9 Fla. L. Weekly Supp. 716a

Insurance — Attorney’s fees — Prevailing insured — Even if delay in payment of disability credit insurance benefits was due to good faith need for insurer to investigate conflicting disability periods apparent in claim by insured who was disabled, returned to work despite disability, and then was involved in a second disabling accident, successful insured is entitled to claim attorney’s fees against insurer that paid total claim during suit — Obligation for attorney’s fees and costs continued past insurer’s offer of judgment where that offer did not include attorney’s fees and costs already incurred — Although insurer was within its rights to dispute claim for period between accidents when it believed insured was working, insurer agreed that insured did not work by paying claim for that period, and insured is entitled to attorney’s fees and costs against insurer for all time reasonably expended by insured’s counsel in pursuit of claims — Insurer’s claim for attorney’s fees because insured’s claim was frivolous is denied where, although chances of success at outset were even, claim had merit — Where insurer contested entitlement to attorney’s fees, insured is awarded fees and costs for litigating entitlement issue

DERRY C. CASSIDY, Plaintiff, vs. AMERICAN HERITAGE LIFE INSURANCE COMPANY, Defendant. County Court, 15th Judicial Circuit in and for Palm Beach County. Case No. MS-00-009178-RF. August 5, 2002. Robert Schwartz, Judge. Counsel: Deigo C. Asencio, Diego C. Asencio, P.A., North Palm Beach, for Plaintiff. Maritza G. Fisher, Liebler, Gonzalez & Portuondo, P.A., Miami.

ORDER ESTABLISHING PLAINTIFF’S ENTITLEMENT TOATTORNEYS FEES AND COSTS

THIS CAUSE came to be heard upon the Plaintiff’s Motion for Attorneys Fees and Costs. This court bifurcated the issues of entitlement and amount. The sole issue addressed at this time is whether Plaintiff DERRY C. CASSIDY (hereinafter MR. CASSIDY) was entitled to attorneys fees and costs against the Defendant AMERICAN HERITAGE LIFE INSURANCE COMPANY (hereinafter AMERICAN HERITAGE).

The issue for the court’s determination with regard to entitlement is whether there was a confession of judgment by AMERICAN HERITAGE in making payment of disability benefits during the pendency of this litigation. MR. CASSIDY argues that AMERICAN HERITAGE paid disputed benefits during the pendency of the litigation and, therefore, has confessed judgment. AMERICAN HERITAGE argues that it owed nothing at the time suit was filed on May 15, 2000 and it further claims that the action filed by MR. CASSIDY was frivolous at that time. AMERICAN HERITAGE claims that it was only after the filing of suit that it received sufficient information to determine that benefits were due and owing and, thus, MR. CASSIDY is not entitled to any attorneys fees or costs. Finally, AMERICAN HERITAGE claims that it is entitled to fees pursuant to F.S. §57.105 because MR. CASSIDY’s claims were frivolous.

It was undisputed that AMERICAN HERITAGE issued a policy of credit disability insurance to MR. CASSIDY. The purpose of the policy was to cover MR. CASSIDY’s truck payments in the event MR. CASSIDY was unable to work. MR. CASSIDY’s truck payments were $405.10. The factual dispute on entitlement revolved around the submission of claims forms by MR. CASSIDY to AMERICAN HERITAGE following two auto related accidents. AMERICAN HERITAGE was basically claiming insufficient proof of loss as its defense.

The entitlement issue was heard at three (3) separate hearings taking place on May 8, 2001, January 9, 2002 and April 15, 2002. The court heard the testimony of counsel for the Plaintiff, Diego C. Asencio, at the first hearing. MR. CASSIDY, Lorraine Viera, Beth Brewster and Kim Brewster testified at the second hearing. AMERICAN HERITAGE called their corporate representative Mr. Berkeley Davis at the last hearing. Having considered the entire file, all of the evidence adduced at the attorney fee hearings, including all of the exhibits, and being otherwise fully advised in the premises, the court makes the following findings of fact and conclusions of law:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. FACTS UNDERLYING THE CREDIT DISABILITY CLAIMS

The facts underlying the credit disability claims are that MR. CASSIDY was a self employed semi tractor trailer driver who was involved in an accident on August 23, 1999. MR. CASSIDY claimed he sustained personal injuries in that accident (the claim forms show he sustained herniated disks in his back). MR. CASSIDY sought treatment with an osteopathic physician named Dr. Michael Landman who signed a prescription receipt on October 8, 1999 stating that MR. CASSIDY was disabled “from August 23, 1999-ongoing.” Despite that Dr. Landman found MR. CASSIDY to be disabled, MR. CASSIDY began to look for work sometime in November of 1999.

MR. CASSIDY found work in late November of 1999. He attempted to return to work and was working from November 28, 1999 until December 12, 1999 when he was involved in another auto accident. The second accident caused a significant aggravation of MR. CASSIDY’s prior injuries and he stopped working again. MR. CASSIDY, Beth Brewster and Kimberly Brewster all testified that MR. CASSIDY only returned to work out of necessity and that he was still unable to properly perform the duties of long haul trucking.

Prior to the filing of this action AMERICAN HERITAGE made the following six (6) payments: 1) $405.10 on 12/28/99 covering the timer period of 08/24/99-09/22/99; 2) $526.63 on 01/19/00 covering the time period of 12/22/99-01/30/00; 3) $297.07 on 02/14/00 covering the time period of 01/31/00-02/21/00; 4) $376.09 on 02/25/00 covering the time period of 02/27/00-03/20/00; 5) $405.10 on 03/29/00 covering the time period of 03/21/00-04/20/00 and 6) $216.05 on 03/29/00 covering the time period of 09/23/99-10/08/99.

The testimony showed that MR. CASSIDY lived with Beth Brewster and Ms. Brewster’s daughter Kimberly Brewster before and during the time period of his claimed disability from both the accidents. Ms. Brewster testified that she took charge of submitting the claims with AMERICAN HERITAGE. She testified that she had trouble getting the forms in late August and that she had to repeatedly submit the forms to AMERICAN HERITAGE for weeks without getting proper payment since early September. The evidence showed she made repeated calls to AMERICAN HERITAGE. When she would call, AMERICAN HERITAGE claimed forms were not received. She would then send them in again. Ms. Brewster also testified that when payments were made, they were made for amounts different from the $405.10 truck payment.

When Ms. Brewster grew frustrated with the claims handling by AMERICAN HERITAGE, she sought out the assistance of attorney Larry Chandler because her friend Loraine Viera worked there as a legal assistant. Ms. Viera testified that she also began to submit forms, make calls, and send letters to AMERICAN HERITAGE following up on the disability claims. During this time period, AMERICAN HERITAGE became suspicious that MR. CASSIDY had worked in October of 1999. The period of 10/09/99-11/27/99 became the focus of the dispute. AMERICAN HERITAGE paid claims for both before and after this period. However, it did not pay for that period claiming that the information on disability was conflicting. Clearly, it was.

However, documentation was furnished to AMERICAN HERITAGE supportive of disability for the period of 10/09/99-11/27/99. On December 24, 1999 MR. CASSIDY furnished a Statement of Insured stating that he had been completely disabled since 08/23/99 and that he classified his work as “very heavy work.” There was also the prescription receipt of October 8, 1999 from Dr. Landman stating that MR. CASSIDY was disabled “from August 23, 1999-ongoing.” Once Mr. Chandler’s office was involved, many letters were exchanged with AMERICAN HERITAGE. Mr. Chandler’s office consistently maintained MR. CASSIDY never worked during the time period 10/09/99-11/27/99. AMERICAN HERITAGE failed to pay citing conflicting evidence on whether MR. CASSIDY actually worked during that time period. AMERICAN HERITAGE claims this was not a “denial.”

The dispute persisted from December 24, 1999 until April 25, 2000 when Mr. Chandler’s office requested attorney Diego C. Asencio to get involved in the action. However, prior to Mr. Asencio getting involved, Mr. Chandler’s office sent a detailed letter on March 22, 2000 explaining the situation and enclosing Dr. Landman’s records from 09/01/99 through 01/01/00. Mr. Chandler’s letter reiterated MR. CASSIDY’s position that he never worked during October of 1999 but admitted that MR. CASSIDY had in fact worked from 11/28/99 until 12/11/99. Nevertheless, Mr. Chandler’s March 22, 2000 letter did not prompt AMERICAN HERITAGE to pay the disability claim for the disputed period of 10/09/99-11/27/99.

By the time MR. CASSIDY first saw Mr. Asencio, he was quite frustrated with AMERICAN HERITAGE. The bank holding the note on his truck was calling constantly and was threatening to repossess his truck. However, Mr. Asencio did not file suit immediately. Prior to the filing of this action, Mr. Asencio assessed the chances of success as even due to dispute over whether MR. CASSIDY was disabled and due to the dispute over the extent of the information that was provided to AMERICAN HERITAGE and whether that requested information was really necessary. Mr. Asencio contacted Dr. Landman’s office and verified that it had repeatedly furnished AMERICAN HERITAGE with disability information and that it had advised AMERICAN HERITAGE of the restrictions which accompanied MR. CASSIDY’s physical injuries. Mr. Asencio also reviewed the restrictions with MR. CASSIDY relayed by Dr. Landman’s office and confirmed that he was unable to obtain any type of employment in his field with those sorts of restrictions. Once Mr. Asencio established a proper basis, then suit was filed on May 15, 2000.

2. PROCEDURAL POSTURING AFTER THE FILING OF SUIT

Since Mr. Asencio filed this action within the small claims court jurisdictional limits of $5,000, the action came before the court June 15, 2000 on a pretrial hearing pursuant to the Small Claim Court Rules. During the pretrial hearing, parties attended a mediation. That mediation reached an impasse. Following the mediation, Mr. Asencio successfully opposed adoption of any of the Rules of Civil Procedure.¹ To conclude the pretrial hearing, the court set a non-jury trial to be heard on September 25, 2000.

On June 22, 2000, AMERICAN HERITAGE served an offer of judgment pursuant to F.S. §768.79 “in the amount of $100.00, in full and final settlement of any and all claims by Cassidy against AML as set forth in the above-referenced lawsuit, with each party to bear its own attorneys’ fees and costs.” MR. CASSIDY moved to strike the proposal for Settlement. On August 11, 2000 The court denied the motion to strike but allowed additional time for MR. CASSIDY to consider the proposal.²

3. PAYMENTS MADE DURING THE PENDENCY OF

LITIGATION

After suit was filed AMERICAN HERITAGE made the following additional four (4) payments: 1) $1,026.25 on 06/21/00 covering the time period of 04/21/00-07/06/00; 2) $405.10 on 07/18/00 covering the time period of 07/07/00-08/06/00; 3) $405.10 on 07/31/00 covering the time period of 08/07/00-09/06/00; 4) $661.66 on 8/11/00 covering the time period of 10/09/99-11/27/99. MR. CASSIDY maintains that, at a bare minimum, AMERICAN HERITAGE had sufficient information on May 15, 2000 to make the last payment of $661.66 for the disputed time period. AMERICAN HERITAGE maintains that it could not have been expected to have made that last disability payment for the period of 10/09/99-11/27/99 until August 11, 2000.

The last payment of $661.66 is central to the issue of whether there was a confession of judgment. If the court finds that AMERICAN HERITAGE had sufficient information to make this payment, then MR. CASSIDY is entitled to attorneys fees and costs.

4. LAW GOVERNING CREDIT DISABILITY INSURERS

The policy involved herein is a credit disability policy³. F.S. §627.428 is made applicable to all credit disability policies pursuant to F.S. §627.401(5). It would appear that the legislature specifically intended that credit life and credit disability policy holders be entitled to attorneys fees under F.S. §627.428(1). See Old Republic v. Rucks, 363 So.2d 608 (Fla. 4th DCA 1978). Also, credit disability insurers are given a statutory option after thirty (30) days of disability to seek a second physician’s opinion prior to paying additional benefits. See F.S. §627.419(5). Here AMERICAN HERITAGE did not exercise that option. It appears that it simply took the position that MR. CASSIDY had in fact worked in direct opposition to MR. CASSIDY’s claim that he had not worked.

5. LAW ON CONFESSION OF JUDGMENT BY INSURER

When an insurer pays disputed benefits during the pendency of suit, this constitutes a confession of judgment triggering the obligation to pay attorneys fees and costs. Wollard v. Lloyds & Cos., 439 So. 2d 217, 218 (Fla. 1983); Cincinnati Ins. Co. v. Palmer, 297 So.2d 96 (Fla. 4th DCA 1974).

In Wollard an insurer sought to escape liability for attorneys fees by making payment of a claim on the eve of trial. The parties agreed to the settlement of the claim but stipulated that the award of any fees would be submitted to the court. The Wollard court approved of the holding in Palmer, Supra. The Palmer case involved the payment of a mortgagee by a fire insurer shortly after suit was filed. While the fire insurer paid the loss to the mortgagee, it maintained it was not liable for attorneys fees to its insured who brought suit. Specifically, the fire insurer maintained that “it had never wrongfully refused to pay the policy proceeds.” The Palmer court found that “the fact that the insurer’s refusal to pay the amount owed by it under the terms of the policy was in good faith and on reasonable grounds does not relieve the insurer from liability for payment of attorney’s fees where it is subsequently found liable on the policy” at page 98. The Wollard court also held in favor of awarding fees and stated at page 218:

When an 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. Requiring the plaintiff to continue litigation in spite of an acceptable offer of settlement merely to avoid having to offset attorneys fees against compensation for the loss puts an unnecessary burden on the judicial system, fails to protect any interest — the insured’s, the insurer’s or the public’s — and discourages any attempt at settlement.

As stated in Palmer, good faith is not an issue on fees. Whenever an insured prevails against an insurer, the court must award attorneys fees. Even if the insurer believed in good faith the claim should not have been paid, the court must award fees. INA v. Lexow, 602 So.2d 528 (Fla. 1992); Travelers v. Lindsay, 387 So.2d 341 (Fla. 1980). Thus, the good faith belief by AMERICAN HERITAGE that MR. CASSIDY had in fact worked during the disputed period of time does not absolve it of the obligation for attorneys fees and costs once it made payment for that period of disability.

Even if the insurer claims that any delay in payment was based upon reasonable investigation, a successful insured is entitled to claim attorneys fees against an insurer that pays during suit. See Prudential Ins. Co. v. Institute for Marine Science, 371 So.2d 185 (Fla. 3d DCA 1979). Thus, AMERICAN HERITAGE’s investigation, whether caused by reasonable delay or not, is immaterial to fees.

7. INSURER ACTING ON INCOMPLETE OR INCORRECT INFORMATION

The fact that the insurer had information which appeared to support denial of a claim does not absolve it from liability for attorneys fees and costs. Ivey v. Allstate, 774 So.2d 679 (Fla. 2000); Palmer v. Fortune Ins. Co., 776 So. 2d 1019 (Fla. 5th DCA 2001) (PIP insurer acting on incorrect information); Logue v. Clarendon, 777 So.2d 1122 (Fla. 4th DCA 2000) (PIP insurer dealing with competing claims); Ortega v. Fortune, 608 So.2d 75 (Fla. 3d DCA 1992) (insurer acting under mistaken information).

In Allstate v. Ivey, 728 So.2d 282 (Fla. 3d DCA 1999), the District Court of Appeals quashed the decision of the circuit court of appeals (acting in its appellate capacity) for reversing the denial of an award of attorneys fees by a county court judge. The District Court reasoned that the insurer reasonably relied upon an error in a claim form. The Florida Supreme Court reversed stating:

If a dispute arises between an insurer and an insured, and judgment is entered in favor of the insured, he or she is entitled to attorneys fees. It is the incorrect denial of benefits, not the presence of some sinister concept of “wrongfulness,” that generates the basic entitlement to the fees if such denial is incorrect.

Id. at page 14.

Moreover, the Ivey court noted that the payment after suit was filed operates as a confession of judgment. Likewise, the decisions in Palmer v. Fortune, Logue, and Ortega all involved errors in the claims process which may have furnished good faith grounds to deny the claims. Nevertheless, the insurers were liable upon payment of the disputed claims as a confession of judgment.⁴

8. OBLIGATION CONTINUES UNTIL INSURER PAYS WHAT IT OWES

An insurer’s obligation for attorneys fees and costs does not go on forever in any litigation against it. Otherwise an insurer could never terminate litigation against it. The insured cannot continue to incur any collectable attorneys fees and costs once the insurer offers to pay what it owes. Scottsdale Ins. Co. v. DeSalvo, 748 So.2d 941 (Fla. 1999). However, that offer must include all it owes in attorneys fees, costs and interest. Danis Industries Corp. v. Ground Improvement, 645 So.2d 420 (Fla. 1994).

Here AMERICAN HERITAGE offered to pay $100.00 in full settlement on June 22, 2000. At that point the insured had already incurred the costs of his filing fee ($200) and service fee ($15). Additionally, according to Mr. Asencio’s billing records received in evidence, the insured’s attorney had already expended more than ten (10) hours of his time in pursuing the claims. Here the obligation for attorneys fees and costs continued because AMERICAN HERITAGE did not offer to pay all that it owed per the Danis case. Here, even if the court only considers the final payment of $661.66 two months later, this was substantially more than the $100 offer.

9. ISSUES OF FACT IN THE PRESENT DISPUTE

The court fully understands the issue as presented by AMERICAN HERITAGE on the notice of claims. In essence, it is AMERICAN HERITAGE’s position there was no properly payable claim because MR. CASSIDY had failed to give sufficient information for it to have determined whether the claim was payable. The factual scenario on the disputed claims is very similar to that encountered in Life Investors Ins. Co. v. Johnson, 422 So.2d 32 (Fla. 4th DCA 1982). In Johnson a credit disability insurer claimed that its insured had failed to comply with the provisions of the policy on notice and on proof of loss. There was confusion concerning where to send the claim forms after an injury in March and then the insured was involved in another accident in July. The insurer claimed that the forms that were sent in showed conflicting disability periods. The insured finally stopped sending in forms altogether, the insurer stopped making payments and the insured’s car was repossessed. Based upon those set of facts, the appellate court stated:

It appears to us that there were issues for the jury relative to compliance with the notice requirements and, if notice was late, whether the company was prejudiced by the late notice.

Id. at page 33.

Thus, the facts in this case were certainly subject to debate before a trier of fact. However, MR. CASSIDY never sought any jury trial. This court set a non-jury trial in this matter and AMERICAN HERITAGE paid before that non-jury trial could be had. In any event, since this court would have properly sat as trier of fact in this matter, the court hereby finds for MR. CASSIDY on the issues of late notice and proof of loss. It appears clear to this court that MR. CASSIDY did provide notice and proof of loss. There was no prejudice on the part of AMERICAN HERITAGE which this court can discern from any of the facts. It appears that AMERICAN HERITAGE simply did not believe MR. CASSIDY when MR. CASSIDY said he was not working during the disputed disability period. AMERICAN HERITAGE was within its rights to dispute the claim if it believed that MR. CASSIDY did in fact work during that disputed period. However, once AMERICAN HERITAGE paid, it agreed that MR. CASSIDY did not work.

Moreover, the records of AMERICAN HERITAGE show that Mr. Davis specifically refused to authorize the payment of the disputed period of time on June 16, 2000 with his note “Wait on paying any past benefits.” Thereafter, Mr. Davis authorized payment on August 11, 2000 with the note “OK to pay GAP period.” Yet Mr. Davis could not supply any reason for his change in position on payment. It certainly was not based upon having received any new information.

Accordingly, this court finds that MR. CASSIDY is entitled to attorneys fees and costs against AMERICAN HERITAGE for all time reasonably and necessarily expended by his attorneys in pursuit of his disability claims. The court reserves on the issues involved in the amount of attorneys fees, including the multiplier, if any. The court also denies the claim for fees of AMERICAN HERITAGE under F.S. §57.105. While the chances of success may have appeared to be even at the outset as described by Mr. Asencio, the case had merit.

9. FEES FOR LITIGATING ENTITLEMENT TO FEES

Interest, costs and fees are considered to be part of “a claim under the policy” when an insurer makes a belated offer to settle. See Cincinnati Ins. Co. v. Palmer, Supra, at page 99:

Appellee contends, and we think correctly so, that upon suit being filed the relief sought was both the policy proceeds and attorney’s fees, and so long as the insurer failed to voluntarily pay any part of the relief sought, it continued to contest the policy . . . and thus even though the claim at that point is limited to the recovery of attorney’s fees, it is nonetheless a claim under the policy . . .

Also see Gibson v. Walker, 380 So.2d 531 (Fla. 5th DCA 1990).

MR. CASSIDY has also requested the court to award attorney’s fees for the time expended by counsel in litigating the issue of entitlement to attorney’s fees. Under the case of State Farm v. Palma, 629 So.2d 830 (Fla. 1993) fees can be awarded when an insurer contests entitlement to attorneys fees. From the time of the confession of judgment, AMERICAN HERITAGE has not agreed that MR. CASSIDY was entitled to any attorneys fees or costs. MR. CASSIDY’s counsel has expended considerable time and costs in pursuing the entitlement issues herein. All time that was reasonable and necessary in pursuit of these attorneys fees will likewise be awarded. The court reserves on the issues involved in the amount of attorneys fees, including the multiplier, if any. Likewise, the courts finds MR. CASSIDY is entitled to costs for pursuing the attorneys fees and reserves jurisdiction on the amount of those costs.

__________________

¹Later Mr. Asencio explained that this was specifically done in order to avoid the application of Rule 1.442, Fla. R. Civ. P., under which MR. CASSIDY might be subject to a proposal for settlement.

²July 5, 2000 U.S. Security Ins. Co. v. Cahuasqui, 760 So.2d 1101 (Fla. 3d DCA 2000) applied F.S. §768.79 to PIP insurance claims which holding supported this court’s ruling thereby exposing MR. CASSIDY to possible fees.

³“Credit disability insurance” means insurance under which a borrower of money or a purchaser or a lessee of goods is insured in connection with a specific loan or credit transaction against loss of time resulting in accident or sickness. See F.S. §627.677.

⁴Although the case of Time Ins. Co. v. Arnold, 319 So.2d 638 (Fla. 1st DCA 1975) does not appear to have been officially overruled, the more recent opinions in Ivey, Palmer v. Fortune, Logue, and Ortega appear to overrule it sub-silencio. Moreover, Arnold is distinguishable.

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