A recent Florida case involved insureds whose home was insured by Citizens. On May 25, 2012, the home was damaged by water escaping from a broken plumbing system.1 Citizens’ adjuster inspected the home and noticed that the driveway and interior flooring had been trenched and the underground plumbing system had been removed by a plumbing company. Citizens took a recorded statement from the insureds, and paid them approximately $28,000.
Although the insureds testified under oath they had no plumbing problems prior to May 25, 2012, and did not know the plumbing company until the alleged date of loss, Citizens alleged that the plumbing company had been to the insureds’ home prior to May 25. Citizens further alleged that the insureds had met with the plumbing company the day before the reported date of loss to discuss a staged loss.
Four months later, the insureds sued Citizens for breach of contract, alleging that the total amount of the loss was more than $330,000 and that Citizens had refused to pay all covered losses. Citizens alleged an affirmative defense of fraud and also filed a counterclaim for unjust enrichment (to recoup the $28,000 it paid to the insureds).
At trial, on the breach of contract claim, the jury returned a verdict in favor of Citizens, and decided that Citizens proved by the greater weight of the evidence that the insureds intentionally concealed or misrepresented any material fact or circumstance and/or made false statements to Citizens when reporting the loss. On the counterclaim, the jury found that Citizens did not prove by the greater weight of the evidence that it would be unjust for the insureds to retain the $28,000 in insurance proceeds that Citizens paid prior to suit being filed.
The insureds then sought fees under Section 627.428(1), Florida Statutes, and costs under Section 57.041(1).
Section 627.428(1) provides:
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 … 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 … a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.
Section 57.041(1) provides:
The party recovering judgment shall recover all his or her legal costs and charges which shall be included in the judgment….
The trial court granted the insureds’ motion for attorneys’ fees and costs and Citizens appealed. Citizens argued that an award of attorney fees was contrary to public policy, specifically,
Florida’s public policy against material misrepresentations during the claims process; and (2) the public policy behind section 627.428, which is to discourage insurers from contesting valid claims.
The Third District Court of Appeal disagreed with Citizens and upheld the award of attorney fees to the insured, and stated:2
This Court has already spoken to this issue and has made clear that “we believe that modification of [section 627.428] to address false statements by an insured is best left to the legislature.” Mercury Ins. Co. of Fla. v. Cooper, 919 So.2d 491, 493 (Fla. 3d DCA 2005). Citizens seeks the very same remedy requested by the appellant in Cooper and rejected by our opinion in that case: “a judicially crafted exemption to section 627.428(1) in cases where there is insurance fraud.” Id. While Citizens’ argument may be persuasive to support a change in this area of the law (to allow for a fraud exception), we reaffirm that such a change must be effectuated legislatively, not judicially.
Regardless of what we might surmise as the reasons for the jury’s determinations, this much is clear: A judgment was entered in favor of Bascuas on Citizens’ counterclaim, satisfying the provisions of section 627.428(1) that there be a “rendition of a judgment … against an insurer and in favor of any … insured … under a policy or contract executed by the insurer….” Bascuas was therefore entitled to attorney’s fees for the successful defense of, and favorable judgment on, Citizens’ counterclaim, and the trial court properly awarded attorney’s fees and costs to Bascuas.