Analysis and Interpretation by  Michael A. Cassel

On May 8, 2019, the Fourth District Court of Appeals released their decision in Hershel Bryant and Betty Bryant v. GeoVera Specialty Insurance Company (hereinafter " Bryant").  The Bryant opinion discusses the payment of an appraisal award in suit operating as a confession of judgment and serving to ripen bad faith as well as the denial of payment operating as a waiver of compliance with post-loss conditions – namely the proof of loss requirement.  

Background and Facts

On April 28, 2014, the insureds sustained a plumbing leak causing damage to their property.  On May 13, 2014, the insureds subsequently filed their claim with GeoVera under their policy which contained a $5,000 sublimit for smog, rust, mold, rot, or bacteria damages and a $1,000 sublimit for a covered loss caused by water seepage or leakage that occurs over a period of 14 days.  On May 15, 2014, GeoVera inspected and determined the damages in the amount of $21,372.31 broken down as $3,597.11 for the ensuing water loss and $17,775.20 for mold. 

On May 16, 2014, GeoVera sent a request for a sworn proof of loss within the 60 days mandated by the policy.  On June 19, 2014, prior to the expiration of the 60 days time period, GeoVera sent correspondence asserting that coverage was limited a total of $6,000 under the above referenced sublimits.  This correspondence also contained the following language: “Unless additional information is provided to us and we notify you that we are agreeing to reopen your claims and consider the matter further, you should treat this correspondence as being our formal notification to you of our position.” 

On June 20, 2014, the insureds' adjuster inspected the property and estimate damages in the amount of $44,731.49; however, there is no indication that this was provided prior to the insureds initiating their lawsuit in November 2014 which included a count for breach of contract, a petition to compel appraisal, and a count alleging statutory bad faith in violation of Florida Statutes.  Also, at some point during the onset of the litigation, the insureds submitted a sworn proof of loss.  In response to the complaint, GeoVera admitted that it received a proof of loss but denied that it was timely and, furthermore, denied there was a request for appraisal pre-suit but admitted that they refused to participate in appraisal.  Then, during litigation, the parties agreed to stay the breach and petition counts and abate the bad faith count in the complaint and proceed with appraisal.

In January 2016, the appraisal award was entered in the amount of $30,963.62 for the dwelling, $14,477.99 for mold, and $6,600.00 for emergency mitigation services.  The award did not, however, address the application of the $1,000 sublimit.  In February 2016, GeoVera paid the insureds $29,963.62 subject to a set off of the $6,000.00 prior payment and subject to the $5,000 mold sublimit.  They did not attempt to enforce the $1,000 leakage sublimit.

In March 2017, over a year after the payment of the appraisal award, the insureds moved to lift the agreed upon stay in litigation which was, in turn, granted by the court.  GeoVera then filed a motion for summary judgment arguing that 1) it did not breach the contract or act in bad faith as the insureds never disputed the coverage afforded pre-suit, 2) the insureds failed to timely present a sworn proof of loss, and 3) they did not act in bad faith by participating in the appraisal process and timely paying the award.  The court granted this motion and the appeal followed addressing each of the issues raised in GeoVera's motion for summary judgment.

4th DCA Opinion

First, on the issue of confession of judgement, the 4th DCA stated that “it is well settled that the payment of a previously denied claim following the initiation of an action for recovery, but prior to the issuance of a final judgment, constitutes the functional equivalent of a confession of judgment.” [1]  The confession-of-judgment doctrine “applies where the insurer has denied benefits the insured was entitled to, forcing the insured to file suit, resulting in the insurer's change of heart and payment before judgment.” [2]  The court noted that “[t]he confession-of-judgment doctrine is limited to situations where the filing of the lawsuit ‘acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.'” [3]  “However, ‘[i]t 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.'” [4]  “Thus, ‘an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient' to constitute a confession of judgment and to allow the insured to recover attorney's fees.” [5]  The court held that GeoVera's application of the policy's sublimits and subsequent withdrawal of same through their payment was sufficient to constitute a denial of coverage thereby warranting the application of the confession of judgment doctrine.

Next, on the issue of the production/timeliness of the proof of loss, the 4th DCA found that “[w]here an insurer's ‘denial of liability is based upon grounds other than failure to furnish a notice or proof of loss, such denial is tantamount to a waiver of the policy requirements… When the insurer denies in advance that it has any liability under the policy coverage, the formal filing of a proof of loss becomes, in the eyes of the law, a useless and unnecessary thing that would accomplish nothing.' ” [6] Thus, the effect of an insurer's improper repudiation of coverage is ‘to waive any right to insist upon the insureds' necessarily-thus-futile compliance' with policy conditions.” [7]  Because GeoVera denied any additional liability in advance, it was held that the filing of the proof of loss was, in fact, useless and unnecessary.

Finally, on the issue of the dismissal of the insureds' bad faith cause of action, the 4th DCA noted that “‘[i]t is well settled that a statutory first-party bad faith action is premature until two conditions have been satisfied: (1) the insurer raises no defense which would defeat coverage, or any such defense has been adjudicated adversely to the insurer; and, (2) the actual extent of the insured's loss must have been determined.” [8] “[A]n insurer's liability for coverage and the extent of damages, and not an insurer's liability for breach of contract, must be determined before a bad faith action becomes ripe.” [9]

Analysis, Impact, and Effect

It is easy to look at Bryant on its face and think that this is a massive victory for policyholders' rights; however, while it is certainly a very favorable opinion, there are a few distinguishing factors that must be noted before we get into further analysis.  First, this case does not discuss the applicability of any of the extremely constrictive sublimits relied upon by GeoVera.  In fact, the Bryant court specifically stated that “GeoVera could have continued to litigate the coverage issue of whether the $1,000 leakage sublimit applied to the loss.” [10]  Next, as further discussed below, the Bryant court did not reinvent the proverbial wheel with regards to the confession of judgement doctrine or the ripeness of bad faith.  The court simply relied upon well-established maxims set forth in the law cited within the opinion.  Finally, the facts of the case were quite anomalous based on the application of the sublimits in conjunction with the language utilized in the coverage determination letter and the overall timeline of the claim.  As GeoVera knew that the damages exceeded the sublimits but did not pay in excess of same until the appraisal award was entered, the court regarded this as an anticipatory denial which, without the inclusion of same, may have entirely changed the outcome of the case. 

Section 627.428, Florida Statutes, provides that, in the event of a judgment in favor of an insured, the insurance carrier must pay reasonable attorney's fees and costs. [11]  “Section 627.428 was intended ‘to discourage the contesting of valid claims against insurance companies and to reimburse successful insureds for their attorney's fees when they are compelled to defend or sue to enforce their insurance contracts.'” [12]  “[A]lthough the statute requires the ‘rendition of a judgment' in favor of the insured, where an insurer pays the policy proceeds after a suit has been filed but before a judgment has been rendered, ‘the payment of the claim is, indeed, the functional equivalent of a confession of judgment or a verdict in favor of the insured.'” [13]  As such, the courts should determine that confession of judgment has occurred when the filing of the lawsuit is warranted and results in the insurance carrier reversing its original position. [14]  It is clear that the Bryant court correctly found, in line with existing precedent, that the payment of the appraisal award in this matter operated as a confession of judgment thereby entitling the insureds to reasonable attorney's fees and costs under the governing Florida Statutes.

We previously discussed the scope of appraisal and the ripeness of bad faith as a result of the payment of an appraisal award in our analysis of People's Trust v. Tracey. [15]  As a brief recap related to the scope of appraisal, Johnson v. Nationwide has long held that "causation is a coverage question for the court when an insurer wholly denies that there is a covered loss and an amount-of-loss question for the appraisal panel when an insurer admits that there is covered loss, the amount of which is disputed." [16]  The Tracey court extended the maxims from Johnson to include any claim where coverage has been afforded in whole or in part.  With that said, issues of coverage in the counties governed by the 4th DCA must be adjudicated prior to a trial court sending parties to appraisal. [17]   In fact, the Bryant court mentioned this in discussing the proof of loss requirement stating “because GeoVera had raised coverage defenses, the insureds had no right to demand an appraisal under the policy until the coverage issues had been resolved.” [18]  The Bryant court went on to note that “[t]he only reason the claim eventually proceeded to appraisal here was because the parties agreed to a line-item appraisal during the litigation to assist in resolving the coverage dispute. However, the coverage questions ultimately would have been questions for the court—not the appraisers.” [19]  As such, it seems GeoVera could have avoided appraisal entirely should it have desired if it had maintained its application of the policy's sublimits.

The Civil Remedy Notice in this matter was filed on May 29, 2015.  The agreed order staying the breach of contract and petition and abating the bad faith count was entered on July 21, 2015.  This means GeoVera gave themselves one (1) week to complete the appraisal process prior to the expiation of the statutorily afforded 60 day cure period for the Civil Remedy Notice.  There is no question that the February 2016 payment of the appraisal award constituted both a waiver of its coverage defenses and a confession of judgement as well as ripened a bad faith cause of action.  Again, to recap our prior analysis, there are three (3) elements which must be met in order for a bad faith cause of action to become ripe:  (1) the insurer raises no defense which would defeat coverage, or any such defense has been adjudicated adversely to the insurer; (2) the actual extent of the insured's loss must have been determined; and (3) the insured must be indemnified for its damages after the expiration of a properly served Civil Remedy Notice. [20]   With that said, there is no requirement that the CRN be filed at any specific time and Florida courts have consistently held that the payment of an appraisal award after the expiration of a CRN is sufficient to satisfy the conditions precedent to a claim for statutory bad faith. [21]  As such, GeoVera should have known that its payment in full of the appraisal award was going to result in additional litigation on the issue of bad faith thereby allowing further damages to be sought and an extremely broad scope of discovery to be conducted.

Perhaps the most compelling language contained in the Bryant opinion deals with the denial of coverage operating as a waiver of compliance with the proof of loss requirement.  The Bryant court cited to Keel v. Indep. Life & Acc. Ins. Co., an older Florida Supreme Court opinion, which held that a denial “‘based upon grounds other than failure to furnish a notice or proof of loss…' is tantamount to a waiver of a formal proof of loss.” [22]  The Bryant court went on to expound upon this sentiment in stating that, “[a]lthough  Keel involved a complete denial of coverage, we conclude that its reasoning applies equally to the partial denial of coverage in this case.” [23]  This can be extrapolated to mean, at least in the eyes of the 4th DCA, that any denial of coverage, either in whole or in part, which does not specifically relate to the failure to comply with a post-loss condition waives any such compliance with policy conditions.  This is particularly important considering the manner in which many carriers assert lack of compliance with conditions precedent as defenses despite having already rendered a coverage determination and underpaid a claim resulting in a constructive denial of additional coverage.  Perhaps the Bryant opinion will dissuade attorneys from asserting such frivolous defense in the future.

Should you have any questions about how this analysis may relate to your own claim,  please do not hesitate to contact us for a free consultation.​​

[1] Bryant v. GeoVera Specialty Ins. Co., No. 4D18-189, 2019 WL 2017972 at *4 (4th DCA 2019) quoting Johnson v. Omega Ins. Co., 200 So. 3d 1207, 1215 (Fla. 2016)

[2] Id. quoting State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007)

[3] Id. quoting State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So. 3d 932, 935 (Fla. 4th DCA 2016)

[4] Id. quoting Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000)

[5] Id. quoting Johnson, 200 So. 3d at 1219

[6] Id. at 5 quoting Keel v. Indep. Life & Acc. Ins. Co., 99 So.2d 225, 227 (Fla. 1957)

[7] Id. quoting Wegener v. Int'l Bankers Ins. Co., 494 So.2d 259, 259 (Fla. 3d DCA 1986)

[8] Id. at 7 quoting Trafalgar at Greenacres, Ltd. v. Zurich Am. Ins. Co., 100 So.3d 1155, 1157 (Fla. 4th DCA 2012)

[9] Id. quoting Cammarata v. State Farm Fla. Ins. Co., 152 So.3d 606, 610 (Fla. 4th DCA 2014)

[10] Bryant at 2 citing Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021, 1025 (Fla. 2002) (holding that coverage issues are to be “judicially determined by the court” and are “not subject to a determination by appraisers”).

[11] Fla. Stat. § 627.428 (2019)

[12] Progressive Express Ins. Co. v. Schultz, 948 So. 2d 1027, 1029-30 (Fla. 5th DCA 2007) (quoting Ins. Co. of N. Am. v. Lexow, 602 So. 2d 528, 531 (Fla. 1992))

[13] Do v. GEICO Gen. Ins. Co., 137 So. 3d 1039, 1043 (Fla. 3d DCA 2014) citing Wollard v. Lloyd's & Cos. of Lloyd's, 439 So. 2d 217, 218 (Fla. 1983)

[14] Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009)

[15] People's Tr. Ins. Co. v. Tracey, 251 So. 3d 931 (Fla. 4th DCA 2018)

[16] Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021, 1022 (Fla. 2002).

[17] Citizens Prop. Ins. Corp. v. Michigan Condo. Ass'n, 46 So. 3d 177, 178 (Fla. 4th DCA 2010) (certifying conflict with this Court's decision in Rawlins); Sunshine State Ins. Co. v. Corridori, 28 So. 3d 129, 130 (Fla. 4th DCA 2010).

[18] Bryant at 6 citing Citizens Prop. Ins. Corp. v. Demetrescu, 137 So.3d 500, 502–03 (Fla. 4th DCA 2014) (holding that insureds could not compel an appraisal until all underlying coverage disputes had been resolved); see also Johnson v. Nationwide Mut. Ins. Co., 828 So.2d 1021, 1025 (Fla. 2002) (holding that coverage issues are to be “judicially determined by the court” and are “not subject to a determination by appraisers”).

[19] Id. at fn. 4

[20] See Vest v. Travelers Ins. Co., 753 So. 2d 1270, 1275-76 (Fla. 2000); Blanchard v. State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55 (Fla. 1995); Landers v. State Farm Florida Ins. Co., 234 So. 3d 856 (Fla. 5th DCA 2018).

[21] Cammarata v. State Farm Florida Ins. Co., 152 So. 3d 606 (Fla. 4th DCA 2014); Demase v. State Farm Florida Ins. Co., 239 So. 3d 218, 223 (Fla. 5th DCA 2018)

[22] Bryant at 5 quoting Keel v. Indep. Life & Acc. Ins. Co., 99 So.2d 225, 227 (Fla. 1957)

[23] Id. at 6