical providers to sue for payment, then paying the claim prior to a judgment to avoid having to pay attorney’s fees. Id. (citing Cincinnati Ins. Co. v. Palmer, 297 So. 2d 96, 99 (Fla. 4th DCA 1974)). The “confession of judgment” rule, however, is not applicable in all instances where an insurance company pays a claim during active litigation. See State Farm Florida Ins. Co. v. Lorenzo, 969 So. 2d 393, 398 (Fla. 5th DCA 2007) [32 Fla. L. Weekly D1791e] (citing Tristar Lodging, Inc. v. Arch Speciality Insurance Co., 434 F.Supp.2d 1286, 1297-98 (M.D.Fla.2006)). Section 627.428 and the “confession of judgment” rule have “consistently been interpreted to authorize recovery of attorney’s fees from an insurer only when the insurer has wrongfully withheld payment of the proceeds of the policy.” Id. The Second District Court of Appeal held:

. . .[T]he question of whether an insurer’s post-suit payment. . .constitutes a confession of judgment will be determined based on whether the filing of the suit acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.

Clifton v. United Cas. Ins. Co. of Am., 31 So. 3d 826, 829 (Fla. 2d DCA 2010) [35 Fla. L. Weekly D364e], reh’g denied (Apr. 16, 2010), review denied, 49 So. 3d 746 (Fla. 2010) (emphasis in original) (internal citations omitted).

Furthermore, the Third District held that“[u]nder Florida law, it is the insurer’s unilateral decision to settle an insurance claim. . .that triggers the insured’s entitlement to attorney’s fees under the statute.” Mercury Ins. Co. of Florida v. Cooper, 919 So. 2d 491, 493 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D2648a].

The trial court, relying on the language from Mercury, ruled that Appellant’s payment during active litigation was a “unilateral decision.” Id. The trial court also focused on the fact that the litigation was still active because the court had yet to grant Appellee’s Motion for Stay. Consequently, the trial court concluded that Appellant’s payment was the “functional equivalent to a confession of judgment,” and granted Appellee’s request for attorney’s fees pursuant to Section 627.428 of the Florida Statutes. See § 627.428, Fla. Stat. (1982).

However, understanding the purpose and application of the “confession of judgment” rule, the procedural history of this case does not support the trial court’s conclusion that Appellant’s payment constituted a confession of judgment. The procedural history indicates the contrary — rather than being a unilateral decision catalyzed by the initiated lawsuit, Appellant’s payment was based on several other intervening factors. The most important of these factors were Appellee’s second demand letter, and Appellee’s representations that it would not seek attorney’s fees if Appellant paid pursuant to the second demand letter.

Once Appellee understood the nature of Appellant’s challenge to Appellee’s pre-suit demand letter, Appellee filed a Motion for Stay and Abatement and requested leave from the trial court to cure the alleged defect by sending a second demand letter. Yet, instead of waiting for the trial court to rule on its Motion for Stay and Abatement, Appellee mailed the second demand letter on its own initiative. Furthermore, in its Motion for Stay and Abatement, as well as in correspondence with Appellant, Appellee indicated that, should Appellant pay pursuant to this second demand letter, Appellee would not seek, nor be entitled to attorney’s fees.

Appellee having sent the second demand letter prior to receiving leave from the trial court to do so, together with its representations that payment pursuant to the second demand letter would preclude Appellee’s entitlement to attorney’s fees, illustrates that Appellant’s payment was not a unilateral decision catalyzed by the initiated lawsuit. Instead, Appellee’s actions, in a way, induced Appellant to effectuate payment to settle the claim, believing that it would not be responsible for Appellee’s attorney’s fees and costs.

Given these circumstances, this Appellate Court is convinced that Appellant’s payment pursuant to the second demand letter does not fit within the parameters of the “confession of judgment” rule. The “confession of judgment” rule cannot be applied so broadly as to include all situations where an insured or medical provider sues an insurer and money is later paid. Lorenzo, 969 So. 2d 393 (Fla. 5th DCA 2007) [32 Fla. L. Weekly D1791e]. Instead, the rule is properly applied when an insurer has wrongfully withheld payment, the initiation of litigation acts as a necessary catalyst to resolve the dispute, and the insurer makes a unilateral decision to settle the claim. Id.; Clifton, 31 So. 3d 826 (Fla. 2d DCA 2010) [35 Fla. L. Weekly D364e]; Mercury, 919 So. 2d 491 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D2648a].

Appellant’s payment to settle the claim was not a unilateral decision catalyzed by the initiated lawsuit, but rather was prompted by Appellee’s second demand letter and representations that it would not seek attorney’s fees should Appellant pay pursuant to that demand letter. Accordingly, the trial court’s order granting Appellee’s motion for attorney’s fees must be reversed.Attorney’s Fees

Appellee filed a motion for appellate attorney’s fees pursuant to Section 627.428 in the event it prevailed on this appeal. As this Appellate Court has ruled against Appellee on this appeal, Appellee’s Motion for Appellate Attorney’s Fees is denied.

Appellant filed a motion for attorney’s fees pursuant to section 768.79 of the Florida Statutes, asserting that it proposed a settlement which Appellee rejected. See § 768.79, Fla. Stat. (1997). While Appellant correctly states that attorney’s fees incurred on appeal may be awarded under Section 768.79, awarding fees based on a rejected offer of judgment presents factual issues which must be determined by the trial court, including whether the offer was made in good faith. Id. Awarding fees pursuant to Section 768.79 is not within the purview of this Appellate Court, but rather is at the discretion of the trial court. Id. Accordingly, the trial court should consider Appellant’s motion for attorney’s fees on remand.

THEREFORE, based on the foregoing analysis, the trial court’s November 6, 2009 Order Granting Plaintiff’s Motion for Entitlement to Attorney Fees and Costs Due to Defendant’s Confession of Judgment is REVERSED, the June 29, 2010 Final Judgment on Plaintiff’s Attorney’s Fees and Costs and Order Granting Plaintiffs Motion to Tax Attorney’s Fees & Costs is VACATED, and Appellee’s Motion for Appellate Attorney’s Fees is hereby DENIED. The case is hereby REMANDED to the trial court to consider Appellant’s Motion for Attorney’s Fees Pursuant to Proposal for Settlement, and for other proceedings consistent with this ruling. (BERNSTEIN, J., concurs.)

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¹Judge Victoria Platzer recused herself from this case. At oral arguments, the parties assented to have the case heard by the remaining judges on the appellate panel.

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