27 Fla. L. Weekly Supp. 400a
Online Reference: FLWSUPP 2704WELCInsurance — Personal injury protection — Attorney’s fees — Proposal for settlement is not valid where complaint alleged both monetary and non-monetary claims — Although medical provider did not formally plead claim for declaratory judgment, allegations of complaint indisputably demonstrate that provider was seeking declaration of its rights under statutory provisions allegedly violated by PIP insurer, and claim for declaration of rights was not subsumed within breach of contract claim — Ambiguity — Proposal language requiring provider to “fully settle and dismiss all direct claims and causes of action pled by or available to plaintiff” is ambiguous where language could extinguish provider’s right to any portion of recovery in insured’s bodily injury suit — Further, nominal proposal was not made in good faith where issue of whether exhaustion of benefits after making a reduced payment that is later determined to be unlawful was proper was being hotly litigated at time insurer made offer, so that insurer only had 50% chance of prevailing on this issue at time of offer — Insurer’s motion for entitlement to attorney’s fees is denied
PAN AM DIAGNOSTIC SERVICES, INC., d/b/a WIDE OPEN MRI, INC., (a/a/o David K. Welch), Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. County Court, 11th Judicial Circuit in and for Miami-Dade County. Case No. 12-2768 SP 26. December 19, 2018. Gloria Gonzalez-Meyer, Judge. Counsel: Dewayne Terry and Marlene S. Reiss, for Plaintiff. John Leinicke, for Defendant.
[Untimely notice of appeal filed, but voluntarily dismissed.]
ORDER DENYING DEFENDANT’S MOTIONTO DETERMINE ENTITLEMENT TO ATTORNEY’S FEES
This cause, having come before the Court on December 4, 2018 on Defendant State Farm’s Motion to Determine Entitlement to attorney’s fees pursuant to a Proposal for Settlement, and the Court having heard argument of counsel,
Accordingly, it is hereby
ORDERED AND ADJUDGED:
that the Defendant’s Motion for Entitlement to Attorney’s Fees is DENIED.
The issue before the Court is Defendant State Farm’s entitlement to attorney’s fees pursuant to a Proposal for Settlement following a summary judgment in State Farm’s favor and the affirmance thereof on alleged exhaustion of benefits.
Proposals for Settlement
The parties do not dispute that Proposal for Settlement fees are governed by §768.79, Fla. Stat., which provides the substantive law concerning proposals, and Fla. R. Civ. P. 1.442, which is the procedural rule by which the substantive requirements of §768.79 are implemented. Both the Statute and the Rule must be strictly construed because they are in derogation of the common law “English Rule,” which requires that each party bear its own fees. See Diamond Aircraft Indus., Inc. v. Horowitch, 107 So.3d 362 (Fla. 2013) [38 Fla. L. Weekly S45a] (“Both section 768.79 and rule 1.442 are in derogation of the common law . . . which requires that [a court] strictly construe both . . . .”); Deer Valley Realty, Inc. v. SB Hotel Assoc., LLC, 190 So.3d 203 (Fla. 4th DCA 2016) [41 Fla. L. Weekly D1036a].
It is also undisputed that the $1.00 Proposal for Settlement is a nominal offer. In and of itself, a nominal Proposal does not render a Proposal invalid.1 However, the Court takes note of the Florida Supreme Court’s statement that, in PIP cases, “for the offer of judgment to apply, the plaintiff either must have a very weak case, or must reject a very generous offer.” State Farm Mut. Auto. Ins. Co. v. Nichols, 932 So.2d 1067, 1077 (Fla. 2006) [31 Fla. L. Weekly S358a] (italics added).
Section 768.79 creates a “penalty” for the declining offeree’s failure to accept the offer and end the litigation. See Zalis v. M.E.J. Rich Corp., 797 So.2d 1289 (Fla. 4th DCA 2001) [26 Fla. L. Weekly D2592a]
If a Proposal for Settlement is valid and enforceable on its face, then a court must find entitlement. However, once entitlement is found, a court still may find that the Proposal was not made in good faith and deny attorney’s fees on that basis. See Event Svcs. America, Inc. v. Ragusa, 917 So.2d 882 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D1913a].
In this case, State Farm alleges that its Proposal is facially valid and was made in good faith.
Plaintiff Pan Am advances multiple arguments in opposition: first, that the Proposal is not valid because Pan Am sought both monetary and non-monetary relief (albeit in an inartfully drafted Complaint); second; that the Proposal is not valid on its face because it is ambiguous inasmuch as it seems to offer one dollar to settle claims not alleged in the Complaint (“to fully settle and dismiss all direct claims and causes of action pled by or available to Plaintiff”); and, third, that even if the Proposal is facially valid it was not made in good faith because State Farm did not have a reasonable basis to believe that its exposure was nominal or non-existent when it made the offer.
Facial Validity of State Farm’s ProposalMonetary and Non-Monetary Claims
Pan Am alleges that State Farm’s Proposal is not valid because the Complaint alleged both monetary and non-monetary claims.
Pan Am’s Complaint is not a model of clarity in legal drafting. However, although the Complaint does allege a breach of contract that seeks policy benefits, it also contains allegations that seem to request non-monetary relief in the form of alleged statutory violations.
Specifically, the Complaint alleges violations of §627.736(4)(b), by failing to obtain reasonable proof that it was not liable for Mr. Welch’s medical bills within 30 days of receipt of the bills, and further failed to provide the plaintiff with an itemized statement of any charges reduced or denied; alleges violation of §627.736(6)(d) by failing to provide a PIP Log after Pan Am made a written request for the PIP Log; and, violations of of §627.736(7)(a) by failing to obtain a physician’s report prior to withholding or denying the requested benefits.
These allegations are not set forth in a separate Count for declaratory relief, but State Farm never moved for a dismissal or for more definite statement, notwithstanding the inartfully drafted Complaint. The “wherefore” clause of the Complaint seeks benefits, interest, costs and attorney’s fees, but also seeks “any other further relief” the Court “may deem just and proper.”
The Court finds that the allegations are sufficient to suggest that Pan Am was seeking the Court’s declaration of whether State Farm is required to comply the statutory provisions that the Complaint alleges were violated. As such, in addition to its claim for monetary relief, Pan Am sought to know its rights under the statute; specifically, whether it was entitled to the PIP Log and entitled to an itemized statement of reduced or denied benefits; and whether State Farm was required to obtain its reasonable proof of disclaiming liability within 30 days of receiving the bills and whether State Farm was required to obtain a physician’s report prior to withholding or denying policy benefits.
The Court finds applicable, the Florida Supreme Court’s decision in Diamond Aircraft Indus., Inc., v. Horowitch, 107 So.3d 362 (Fla. 2013) [38 Fla. L. Weekly S45a], which holds that the offer of judgment statute does not apply to an action in which a plaintiff seeks both monetary and non-monetary relief.
Although a claim for declaratory judgment was not formally pled, the allegations in the Complaint indisputably demonstrate that Pan Am sought a declaration of its rights under the alleged provisions of the Statute, otherwise the paragraphs alleging statutory violations are meaningless. Most particularly, since State Farm’s defense was exhaustion of the policy benefits prior to the lawsuit being filed, Pan Am was entitled to know whether it had a right to obtain the requested PIP Log in order to determine whether the benefits were properly exhausted.2
The Court rejects State Farm’s position that the “true relief” sought in the Complaint was monetary relying on Tower Hill Signature Ins. Co. v. Javellana, 238 So.3d 372 (Fla. 3d DCA 2014) [42 Fla. L. Weekly D2597a]. Javellana is distinguishable because the declaratory judgment sought by the homeowners was simply that Tower Hill may not unilaterally determine actual cash value. That claim actually was subsumed by the breach of contract claim in which the homeowners sought actual cash value.
In this case, just by way of example, Pan Am’s allegation that State Farm violated the PIP Statute by failing to provide the PIP Log went, not to its claim for policy benefits, but rather went to State Farm’s defense that it had exhausted benefits. In order to determine whether benefits were properly exhausted, an insured should be entitled to see the manner in which benefits were paid. Thus, the “true relief’ test in Javellana does not apply here. See also Starboard Cruise Svcs., Inc. v. Deprince, __ So.3d __, 2018 WL6071456 (Fla. 3d DCA, Nov. 21, 2018) [259 So.3d 295; 43 Fla. L. Weekly D2581a] (affirming denial of proposal for settlement fees where complaint alleged breach of contract and specific performance and specific performance claim was not abandoned until just before trial, long after proposal for settlement was made); Southern Specialties, Inc. v. Farmhouse Tomatoes, Inc., __ So.3d __, 2018 WL 6131496 (Fla. 4th DCA, Nov. 21, 2018) [259 So.3d 869; 43 Fla. L. Weekly D2587a] (proposal for settlement did not carve out claim for injunctive relief, but rather attempted to settle all claims, “[t]herefore, Diamond is controlling” and attorney’s fee judgment based on proposal for settlement vacated).
Ambiguity
A Proposal for Settlement fails to satisfy the “particularity” requirements of Fla. R. Civ. P. 1.442 if an ambiguity within the proposal could reasonably affect the offeree’s decision. See Nichols, supra at 1079.
The Proposal alleges that it “is to fully settle and dismiss all direct claims and causes of action pled by or available to Plaintiff against Defendant arising out of the services rendered to [Mr. Welch]. . . .”
“Ambiguities can be either patent or latent. A patent ambiguity is one that appears on its face.” See Saenz v. Campos, 967 So.2d 1114, 1117 (Fla. 4th DCA 2007) [32 Fla. L. Weekly D2701a] (one paragraph stated that the offer would resolve “all claims” against the insurer and another paragraph indicated that the proposal would resolve “the claims raised in the suit”). A latent ambiguity arises when the language employed is clear and suggests a single meaning, but some extrinsic fact or extraneous evidence creates a necessity for interpretation or a choice among two or more possible meanings. See Saenz, supra at 1117.
Pan Am alleges that the Proposal is ambiguous as it can be read to require Pan Am to give up any and all claims that Pan Am may have, including any claims it may have had to the bodily injury proceeds that were recovered by Mr. Welch in a bodily injury claim against the third-party tortfeasor.
While there are cases interpreting the broadness of Proposals for Settlement, the Court reads State Farm’s Proposal to require it to accept a very nominal settlement of $1.00 for claims “available” to it, but not necessarily pled in this lawsuit, and it is undisputed that Mr. Welch had a bodily injury lawsuit for which he received funds to which Pan Am may have been entitled. See Zalis v. M.E.J. Rich Corp, 797 So.2d 1289 (Fla. 4th DCA 2001) [26 Fla. L. Weekly D2592a]; Saenz v. Campos, 967 So.2d 1114 (Fla. 4th DCA 2007) [32 Fla. L. Weekly D2701a].
The burden of clarifying the intent or extent of a proposal cannot be placed on the party to whom the proposal is made. See Dryden v. Pedemonti, 910 So.2d 854 (Fla. 5th DCA 2005) [30 Fla. L. Weekly D992a] (release language “release of all claims against the defendant and all persons legally liable for the Defendant’s actions” could potentially require offeree to extinguish first party PIP and health insurance claims).
As the Zalis court points out, “[t]he condition that a plaintiff relinquish all rights to sue about anything at any point in the future is intrinsically a condition incapable of being stated with the particularity required under section 768.79. . . No reasonable estimate can be assigned to such a waiver.” Zalis, supra at 1290.
The Court follows Zalis, Dryden and Saenz to find that State Farm’s proposal language, which requires Pan Am to “fully settle and dismiss all direct claims and causes of action pled by or available to Plaintiff” to be ambiguous in that the language could potentially have extinguished any right that Pan Am had to any portion of the recovery in Mr. Welch’s bodily injury lawsuit. Had the Proposal merely required Pan Am to settle and dismiss all claims and causes of action pled by Pan Am in this lawsuit, the language would have been clear and unambiguous — but State Farm said much more.
Proposal Not Made in Good Faith
Lastly, Pan Am argues that State Farm’s nominal proposal was not made in good faith.
“The good faith requirement ‘insists that the offeror have some reasonable foundation on which to base an offer’.” Event Svcs. Of America, Inc. v. Ragusa, 917 So.2d 882,884 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D1913a], quoting Schmidt v. Fortner, 629 So.2d 1036, 1039 (Fla. 4th DCA 1993).
A determination of whether a proposal for settlement is made in good faith is within the trial court’s discretion. See Hayes Robertson Group, Inc. v. Cherry, et al., Case No. 3D18-106, et al. (Fla. 3d DCA Dec. 12, 2019) [260 So.3d 1126; 43 Fla. L. Weekly D2752f], citing State Farm v. Laughlin-Alfonso, 118 So.3d 314, 315 (Fla. 3d DCA 2013) [38 Fla. L. Weekly D1654a]. “There is no statutory requirement that the court state specific findings to justify its exercise of discretion. The issues — good faith or not; whether to award or not — are expressly addressed to the trial court’s exercise of discretion.” Ragusa, supra at 885.
State Farm relies on the fact that it exhausted benefits before suit was filed, advised Pan Am of the exhaustion before suit was filed and, ultimately, prevailed on its summary judgment based its exhaustion defense. However, the law requires the Court to view the proposal “at the time it was offered.” See Saenz, supra at 1116. In other words, the Court must look at the “snapshot” of time when the offer was made, and the outcome of the case does not influence the Court’s view.
In the case of nominal proposals, there is no abuse of discretion in determining that a proposal was not made in good faith if at the time the proposal was made, “the defendant ‘had at least some exposure’.” Hayes Robertson Group, Inc. v. Cherry, et al., Case No. 3D18-106, et al. (Fla. 3d DCA Dec. 12, 2019) [260 So.3d 1126; 43 Fla. L. Weekly D2752f]), quoting Event Svcs. America, Inc. v. Ragusa, 917 So.2d 882 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D1913a] (affirming denial of PFS fees where it appeared that the offeror “had at least some exposure at the time the offers were made.”).
In May of 2011, State Farm sent Pan Am a reduced reimbursement utilizing the Medicare Hospital Outpatient Prospective Payment System (OPPS). Shortly thereafter, the Second District decided Nationwide Mut. Fire Ins. Co. v. AFO Imaging, Inc., 71 So.3d 134 (Fla. 2d DCA 2011) [36 Fla. L. Weekly D1463b], which held that insurers could not utilize OPPS. Instead of sending Pan Am the money it was due after AFO Imaging was decided, in response to Pan Am’s July 20, 2011, statutory pre-suit Demand Letter, State Farm responded by maintaining its position that it made proper payment (even though the law was squarely against State Farm at that point in time on the OPPS issue). On November 17, 2011, State Farm exhausted the remaining benefits of $103.25 to Pan Am, after paying out benefits to other providers, and advised Pan Am that the $103.25 exhausted benefits. The lawsuit was filed on April 23, 2012.
At the time, the issue of whether an insurer’s reduced payment and subsequent exhaustion of benefits was a proper exhaustion was being hotly litigated. That issue culminated in a decision of the 11th Judicial Circuit Appellate Court in favor of the plaintiff, holding that such an exhaustion was wrongful. See Geico v. Gables Ins. Recovery, Inc. (a/a/o Rita Lauzan), 20 Fla. L. Weekly Supp. 862a (Fla. 11th Jud. Cir. June 25, 2013). The Third District eventually quashed that decision in December of 2014, (after summary judgment was entered in favor of State Farm) but State Farm could not have devined that outcome when it made a nominal offer on November 29, 2012.
Like the proposal in Cherry, supra, under the circumstances of the case at the time the proposal for settlement was made, “there was certainly no guarantee” that State Farm would prevail on its summary judgment and, in fact, between the time of the proposal and the summary judgment, the law was squarely in favor of the plaintiff with the Lauzan decision still in full force and effect.
Thus, because State Farm, at best, had a 50-50 chance of prevailing on its exhaustion defense when the nominal offer was made, given that the issue was being hotly litigated at the time the offer was made, the Court cannot say that State Farm did not have “some exposure,” and finds that the nominal offer was not made in good faith.3 Hayes Robertson Group, Inc. v. Cherry, et al., Case No. 3D18-106, et al. (Fla. 3d DCA Dec. 12, 2019) [260 So.3d 1126; 43 Fla. L. Weekly D2752f], quoting Event Svcs. America, Inc. v. Ragusa, 917 So.2d 882 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D1913a] (affirming denial of PFS fees where it appeared that the offeror “had at least some exposure at the time the offers were made.”).
For the reasons stated herein and argued by both parties at the entitlement hearing, the Court DENIES Defendant State Farm’s Motion for Entitlement to Attorney’s Fees pursuant to §768.79 and Fla. R. Civ. P. 1.442.
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1State Farm offered $1.00 in PIP benefits and $46.00 for attorney’s fees and costs. A reasonable basis for a nominal offer exists only where “the undisputed record strongly indicate[s] that [the defendant] had no exposure” in the litigation. People Gas Sys., Inc. v. Acme Gas Corp., 689 So.2d 292, 300 (Fla. 3d DCA 1997) [22 Fla. L. Weekly D205d].
2It goes without saying that an insurer may be liable to benefits above policy limits if benefits are not exhausted properly, i.e., paid in the absence of liability. See Coral Imaging Svcs. v. Geico Indem. Ins. Co., 955 So.2d 11 (Fla. 3d DCA 2006) [31 Fla. L. Weekly D2478a]; see also Northwoods Sports Medicine and Phys. Rehab., Inc. v. State Farm, 137 So.3d 1049, 1057 (Fla. 4th DCA 2014) [39 Fla. L. Weekly D491a] (bad faith in claims handling may expose insurer to liability above policy limits).
3At this time, the Court declines to hold an evidentiary hearing on the issue of whether State Farm’s apparent routine practice of sending nominal proposals in most, if not all, PIP cases is per se bad faith and the Court does not address that issue in this Order
