In Johnson v. Omega Ins. Co., 2016 Fla. LEXIS 2148 (Sept. 29, 2016), the Florida Supreme Court determined that the 5th DCA misapplied and misinterpreted two statutes, the first providing a presumption of correctness to the initial report of an engineer retained by an insurer to investigate a sinkhole claim, and the second providing for the award of attorney’s fees to the insured upon prevailing in litigation.
In Omega, Kathy Johnson’s homeowner’s policy included statutorily mandated sinkhole coverage. In 2010, she filed a claim with Omega to recover for damages she believed were due to sinkhole activity. In accordance with the statutory framework commonly known as the “sinkhole statutes,” Omega selected an engineer to provide an initial sinkhole investigation. That investigation revealed no sinkhole activity, and Omega denied Johnson’s claim. Under Fla. Stat. § 627.7073(1)(c), the engineer’s findings and recommendations are afforded a statutory presumption of correctness.
Johnson then retained an attorney, who hired an engineer to perform an independent investigation. That engineer opined that the damage to Johnson’s home was caused by sinkhole activity. Johnson brought suit against Omega, including a demand for attorney’s fees. Omega requested a neutral evaluator, as contemplated by Fla. Stat. § 627.7074. The neutral evaluator did find sinkhole activity at Johnson’s property, and Omega ultimately paid Johnson for the cost of repairs, which totaled over $200,000. The court awarded Johnson attorneys’ fees, and Omega appealed.
The 5th DCA agreed with Omega’s argument on appeal that Johnson had failed to rebut the presumption of correctness applying to Omega’s initial expert report identifying no sinkhole activity. The Florida Supreme Court reversed, noting its explicit holding in Universal Ins. Co. v. Warfel, 82 So. 3d 47, 57 (Fla. 2012) that the presumption did not apply to litigation. The statutory presumption was designed to protect the public during the claims process, and did not operate as a burden-shifting statute in trial proceedings.
Turning to the ruling on attorneys’ fees, the Florida Supreme Court reversed the 5th DCA’s decision that attorney’s fees could be awarded to Johnson only if her insurer had denied the valid claim in bad faith. The reversal was based on numerous Florida Supreme Court precedential decisions.
Dissenting, Justice Canady wrote that he would dismiss the case for lack of jurisdiction. Justice Canady distinguished Warfel and another decision cited by the majority, stating that the cases relied upon presented no direct conflict with the lower court’s decision in Omega.
While sinkhole litigation appears to be winding down in Florida, Omega reminds insureds and insurers of the scope and reach of Florida’s statutory presumption of correctness as well as Florida’s unique position on the awarding of attorney’s fees in the absence of bad faith in coverage disputes.