Middle District of Florida Addresses Insured’s Claims for Delay Damages, Appraisal Costs, Legal/Prejudgment Interest and Attorneys’ Fees in Bad Faith Action

By Jonathan S. Wickham

The Middle District of Florida recently had an opportunity to address an insured’s claims for: (1) delay damages; (2) appraisal costs; (3) legal and prejudgment interest; and (4) attorneys’ fees in the context of a bad faith action in the case of Las Brisas Condo Homes Condo Ass’n Inc., v. Empire Indem. Ins. Co., 2024 U.S. Dist. LEXIS (M.D. Fla. 2024). Las Brisas involved a bad faith action stemming from an insurance dispute. Following Hurricane Irma, Las Brisas submitted an insurance claim for storm-related damage to its insurer, Empire. Within weeks of receiving the claim, Empire sent a field adjuster to survey the damage. The field adjuster reported “severe wind damage to tile roofs on all locations.” According to an email in Empire’s file, he estimated the damage at $1 to $1.5 million.

Empire then retained a structural engineer to inspect the property. His report, in contrast to the field adjuster’s findings, found no storm-related damage. The engineer attributed the roof problems to “foot traffic, wear and tear, [and] thermal expand and contraction.”

Unhappy with Empire’s handling of its claim, Las Brisas filed a civil remedy notice (“CRN”), a statutory prerequisite to filing a bad faith claim, with the Florida Department of Financial Services. While the CRN was pending, Empire sent Las Brisas a check for $207,313.21. However, several days later, Empire denied coverage, and in response to the CRN, stated that the check was sent in error based on a misinterpretation of its engineer’s report. Unable to resolve the remaining claim, the parties went to appraisal, where Las Brisas obtained a $788,230.07 award. The bad faith action followed.

In the bad faith action, Las Brisas sought several categories of damages. The Middle District of Florida’s Order addressed Las Brisas’ claims for: (1) delay damages; (2) costs of appraisal; (3) interest and prejudgment interest; and (4) attorney’s fees. Empire moved for summary judgment on these damages, arguing that they were not recoverable. The Court denied the motion, and stated that Empire’s arguments concerning the relief sought were better addressed through motions in limine or jury instructions.

As a result, Empire retitled its motion for summary judgment and filed it as a motion in limine. Once again, it asked the Court to preclude Las Brisas from referencing or seeking delay damages, prejudgment interest, attorney’s fees, and the costs associated with appraisal at trial and argued that those categories of damages were not recoverable as a matter of law.

With regard to the claim for delay damages, Las Brisas sought $711,769.93 in delay damages. This represented the difference between the high-end of Empire’s field adjuster’s estimate to replace Las Brisas’ roofs and the appraisal award Las Brisas received.

Empire contended that evidence of its field adjuster’s estimate was irrelevant because the policy language confirmed the binding nature of the appraisal award. Empire essentially argued that Las Brisas sought a $1.5 million roof replacement at appraisal, the appraisal panel awarded a lesser amount, that decision was binding on the parties, and consequently, Las Brisas was not permitted to come to Court to obtain the un-awarded difference.

The Court held that Empire was correct that the appraisal process was a binding determination of the damages owed under the policy. The Court noted that the appraisal panel rejected Las Brisas’ claim for a $1.5 million roof replacement, awarding it $788,230.07 to perform repair work, and that allowing Las Brisas to relitigate its entitlement to the difference would obviate the parties’ contact and subvert the appraisal process. The Court therefore concluded that Las Brisas’ method for calculating its delay damages was fundamentally flawed, and agreed with Empire that Las Brisas was not entitled to relitigate its entitlement to the $711,769.93 by labeling it “delay damages.”

Notwithstanding, the Court held that Las Brisas was still entitled to pursue delay damages. The Court stated that invoking appraisal and timely paying an award will not prevent a bad faith claim where an insurer “exercise[es] its contractual rights to an appraisal in an effort to delay inevitable payment.” Therefore, the Court concluded that Las Brisas was entitled to introduce evidence that the appraisal process was done in bad faith, causing damages by delay or expense.

Las Brisas also argued that it was entitled to recover appraisal expenses based on the argument that a plaintiff bringing a bad faith claim under § 624.155 may recover “those damages which are a reasonably foreseeable result of” the insurer’s bad faith. Las Brisas contended that those reasonably foreseeable damages included appraisal expenses. It argued that Empire knew appraisal was inappropriate because they disputed coverage, rather than the amount of loss, but paid Las Brisas $207,313.21 under false pretenses to force the matter into alternative dispute resolution.

The Court noted that according to Las Brisas’ policy, appraisal expenses must be split equally among the parties. Citing that policy provision and case law, Empire contended Las Brisas could not recover its appraisal costs.

The Court noted that Empire did not identify specific evidence that it believed should be excluded as irrelevant or inadmissible. Rather, it asked the Court to preclude Las Brisas from recovering an entire class of damages and exclude all evidence that would be used to support its claim for entitlement. The Court held that was not the proper use of a motion in limine, and that a court could not grant Empire’s motion in limine without knowing the specific evidence Empire was seeking to exclude.

The Court further held that because the issue was presented in a motion in limine, the question before the Court was not whether a reasonable jury could return a verdict for Las Brisas, but whether certain evidence was clearly inadmissible for any purpose.

The Court also noted that Las Brisas was seeking reimbursement of its appraisal costs because it believed Empire invoked appraisal in bad faith to delay payment, making the process illusory. The Court concluded by stating that Empire had not met its burden of showing that Las Brisas was categorically barred from recovering appraisal costs. and would not preclude Las Brisas from “referencing any damages associated with the appraisal process, including umpire costs” as allowed under Florida law.

Las Brisas also sought interest and pre-judgment interest. Empire argued that these costs were unavailable because an insured is only entitled to prejudgment interest on the amount of the appraisal award that was not timely paid to it by the insurer from the date such payment became due under the terms of the policy. Empire further contended that it timely paid the appraisal award.

The Court held that Empire was incorrect that an insured is “only entitled to prejudgment interest on the amount of the appraisal award that was not timely paid to him.”

The Court noted that Empire’s argument ignored Florida Statute § 627.70131, which provides:

Any payment of an initial or supplemental claim or portion of such claim made 60 days after the insurer receives notice of the claim, or made after the expiration of any additional timeframe provided to pay or deny a claim or a portion of a claim made pursuant to an order of the office finding factors beyond the control of the insurer, whichever is later, bears interest at the rate set forth in s. 55.03. Interest begins to accrue from the date the insurer receives notice of the claim. The provisions of this subsection may not be waived, voided, or nullified by the terms of the insurance policy.

Fla. Stat. § 627.70131(7)(a) (emphasis added). The Court noted that this provision “can serve to bind the insurer . . . in response to a . . . bad faith claim,” even where the pleadings do not mention the statute. 

The Court found that Empire’s conduct appeared to fall within the ambit of § 627.70131(7)(a). More specifically, Las Brisas reported the loss on June 6, 2018, but Empire did not tender any payment for more than five months. As a result, the Court concluded that Las Brisas could claim statutory interest that was “a reasonably foreseeable result of” any delay in resolving the claim.

The Court concluded that Empire had not met its burden to exclude evidence supporting Las Brisas’ request for interest, and consequently, the Court would not preclude Las Brisas from referencing such damages as allowed under Florida law.

Finally, Las Brisas sought reasonable fees and costs pursuant to Florida Statute § 624.155. The Court noted that the statute provides, “[u]pon adverse adjudication at trial or upon appeal, the authorized insurer shall be liable for damages, together with court costs and reasonable attorney fees incurred by the plaintiff.” Fla. Stat. § 624.155(7).

Empire made several arguments in opposition to the request for reasonable fees and costs. First, it argued that attorney’s fees are not warranted where the insurer pays the appraisal award before the insured files suit.” Second, it contended that an award of attorney’s fees is not warranted where the insurance company did not wrongfully withhold the insured’s benefits. Finally, Empire argued that attorney’s fees should not be awarded when the insurance company timely participated in the appraisal and paid the award without the need for court intervention.

The Court denied Empire’s Motion in Limine to preclude evidence of Las Brisas’ attorneys’ fees and costs and held that Empire did not meet its burden to exclude evidence supporting Las Brisas’ request for attorney’s fees. Thus, the Court would not preclude Las Brisas from referencing damages associated with its attorney’s fees and costs as permitted under Florida law and cited Royal Marco Point I Condo. Ass’n, Inc. v. QBE Ins. Corp., No. 3:07 CV 16, 2010 U.S. Dist. LEXIS 70134, 2010 WL 2757240, at *3 (M.D. Fla. July 13, 2010) (holding that damages under the bad faith statute include “reasonable attorney’s fees incurred in both the bad faith litigation and in the resolution of the underlying claim as a result of the insurer’s conduct in delaying payment”) in support of its ruling.