Case Title: Insurance Co. of North America v. Lexow

Citation: 602 So. 2d 528

Docket Number: 78376

State: florida

Court: Florida Supreme Court

Date: 1992-07-16T00:00:00Z

Document:
602 So. 2d 528 (1992)
INSURANCE COMPANY OF NORTH AMERICA, Appellant,
v.
Clausson P. LEXOW, et al., Appellees.
No. 78376.

Supreme Court of Florida.
July 16, 1992.
*529 Charles M. Johnston and Ada A. Hammond of Taylor, Day & Rio, Jacksonville, for appellant.
Robert Paul Keeley of Ellis, Spencer, Butler and Kisslan, Hollywood, for appellees.
GRIMES, Justice.
We review Insurance Co. of North America v. Lexow, 937 F.2d 569 (11th Cir.1991), in which the United States Court of Appeals for the Eleventh Circuit certified a question of law which is determinative of the cause and for which there is no controlling precedent in this Court. We have jurisdiction under article V, section 3(b)(6) of the Florida Constitution. See also § 25.031, Fla. Stat. (1991); Fla.R.App.P. 9.150.
The pertinent facts and the history of this litigation are stated in the federal court's opinion as follows:
Id. at 570-71 (footnotes omitted).
The federal appeals court affirmed the award of prejudgment interest. However, with reference to the issue of attorney's fees, the court certified the following question:
Id. at 574.
The answer to this question requires an interpretation of section 627.428(1), Florida Statutes (1987), which reads as follows:
Lexow argues that section 627.428(1) reflects Florida's public policy that requires a litigious insurer to pay an insured's attorney's fees when the insured is forced to litigate in order to obtain payment under its insurance policy or to protect the benefits received from an insurer's performance of its policy obligations. Because INA unsuccessfully sought to recover a portion of what it was obligated to pay under the policy, it must reimburse Lexow for his attorney's fees. In support of his position, Lexow cites Molyett v. Society National Life Insurance Co., 452 So. 2d 1114 (Fla. 2d DCA 1984), in which the court summarily imposed the payment of attorney's fees upon an insurer which had unsuccessfully sought to pursue a subrogation claim against its insured's recovery from a third-party tortfeasor. See also Florida Rock & Tank Lines, Inc. v. Continental Ins. Co., 399 So. 2d 122 (Fla. 1st DCA 1981) (insurer obligated for attorney's fees because of unsuccessful claim for reimbursement of costs of defending insured against a liability claim).
INA first reminds us that section 627.428(1) must be strictly construed because an award of attorney's fees is in derogation of common law. Roberts v. Carter, 350 So. 2d 78 (Fla. 1977). INA argues that once it paid its full policy limits to Lexow, its obligations under the insurance policy had come to an end. Thus, the dispute over the entitlement to the fund recovered from the third-party tortfeasor was not a dispute under the insurance policy and did not involve *531 INA's policy obligations to Lexow. In support of its argument, INA refers to Forsyth v. Southern Bell Telephone & Telegraph Co., 162 So. 2d 916 (Fla. 1st DCA 1964). In that case, an insurer had lost its subrogation claim seeking proration of a settlement paid by a third-party tortfeasor to the insured. The court held that the insurer did not have to pay attorney's fees because the suit was in the nature of an action in rem against the fund of money recovered from the third party. Id. at 921-22; accord Government Employees Ins. Co. v. Graff, 327 So. 2d 88 (Fla. 1st DCA 1976).
Florida courts have consistently held that the purpose of section 627.428 and its predecessor is 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. Wilder v. Wright, 278 So. 2d 1 (Fla. 1973); Feller v. Equitable Life Assurance Soc'y, 57 So. 2d 581 (Fla. 1952); Fewox v. McMerit Constr. Co., 556 So. 2d 419 (Fla. 2d DCA 1989); Leaf v. State Farm Mut. Auto. Ins. Co., 544 So. 2d 1049 (Fla. 4th DCA 1989). We are persuaded that the lawsuit involved in this case falls within the scope of this rationale.
In the instant case, the resolution of the dispute over who was entitled to the fund paid by the third-party tortfeasor ultimately determined whether the claim was fully paid under the insurance contract. If the claim was fully paid, INA would have recovered the excess of the amount received by Lexow over the amount of Lexow's claim in the subrogation suit. It is important to note that INA's right to claim subrogation exists solely by virtue of having paid a claim under the policy. Thus, any dispute with Lexow concerning subrogation in this case arises under the policy.
Initially, INA paid Lexow the limits under the policy. However, if INA had been successful in its subsequent suit against Lexow for reimbursement, INA's payments would be reduced to an amount less than the policy limits. There is little difference between paying an insurance claim and then suing for its return and refusing to pay the claim in the first place. If the tortfeasor paid Lexow and then Lexow made his claim against INA, Lexow would have been entitled to attorney's fees under section 627.428(1) if INA had refused to pay the entire claim. Why should there be a different result when INA first paid the claim and then unsuccessfully sought to recover some of it back?
We reject the argument that attorney's fees should not be assessed against INA because this dispute involved a type of claim which reasonably could be expected to be resolved by a court. INA's good faith in bringing this suit is irrelevant. If the dispute is within the scope of section 627.428 and the insurer loses, the insurer is always obligated for attorney's fees. This is not a case like Manufacturers Life Insurance Co. v. Cave, 295 So. 2d 103 (Fla. 1974), or Equitable Life Assurance Society v. Nichols, 84 So. 2d 500 (Fla. 1956), in which the insurance company did not deny liability but simply became involved in a dispute over which of two claimants was entitled to the benefits of the policy.
Accordingly, we answer the certified question in the affirmative. Having answered the certified question, we return the record to the United States Court of Appeals for the Eleventh Circuit.
It is so ordered.
BARKETT, C.J., and OVERTON, SHAW, KOGAN and HARDING, JJ., concur.
McDONALD, J., dissents.