Goff v. State Farm Florida Ins. Co.
999 So. 2d 684, 2008 WL 5191521, 2008 Fla. App. LEXIS 18606 (2008)
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Rule of Law:
Under Florida law, an insured is entitled to attorney's fees when their lawsuit prompts an insurer to pay a significantly higher claim amount, as this constitutes a confession of judgment, even if the dispute is resolved through appraisal. However, under a replacement cost policy, it is permissible for an insurer to calculate actual cash value by depreciating all components of the replacement cost, including contractor's overhead and profit.
Facts:
- Chad and Carol Goff's home was insured by State Farm Florida Insurance Company under a replacement cost policy.
- In late 2004, their home sustained hurricane damage, and they filed a claim.
- In January 2005, State Farm paid the Goffs $4522.81 for the actual cash value (ACV) of the damage.
- The Goffs disputed the amount and, after State Farm denied their claim for more money, retained a public adjuster who estimated their total loss at $66,708.
- In January 2006, after its own adjuster reinspected the property, State Farm paid the Goffs an additional $3108.76.
- The total amount paid by State Farm was approximately eleven percent of the loss estimated by the Goffs' public adjuster.
Procedural Posture:
- In March 2006, the Goffs sued State Farm in a Florida trial court for breach of contract and declaratory relief.
- The trial court granted State Farm's motion to compel appraisal.
- The appraisal resulted in an award establishing an actual cash value loss of $43,059.83, significantly more than State Farm had paid.
- Following the appraisal, State Farm paid an additional $34,928.26, representing the remainder of the ACV award, but withheld the depreciation amount.
- The Goffs and State Farm filed cross-motions for summary judgment.
- The trial court denied the Goffs' motion and granted final summary judgment in favor of State Farm, ruling that State Farm did not breach the contract.
- The Goffs (Appellants) appealed the trial court's summary judgment to the District Court of Appeal of Florida, Second District, with State Farm as the Appellee.
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Issue:
Under a replacement cost insurance policy, 1) does an insurer's payment of a significantly higher appraisal award after the insured files a lawsuit constitute a confession of judgment entitling the insured to attorney's fees, and 2) can the insurer permissibly depreciate and withhold a portion of a contractor's overhead and profit from the initial actual cash value payment?
Opinions:
Majority - LaRose, J.
Yes, as to the first part; No, as to the second part (meaning the insurer's action was permissible). An insurer's payment of a disputed claim after a lawsuit has been filed constitutes a confession of judgment entitling the insured to attorney's fees, but an insurer may properly depreciate contractor's overhead and profit when calculating the actual cash value payment. For the first issue, the court found that the Goffs' lawsuit was the catalyst that forced State Farm to participate in the appraisal process and ultimately pay significant additional amounts. Citing Florida Statute § 627.428 and the 'confession of judgment' doctrine established in cases like Wollard and Ivey, the court held that when an insurer pays policy proceeds after a suit is filed, it is the functional equivalent of a verdict in the insured's favor. Because the lawsuit was the impetus for payment, the Goffs were entitled to attorney's fees. For the second issue, the court addressed whether contractor overhead and profit can be depreciated. The court reasoned that 'actual cash value' is synonymous with fair market value, which inherently accounts for depreciation. Since contractor overhead and profit are integral components of the total replacement cost, they are subject to depreciation just like materials and labor. The court distinguished this case from others where insurers withheld the entire amount of overhead and profit, noting that State Farm only withheld the depreciated portion, which is permissible under a replacement cost policy until the actual repairs are completed.
Analysis:
This decision solidifies the 'confession of judgment' doctrine in Florida insurance law, clarifying its application to disputes resolved via post-litigation appraisal. It provides a strong incentive for insurers to promptly and fairly evaluate claims to avoid liability for an insured's attorney's fees if a lawsuit forces a significant increase in payment. Concurrently, the opinion provides crucial guidance on the calculation of actual cash value, explicitly permitting the depreciation of intangible costs like overhead and profit. This ruling balances policyholder protections against insurer overpayment by affirming the two-part payment structure of replacement cost policies, where the full cost is not due until it is actually incurred.
