Companion Property & Casualty Insurance Co. v. Category 5 Management Group, LLC , 189 So. 3d 905 ( 2016 )

IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
COMPANION PROPERTY & NOT FINAL UNTIL TIME EXPIRES TO
CASUALTY INSURANCE CO., FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
Appellant/Cross-Appellee,
CASE NO. 1D14-5863
v.
CATEGORY 5 MANAGEMENT
GROUP, LLC,
Appellee/Cross-Appellant.
_____________________________/
Opinion filed March 17, 2016.
An appeal from the Circuit Court for Escambia County.
J. Scott Duncan, Judge.
Peter D. Webster and Christine Davis Graves of Carlton Fields Jorden Burt, P.A.,
Tallahassee, for Appellant/Cross-Appellee.
Mark A. Newell, Mobile, Alabama and Kevin F. Masterson, Daphne, Alabama, for
Appellee/Cross-Appellant.
SWANSON, J.
This is an appeal and cross-appeal from a final judgment awarding
attorney’s fees to Category 5 Management Group, LLC (“Category 5”) in an
insurance coverage action. We affirm without discussion the trial court’s decision
to apply a contingency fee multiplier to enhance the attorney’s fee award.
However, for the reasons that follow, we reverse the trial court’s determination that
the contingency fee agreement did not contemplate payment of attorney’s fees for
the defense of Category 5 in the underlying Alabama personal injury lawsuit,
which was the subject of this insurance coverage action.
Category 5, a company located in Pensacola, purchased a commercial
general liability policy from Companion Property & Casualty Insurance Company
(“Companion”) for a one-year period commencing June 1, 2007, and ending June
1, 2008. In the summer of 2007, Companion was hired to supervise subcontractors
and their crews performing cleanup operations in New Orleans following
Hurricane Katrina. One of these subcontractors was Colonel McCrary Trucking,
which performed certain transportation-related services at the project site. Joe
Johnson, an employee of Colonel McCrary Trucking, worked at the site. On July
11, 2007, while driving a pickup truck owned by R.D. Construction (a
subcontractor of Colonel McCrary Trucking), Johnson ran a stop light in Alabama
and struck a car occupied by the Stewart family, severely injuring three family
members.
On December 31, 2007, the Stewart family filed a five-count personal injury
lawsuit in Alabama state court against several defendants, including Category 5.
Companion denied Category 5’s request for defense and indemnity, citing the
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“auto exclusion” of the policy as the sole basis for denial. Category 5
subsequently retained Masterson & Newell, LLC, to defend Category 5 against the
allegations of the Alabama lawsuit and to seek insurance coverage from
Companion. The contingency fee agreement between Category 5 and its counsel
provided in pertinent part:
Attorney Fees. This representation is made upon a
contingency-fee basis. Therefore, if no recovery is made,
Client will not be indebted to Attorneys for any sum
whatsoever as Attorney’s Fees. If a recovery is made,
the compensation to be paid to said Attorneys by Client
shall be a reasonable attorney’s fee as determined by the
Court or any appointed Master pursuant to Fla. Stat. Sec.
627.428, as supplemented by any multiplier which may
be awarded thereon pursuant to Florida law, and all
accrued interest thereon. Attorneys may associate with
other attorneys to assist with these matters. However,
under no circumstances will Client be responsible for
attorney’s fees in excess of the fees specified above.
Eventually, a consent judgment was entered against Category 5 and in favor of the
Stewart family for $6,000,000.00 in the Alabama lawsuit. The Stewart family
agreed not to record or execute the judgment against Category 5 in exchange for
Category 5’s promise to continue to prosecute its coverage action against
Companion and to pay the Stewarts any insurance proceeds collected from
Companion.
On July 15, 2008, Category 5 filed a complaint seeking a declaratory
judgment that the insurance policy issued by Companion provided coverage to
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Category 5 for the personal injury action brought by the Stewart family in
Alabama. Companion filed a motion for summary judgment on the ground that
Category 5 was not entitled to a defense or indemnity due to the “automobile
exclusion” contained in the policy. The trial court granted Companion’s motion
for summary judgment and dismissed Category 5’s complaint with prejudice. On
appeal, this court reversed and remanded for further proceedings after concluding
that Companion breached its duty to defend. Category 5 Mgmt. Group, LLC v.
Companion Prop. & Cas. Ins. Co., 76 So. 3d 20 (Fla. 1st DCA 2011).
On remand, the trial court granted Category 5’s motion for summary
judgment on the issue of coverage. However, the trial court granted Companion’s
motion for partial summary judgment, finding in pertinent part:
4. The Court concludes the contingency fee
agreement is plain and unambiguous in all respects.
Category 5 hired Masterson and Newell to represent it in
all litigation that related to the Alabama case and in any
claims involving liability insurance coverage. However,
the attorney fee section of the agreement plainly states
that “If a recovery is made, the compensation to be paid
to said Attorneys by Client shall be a reasonable
attorney’s fee as determined by the Court or any
appointed Master pursuant to Fla. Stat. Section 627.428,
as supplemented by any multiplier which may be
awarded thereon pursuant to Florida law, and all accrued
interest thereon.” The Court finds that the phrase “as
determined by the Court” is modified by the phrase
“pursuant to Fla. Stat. Section 627.428.” Thus, the plain
meaning of the contingency fee agreement is that the
attorney’s compensation is to be determined by the Court
pursuant to Section 627.428. Further, there is nothing in
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the contingency fee agreement that addresses the
compensation that may be owed to Category 5’s
attorneys for defending the company in the Alabama
litigation. In fact, the agreement clearly states that
“under no circumstances will Client be responsible for
attorney’s fees in excess of the fees specified above.”
5. The Court further finds that Section 627.428 is
not a basis to award those attorney fees which would be
classified as the damages suffered by an insured when its
insurance company breaches its duty to defend. While
the statute clearly permits Category 5 to recover the
attorney fees incurred in prosecuting its Florida suit
against Companion for coverage and duty to defend
issues, it does not provide for a recovery of the fees
incurred in defending the Alabama lawsuit (the
underlying litigation). When Category 5 signed the fee
agreement it only obligated itself to pay its attorneys
those fees that were awarded by a court pursuant to
Section 627.428. Because the fees incurred for the
Alabama litigation could not be awarded based upon
Section 627.428, Category 5 would not be obligated to
pay such fees to its attorneys.
After holding hearings on the award of attorney’s fees pursuant to section 627.428,
the trial court entered a final judgment awarding attorney’s fees to Category 5.
This appeal followed.
The intent of the parties to a contract should govern the construction of the
contract. Am. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 593 So. 2d 195,
197 (Fla. 1992). To determine the intent of the parties, a court should consider the
language in the contract, the subject matter of the contract, and the object and
purpose of the contract. Id. A court must construe a contract in a manner that
accords with reason and probability and avoids an absurd construction. Kipp v.
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Kipp, 844 So. 2d 691, 693 (Fla. 4th DCA 2003). The interpretation of a contract is
a question of law subject to de novo review. City of Tampa v. Ezell, 902 So. 2d
912, 914 (Fla. 2d DCA 1995).
In this case, Category 5 claims the trial court erred in construing the
contingency fee agreement as not contemplating payment of attorney’s fees for
defense of the Alabama tort litigation. Below, Companion argued the language of
the contingency fee agreement limited the recovery of attorney’s fees to those
incurred in litigating the Florida coverage action thereby allowing no recovery for
attorney’s fees incurred in defending Category 5 in the Alabama tort action. Even
though Category 5 and its counsel disputed that this was their intent when they
entered the contingency fee agreement, the trial court agreed with Companion and
granted partial summary judgment in Companion’s favor on this issue.
This ruling was in error because Companion had no standing to advance a
construction of the contingency fee agreement to which it was neither a party nor a
third-party beneficiary. See Gallagher v. Dupont, 918 So. 2d 342, 347 (Fla. 5th
DCA 2005) (“When a contract is designed solely for the benefit of the contracting
parties, a third party cannot enforce its provisions even though the third party may
derive some incidental or consequential benefit from the enforcement.”). Because
there is nothing in the contingency fee agreement demonstrating any intent to
benefit Companion, it cannot impose an interpretation of the agreement that runs
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counter to the intent of the parties to the contract, who agree that they
contemplated recovery of attorney’s fees incurred in defending the Alabama tort
action.
The inclusion of such fees is consistent with the subject matter and the
object and purpose of the contract, which contemplated bringing a lawsuit in
Florida against Companion for a breach of its duty to defend Category 5 in the
Alabama tort action. “The law is well established that when an insurer
unjustifiably refuses to defend its insured, the insurer is liable to the insured for the
reasonable attorney’s fees and other expenses incurred in defending the action
brought by the third party as damages for the breach of contract.” Fla. Ins. Guar.
Ass’n v. All the Way with Bill Vernay, Inc., 864 So. 2d 1126, 1129 (Fla. 2d DCA
2003). Thus, by bringing suit against Companion for breach of its duty to defend
Category 5 in the Alabama tort action, Category 5 and its counsel were seeking
damages from Companion in the form of attorney’s fees incurred in the Alabama
tort action. However, under Companion’s interpretation of the contingency fee
agreement, Category 5 and its counsel waived the legal right to recover these
damages, depriving counsel of substantial attorney’s fees and gifting Companion
with an unwarranted windfall by excusing it from the legal consequences of its
failure to defend Category 5. Such an interpretation is not compelled by the
language of the contingency fee agreement, is contrary to the intent of the parties
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to the contract, is not consistent with the subject matter or object and purpose of
the contract, and borders on the absurd insofar as it would compel counsel to
represent Category 5 pro bono in the Alabama tort action.
Concluding the trial court erred in construing the contingency fee agreement,
we reverse and remand for an award of reasonable attorney’s fees incurred by
Category 5 in defending the Alabama tort action. At this point, we decline to
address (1) whether Companion waived its right to a jury trial on the issue of the
reasonable amount of attorney’s fees incurred by Category 5 in the Alabama tort
action or (2) whether fees expended in pursuit of a defense and indemnity from
Colonel McCrary Trucking were a reasonable and necessary part of Category 5’s
defense in Alabama. Because they involve factual issues, these matters should be
resolved by the trial court on remand.
AFFIRMED in part; REVERSED in part; and REMANDED for further
proceedings.
LEWIS and WINOKUR, JJ., CONCUR.
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