People’s Trust Insurance Company v. Polanco—(J. Levine; 4DCA; 1/11/23). This case is the other side of the coin from Deotscj v/ Certain Underwriters at Lloyds of London, summarized above. This was another attorney’s fee dispute where the question what whether attorney’s fees were owed under the standard that litigation was a necessary catalyst to resolve the dispute or there was a “breakdown in the claims-adjusting process.” This was a homeowner’s claim about alleged hurricane water damages. The insurer accepted part of the claim, but they denied coverage for the roof because their investigation concluded that Hurricane Irma was not the cause of the roof damage. People’s Trust also denied coverage for the interior water damage, because the investigation concluded that this damage was caused by age related “wear, tear, and deterioration,” which was not a covered loss under the insured’s policy. People’s Trust did admit coverage for damage to the insured’s soffit and fascia. However, since the cost of repair did not exceed the insured’s deductible, no repairs were commenced on the property. The homeowner sued, People’s Trust moved to compel an appraisal, and the appraisal came out in the insured’s favor to the tune of over $55,000 including finding the previously-denied portion of the claim to be covered losses. The insurer agreed to pay, and then the trial court approved prevailing party fees and costs of $10,500. People’s Trust appealed the fee award. Startlingly, the DCA found that the litigation was not a catalyst to resolve the dispute. Despite the fact that there was a claim and a denial of the claim prior to the filing of the suit, the DCA found there was really no dispute prior to filing of the suit because the insured never informed People’s Trust that he disputed its estimate or coverage determination, and he did not send People’s Trust a competing estimate or a completed sworn proof of loss. Instead, the insured filed a suit for breach of insurance contract. An insured moving for attorney’s fees must prove that “the suit was filed for a legitimate purpose, and whether the filing acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.” For attorney’s fees to be awarded, there must have been “some dispute as to the amount owed by the insurer” before the insured filed suit. For some reason, the claim and denial of the claim did not satisfy this test in the DCA’s view. The DCA cited its own case from last year (in favor of the same exact insurer) where fees were denied when an insured’s claim was denied, the parties provided each other competing estimates, the insurer demanded an appraisal, and the insured then sued instead of waiting for the appraisal. The DCA observed that fees were not appropriate in that case because the dispute between the parties did not showcase “a breakdown in the claims-adjusting process.” Thus, the lawsuit was not a “necessary catalyst” to resolving the insurance dispute, entitling the insured to attorney’s fees. Similarly, in this case, the DCA held there was no breakdown in the claims-adjusting process because the insurer was never informed of a potential dispute until suit was filed. The insured must show that he “attempted to resolve any differences without resorting to formal legal action” for an award of attorney’s fees to be appropriate. 7 It did not matter that the lawsuit came before the appraisal in this case. In the DCA’s view, the insurance company could not compel an appraisal until after it was informed that a dispute existed. (NOTE: Again, the insurance company denied a claim. The DCA does not explain why an insured must disagree with the insurance company’s disagreement with the insured’s claim for a “dispute” to exist. The insured requested a payout, and the insurance company refused. Why this is not a “dispute” remains unclear. Why the insurance company did not seek an appraisal before denying the claim is also unclear.) The DCA left intact prior holdings that allow for an immediate suit (and fees) where an insurer completely denies a claim. That allows the insured to sue immediately. Here, though, because the insurer accepted coverage for the soffit and fascia (even though it didn’t pay out a cent because that damage did not exceed the deductible and even though $55,000 was the ultimate award), the DCA held that because the insurer had not completely denied coverage, the insured had to address the discrepancy in the coverage determination before filing suit.