HERSHEL BRYANT and BETTY BRYANT v. GEOVERA SPECIALTY INSURANCE COMPANY

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
HERSHEL BRYANT and BETTY BRYANT,
Appellants,
v.
GEOVERA SPECIALTY INSURANCE COMPANY,
Appellee.
No. 4D18-189
[ May 8, 2019 ]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Jeffrey R. Levenson, Judge; L.T. Case No. CACE14-
022553.
David P. Pakula of David P. Pakula, P.A., Pembroke Pines, and David
A. Neblett and James M. Mahaffey of Perry & Neblett, P.A., Miami, for
appellants.
Maureen G. Pearcy and Andrew E. Grigsby of Hinshaw & Culbertson
LLP, Coral Gables, for appellee.
TAYLOR, J.
The insureds, Hershel and Betty Bryant, appeal a final summary
judgment in favor of GeoVera Specialty Insurance Company (“GeoVera”) in
the insureds’ suit for breach of contract and bad faith. The trial court
ruled that the insurance company complied with the homeowner’s
insurance policy, as a matter of law, by asserting coverage defenses pre-
suit and paying an appraisal award during suit. We reverse, because the
insurance company’s post-suit payment of the appraisal award
constituted a confession that it incorrectly denied benefits by erroneously
invoking the $1,000 leakage sublimit in its formal response to the claim
before the lawsuit. We also reverse summary judgment as to the insureds’
bad faith claim. Genuine issues of material fact remain.
I. Facts
A. The Policy
In February 2014, the insureds purchased a surplus lines homeowner’s
insurance policy from GeoVera with a policy term of 12 months. The policy
requires the insureds to provide GeoVera with a sworn proof of loss within
60 days of GeoVera’s request. The policy conditions further provide: “No
action can be brought against us [GeoVera] unless there has been full
compliance with all of the terms under Section I of this policy.” The policy
also contains an appraisal clause that allows either party to demand an
appraisal of the loss “[i]f you and we fail to agree on the amount of the
loss.” The policy’s loss-payment provision states that loss is payable “60
days after we receive your proof of loss” and there is either “an agreement
with you,” “an entry of a final judgment,” or “a filing of an appraisal award
with us.”
A policy endorsement contains a combined $5,000 sublimit for smog,
rust, mold, rot, or bacteria coverage and a combined $1,000 sublimit for a
covered loss caused by water seepage or leakage that occurs over a period
of 14 days or more.
B. The Loss
On April 28, 2014, a pipe leak in the insureds’ residence resulted in
damage to their home. The insureds hired a company to perform
emergency water-remediation services at a cost of $6,600. The insureds
reported the loss to GeoVera on May 13, 2014. On May 15, 2014,
GeoVera’s adjuster inspected the property and issued a repair estimate of
$21,372.31, allocating $3,597.11 as subject to the ensuing water loss
endorsement and $17,775.20 as subject to the mold endorsement.
On May 16, 2014, GeoVera requested a sworn proof of loss. The
insureds did not provide a sworn proof of loss within 60 days of the
request.
However, on June 19, 2014, before the 60 days for providing the proof
of loss had expired, GeoVera sent the insureds a formal response to their
claim. In the letter, GeoVera stated that the policy provided “limited
coverage for the ensuing water and rot/rust/mold damages.” GeoVera
stated that, based on its inspection of the damages, it had determined that
the water leakage had been ongoing for 14 days or more. GeoVera asserted
that coverage was limited to the $1,000 sublimit for water leakage and the
$5,000 sublimit for mold, rust, and rot damages. Accordingly, GeoVera
issued payment in the amount of $6,000. GeoVera also stated: “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
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should treat this correspondence as being our formal notification to you of
our position.” The letter was copied to the insureds’ public adjuster.
On June 20, 2014, the insureds’ public adjuster conducted its own
inspection of the property and issued a repair estimate of $44,731.49.
However, there is no record evidence as to whether this estimate was
submitted to GeoVera before the insureds filed suit.
C. The Pleadings
In November 2014, the insureds filed suit against GeoVera. They later
filed a Verified Amended Complaint, asserting three counts: (1) breach of
contract; (2) petition for appraisal; and (3) statutory bad faith in violation
of section 624.155, Florida Statutes.
On the same day they filed their amended complaint, the insureds
provided GeoVera with a sworn proof of loss.
GeoVera answered the amended complaint and asserted affirmative
defenses, including the defense that coverage was limited to the $1,000
water leakage sublimit and the $5,000 mold sublimit. In its answer,
GeoVera denied the insureds’ allegation that the public adjuster
demanded an appraisal, but admitted the insureds’ allegation that
“[GeoVera] refused to begin the appraisal process, notwithstanding the
language of the subject policy.” GeoVera also admitted that a sworn proof
of loss had been filed, but denied that it was timely.
D. Agreed Order Staying Counts I and II and Abating Count III
GeoVera moved to stay Counts I and II and to abate Count III. The trial
court entered an agreed order on the motion, directing that: (1) the parties
were to comply with the policy’s appraisal provision; (2) the appraisal
award would include an itemization of any damages coming within the
leakage sublimit, any damages coming within the mold sublimit, and any
covered damages that did not fall within those sublimits; (3) Counts I and
II would be stayed until the appraisal award had been issued and GeoVera
had sufficient time to pay the award; and (4) Count III would be abated
until Counts I and II had been adjudicated.
E. The Appraisal
The appraisal award was issued in January 2016. It itemized the
damages as follows: $30,963.62 for “dwelling,” $14,477.99 for “mold,” and
$6,600 for “EMS.” The appraisal award did not identify any damages as
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being subject to the $1,000 leakage sublimit. Nonetheless, GeoVera could
have continued to litigate the coverage issue of whether the $1,000 leakage
sublimit applied to the loss. See 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”).
Instead, in February 2016, GeoVera paid $29,963.62 to the insureds
and $6,600 to the water mitigation company. The total amount paid
represented the balance due under the appraisal award after taking into
account the $6,000 prior payment and the $5,000 sublimit for mold.
F. The Lifting of the Stay
In March 2017, over a year after the appraisal award, the insureds
moved to lift the stay and the trial court granted the motion.
G. Summary Judgment Proceedings and Final Judgment
GeoVera then moved for summary judgment, arguing that it was not
liable for breach of contract or bad faith because: (1) the insureds never
disputed GeoVera’s adjustment of the loss pre-suit, either with regard to
the coverage sublimits or the amount of the loss; (2) the insureds failed to
comply with GeoVera’s demand for a sworn proof of loss; and (3) GeoVera
acted in good faith by participating in the appraisal process and timely
paying the appraisal award. In support of its motion, GeoVera submitted
the affidavit of one of its managers, who attested that “[n]o estimate or
sworn proof of loss was received.” The insureds filed a response in
opposition to summary judgment.
The trial court granted the motion for summary judgment, ruling that
there was no evidence the insureds had disputed GeoVera’s adjustment of
the loss pre-suit. However, the trial court allowed the insureds to file a
motion for rehearing to provide additional evidence showing that their
public adjuster had disputed GeoVera’s adjustment of the claim.
After the trial court entered final summary judgment, the insureds
moved for rehearing, arguing that there were genuine issues of material
fact remaining. They filed the affidavits of their public adjuster and Ms.
Bryant.
The insureds filed a notice of appeal. We stayed the appeal pending a
ruling on the motion for rehearing. The trial court denied the motion for
rehearing, allowing this appeal to proceed.
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II. Arguments and Analysis
A. Parties’ Arguments
On appeal, the insureds argue that the trial court reversibly erred in
concluding that GeoVera complied with the insurance policy as a matter
of law. The insureds contend that GeoVera’s payment of the appraisal
award constituted a confession that it breached the policy by erroneously
invoking the $1,000 leakage sublimit. Furthermore, the insureds argue
that GeoVera’s payment of $1,000 towards the water loss and its denial of
coverage above that amount constituted a waiver of the proof-of-loss
requirement. Similarly, the insureds maintain that GeoVera’s notification
that it was limiting the coverage on the water loss to $1,000 constituted
an anticipatory breach of contract, giving rise to an immediate right to sue
and rendering it unnecessary for the insureds to contest GeoVera’s
erroneous position before filing suit. Finally, the insureds argue that
GeoVera’s confession of judgment entitles them to an award of attorney’s
fees and also serves as the necessary predicate to allow their bad faith
claim to proceed.
GeoVera responds that the trial court correctly entered summary
judgment in its favor, arguing that: (1) GeoVera’s payment of the appraisal
award was pursuant to the policy and cannot constitute a breach of
contract or a confession of judgment where the insureds prematurely filed
suit before they complied with their post-loss duty to provide a sworn proof
of loss; (2) GeoVera’s pre-suit application of the policy sublimits did not
establish a breach or an anticipatory breach where the insureds “never
disputed the payment” pre-suit; (3) GeoVera’s pre-suit payment of the
policy sublimits did not constitute a waiver of the proof-of-loss
requirement; and (4) summary judgment was proper on the bad faith
count because GeoVera complied with the terms of the insurance contract
by participating in the appraisal process and paying in a timely manner.
B. Standard of Review
A summary judgment is reviewed de novo. Haber v. Deutsche Bank
Nat’l Tr. Co., 81 So. 3d 565, 566 (Fla. 4th DCA 2012).
C. Whether GeoVera’s Post-Suit Payment was a Confession of Judgment
The first issue we address is whether GeoVera’s payment of the
appraisal award constituted a confession that it breached the policy by
applying the $1,000 leakage sublimit in its formal response to the claim.
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“[I]t 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.” Johnson v. Omega Ins. Co., 200 So. 3d 1207, 1215 (Fla.
2016). 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.” State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla.
5th DCA 2007).
The 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.” See, e.g., State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187
So. 3d 932, 935 (Fla. 4th DCA 2016). 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.”
Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000). 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. 1 Johnson,
200 So. 3d at 1219.
An attorney’s fees award is also appropriate “where, following some
dispute as to the amount owed by the insurer, the insured files suit and,
thereafter, the insurer invokes its right to an appraisal and, as a
consequence of the appraisal, the insured recovers substantial additional
sums.” Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla.
4th DCA 2009).
1 Most of the cases addressing the confession-of-judgment doctrine involved the
application of section 627.428, Florida Statutes. As a surplus lines carrier,
however, GeoVera is exempt from the provisions of Chapter 627, including
section 627.428, Florida Statutes. See § 626.913(4), Fla. Stat. (2014) (providing
that “[e]xcept as may be specifically stated to apply to surplus lines insurers, the
provisions of chapter 627 do not apply to surplus lines insurance”). Nonetheless,
surplus lines carriers are subject to an attorney’s fees statute that is nearly
identical to section 627.428. See § 626.9373, Fla. Stat. (2014). Because section
626.9373 is patterned after section 627.428, the confession-of-judgment doctrine
applicable to section 627.428 applies equally to section 626.9373. See Capitol
Specialty Ins. Corp. v. Ortiz, No. 17-23329-Civ-SCOLA/TORRES, 2019 WL
383868, at *3 (S.D. Fla. Jan. 15, 2019) (explaining that sections 627.428 and
626.9373 “are nearly identical” and that “courts apply the two fee provisions in
the same way”).
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Even after Johnson, not all post-suit payments by an insurer will
constitute a confession of judgment. We recently held that where an
insurer valued a loss, issued payment, and was unaware of the insured’s
disagreement with the damage valuation until the filing of the complaint,
the insurer’s timely payment of an appraisal award during the litigation
did not constitute a confession that the insurer breached the insurance
policy. See Goldman v. United Servs. Auto. Ass’n, 244 So. 3d 310, 311–12
(Fla. 4th DCA 2018).
In Goldman, we explained that “[t]here was never a breakdown in the
claims adjusting or communications process, nor was there a refusal to
pay the claim.” Id. at 311. Furthermore, we characterized the situation
as one where “the insured never gave the insurer the opportunity to
incorrectly deny the benefits before filing a lawsuit.” Id. at 312.
The present case is more like Johnson than Goldman. Here, although
GeoVera did not completely deny coverage for the loss, GeoVera did deny
coverage above the $1,000 leakage sublimit and the $5,000 mold sublimit.
GeoVera’s formal response to the claim was not merely a valuation of the
loss—it was a partial denial of coverage.
Before the lawsuit, GeoVera knew that the water-loss damages other
than mold were at least $10,000, 2 but GeoVera’s response was a refusal
to pay part of the claim due to a coverage issue. While Johnson involved
a total denial of coverage, we conclude that an incorrect partial denial of
benefits also suffices to give rise to a confession of judgment. See Ivey,
774 So. 2d at 684 (holding that insurer’s payment after suit was filed
operated as a confession of judgment where the insurer incorrectly
reduced benefits before suit based on its erroneous assumption that
treatment covered only one of two injuries).
Under Johnson, “[o]nce an insurer has incorrectly denied benefits and
the policyholder files an action in dispute of that denial, the insurer cannot
then abandon its position without repercussion.” 200 So. 3d at 1218.
Here, the insurer’s payment of the appraisal award of $37,563.62
demonstrated that GeoVera had abandoned its pre-suit coverage position
that the claim was subject to the $1,000 sublimit for long-term water
leakage.
In this case, unlike in Goldman, GeoVera’s response to the claim
invoked coverage defenses. And there was a pre-suit refusal by the insurer
2 This $10,000 figure consists of the $6,600 water-remediation bill plus the
$3,597.11 repair estimate by GeoVera’s adjuster for the ensuing water loss.
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to pay a portion of the claim—that is, any amount of water damage (aside
from mold) that exceeded the $1,000 leakage sublimit. By invoking the
$1,000 leakage sublimit, GeoVera raised a coverage issue that only a court
could resolve. This coverage issue went beyond a mere dispute about the
valuation of the loss, so the insureds could not have simply invoked the
policy’s appraisal provision before filing suit.
Because GeoVera invoked the $1,000 leakage sublimit to deny coverage
for a portion of the claim, it was of no consequence whether the insureds
notified GeoVera pre-suit that they were disputing GeoVera’s coverage
position or damage valuation. Once GeoVera incorrectly invoked the
$1,000 leakage sublimit and notified the insureds that it would not pay
any non-mold-related water damage above that amount, GeoVera
committed an anticipatory breach of the policy and created an immediate
right of action for the insureds, even though GeoVera’s repudiation took
place before the time prescribed for the promised performance under the
policy’s loss-payment provision. 3 See Peachtree Cas. Ins. Co. v. Walden,
759 So. 2d 7, 8 (Fla. 5th DCA 2000) (holding that an insurer’s notice that
it would no longer pay benefits constituted an anticipatory breach of its
agreement to provide those benefits).
In short, GeoVera’s payment of the appraisal award constituted a
confession that it incorrectly denied benefits by erroneously invoking the
$1,000 leakage sublimit in its formal response to the claim before the
lawsuit.
D. Whether GeoVera Waived the Proof-of-Loss Requirement
The next issue we address is whether GeoVera waived the proof-of-loss
requirement by its payment of the policy sublimits and its denial of
coverage above those amounts.
A policy provision requiring an insured to submit a sworn proof of loss
is a condition precedent to a suit against an insurer. Soronson v. State
Farm Fla. Ins. Co., 96 So. 3d 949, 952 (Fla. 4th DCA 2012). But where 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.” Keel v. Indep. Life & Acc. Ins. Co., 99 So. 2d 225,
227 (Fla. 1957). “When the insurer denies in advance that it has any
liability under the policy coverage, the formal filing of a proof of loss
3In light of this conclusion, we need not reach the insureds’ alternative argument
that the affidavits they filed on rehearing created a genuine issue of material fact
as to whether they contested GeoVera’s adjustment of the claim pre-suit.
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becomes, in the eyes of the law, a useless and unnecessary thing that
would accomplish nothing.” Id. 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. Wegener v. Int’l
Bankers Ins. Co., 494 So. 2d 259, 259 (Fla. 3d DCA 1986).
In this case, GeoVera’s denial of liability above the sublimits was “based
upon grounds other than failure to furnish a notice or proof of loss,” which
is tantamount to a waiver of a formal proof of loss. Keel, 99 So. 2d at 227.
Although Keel involved a complete denial of coverage, we conclude that its
reasoning applies equally to the partial denial of coverage in this case.
Once GeoVera denied in advance that it had any liability above the
policy sublimits, “the formal filing of a proof of loss [became], in the eyes
of the law, a useless and unnecessary thing that would accomplish
nothing.” Id. Here, a sworn proof of loss would have done nothing to
resolve the coverage issues raised in GeoVera’s formal response to the
claim—for example, it would not have resolved whether the water leakage
had been occurring for more than 14 days so as to trigger application of
the $1,000 leakage sublimit.
Moreover, 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. 4 See 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”). Under the circumstances here, a sworn proof of loss would
have been a useless act.
We conclude that GeoVera waived the proof-of-loss requirement by
denying coverage above the sublimits based upon grounds other than the
insureds’ failure to furnish a notice or proof of loss. We need not decide
whether GeoVera waived the proof-of-loss requirement for the additional
4 The 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.
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reason that it admitted liability in some amount when it paid the coverage
sublimits. 5
E. Whether Summary Judgment was Proper on the Bad Faith Count
Finally, we address whether summary judgment was proper on the bad
faith count.
“[A] claim for bad faith pursuant to section 624.155(1)(b)1 is founded
upon the obligation of the insurer to pay when all conditions under the
policy would require an insurer exercising good faith and fair dealing
towards its insured to pay.” Vest v. Travelers Ins. Co., 753 So. 2d 1270,
1275 (Fla. 2000). “A duty of good faith must relate to the performance of
an express term of the contract and is not an abstract and independent
term of a contract which may be asserted as a source of breach when all
other terms have been performed pursuant to the contract requirements.”
QBE Ins. Corp. v. Chalfonte Condo. Apartment Ass’n, Inc., 94 So. 3d 541,
548 (Fla. 2012) (internal quotation marks omitted). The obligation of good
faith “on the part of an insurer requires the insurer to timely evaluate and
pay benefits owed on the insurance policy.” Vest, 753 So. 2d at 1275.
“It 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.” Trafalgar at Greenacres, Ltd.
v. Zurich Am. Ins. Co., 100 So. 3d 1155, 1157 (Fla. 4th DCA 2012). “[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
5 In a long line of cases, Florida courts have held that an insurer waives the
requirement of a formal proof of loss when it admits liability in some amount.
See Bear v. N.J. Ins. Co., 189 So. 252, 252 (Fla. 1939); Cincinnati Ins. Co. v.
Palmer, 297 So. 2d 96, 98 (Fla. 4th DCA 1974); English & Am. Ins. Co. v. Swain
Groves, Inc., 218 So. 2d 453, 457 (Fla. 4th DCA 1969); Llerena v. Lumbermens
Mut. Cas. Co., 379 So. 2d 166, 167 (Fla. 3d DCA 1980). By contrast, in Rodrigo
v. State Farm Florida Insurance Co., 144 So. 3d 690, 692 (Fla. 4th DCA 2014), we
held that “the insurer did not waive the sworn proof of loss requirement by
tendering payment because ‘[i]nvestigating any loss or claim under any policy or
engaging in negotiations looking toward a possible settlement of any such loss or
claim’ does not constitute a waiver of a ‘sworn proof of loss’ requirement.” (quoting
§ 627.426(1)(c), Fla. Stat. (2007)). Our resolution of the instant case does not
require us to address any inconsistency between Rodrigo and the Bear line of
cases.
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faith action becomes ripe.” Cammarata v. State Farm Fla. Ins. Co., 152 So.
3d 606, 610 (Fla. 4th DCA 2014).
“[A]n appraisal award pursuant to an insurance contract constitutes a
‘favorable resolution’ of an underlying breach of contract dispute for
purposes of filing a bad faith cause of action.” Trafalgar, 100 So. 3d at
1156. Moreover, a summary judgment in favor of the insurer on the
underlying breach of contract action does not preclude an insured’s ability
to pursue a bad faith claim. Id. at 1158.
Here, the insureds’ bad faith claim is ripe because GeoVera’s liability
for coverage and the extent of the damages have been established.
GeoVera’s payment of the appraisal award, which included amounts in
excess of the $1,000 leakage sublimit, constituted a waiver of GeoVera’s
previous coverage defense based on that sublimit. Although our case law
does not require a breach of contract as a prerequisite to a bad faith claim,
we note that GeoVera did breach the policy by erroneously invoking the
$1,000 leakage sublimit in its formal pre-suit response to the claim.
On this record, GeoVera has not shown that it acted in good faith as a
matter of law. Genuine issues of material fact remain as to whether
GeoVera exercised good faith and fair dealing towards the insureds when
it incorrectly invoked the $1,000 leakage sublimit in its formal response
to the claim. GeoVera’s liability for bad faith will turn on whether
GeoVera’s denial of coverage above the $1,000 leakage sublimit was in
good faith. See Vest, 753 So. 2d at 1275 (“The insurer has a right to deny
claims that it in good faith believes are not owed on a policy. Even when
it is later determined . . . that the insurer’s denial was mistaken, there is
no cause of action if the denial was in good faith.”).
For the above reasons, we reverse the summary judgment on the bad
faith count.
III. Conclusion
We reverse the final summary judgment and remand with instructions
for the trial court: (1) to treat GeoVera’s post-suit payment of the appraisal
award as a confession of judgment that it breached the policy by
erroneously applying the $1,000 leakage sublimit in its formal response to
the insureds’ claim; (2) to allow the insureds’ bad faith claim to proceed;
and (3) to conduct further proceedings consistent with this opinion.
Reversed and Remanded.
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CIKLIN and LEVINE, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
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