Fla. Stat. Ann. § 627.428, provides, in pertinent part:
1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had. In a suit arising under a residential or commercial property insurance policy not brought by an assignee, the amount of reasonable attorney fees shall be awarded only as provided in s. 57.105 or s. 627.70152, as applicable. (emphasis added).
Thus, in sum, Florida Statute §627.428 provides that attorneys’ fees shall be awarded against the insurer when judgment is rendered in favor of an insured.
The Florida Supreme Court has held that an insurer’s pre-trial settlement of a lawsuit with its insured is considered a “confession of judgment” for purposes of section 627.428. Wollard v. Lloyd’s & Cos. of Lloyd’s, 439 So.2d 217 (Fla.1983); See Pepper’s Steel & Alloys, Inc. v. U.S., 850 So.2d 462, 465 (Fla.2003).
In Wollard, the Court stated:
“When the insurance company has agreed to settle a disputed case, it has . . . declined to defend its position in the pending suit. Thus, the payment of the claim is . . . the functional equivalent of a confession of judgment.”
A confession of judgment occurs, as would support statutory award of attorney’s fees to insured, where an insurer has denied benefits an insured was entitled to, forcing the insured to file suit, resulting in the insurer’s change of heart and payment before judgment. People’s Tr. Ins. Co. v. Farinato, 315 So. 3d 724 (Fla. 4th DCA 2021).
“The confession of judgment doctrine turns on the policy underlying section 627.428: discouraging insurers from contesting valid claims and reimbursing insureds for attorney’s fees when they must sue to receive the benefits owed to them.” State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007), citing Pepper’s at 465.
This 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. Id.
“[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 doctrine was historically applied in first party suits. However, Florida courts have expanded the doctrine to apply when an insurer settles on behalf of an insured a suit brought against the insured by a third party, and then voluntarily dismisses a complaint for declaratory judgment filed by the insurer against the insured. See Mercury Insurance Co. of Florida v. Cooper, 919 So.2d 491 (Fla.3d DCA 2005), Unterlack v. Westport Insurance Co., 901 So.2d 387 (Fla. 4th DCA 2005), and O’Malley v. Nationwide Mutual Fire Insurance Co., 890 So.2d 1163 (Fla. 4th DCA 2004).
However, Florida courts generally do not apply the confession of judgment doctrine in situations where the insured was not forced to file suit to receive benefits. Basik Exports & Imports, Inc. v. Preferred Nat’l Ins. Co., 911 So.2d 291, 293 (Fla. 4th DCA 2005). Applying the doctrine in such circumstances “would encourage unnecessary litigation by rewarding a race to the courthouse for attorney’s fees even where the insurer was complying with its obligations under the policy.” See State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 398 (Fla. 5th DCA 2007).
Therefore, if you, as the carrier are involved in a pending lawsuit with your insured, make sure that you are considering the confession of judgment doctrine, and its effect, before making any payments on the claim.