On May 15, 2014, GeoVera's adjuster inspected the property and issued a repair estimate of $21,372.31, allocating $3,597.11 as subject to the insurance policy's ensuing water loss endorsement and $17,775.20 as subject to the policy's mold endorsement.

On May 16, 2014, GeoVera requested a sworn proof of loss. The Bryants, however, did not provide a sworn proof of loss within 60 days of the request.

On June 19, 2014, before the 60 days for providing the proof of loss had expired, GeoVera sent the insureds a formal response to their claim. In the letter, GeoVera stated that the policy provided “limited coverage for the ensuing water and rot/rust/mold damages.” GeoVera stated that, based on its inspection of the damages, it had determined that the water leakage had been ongoing for 14 days or more. GeoVera asserted that coverage was limited to the $1,000 sublimit for water leakage and the $5,000 sublimit for mold, rust, and rot damages. Accordingly, GeoVera issued payment in the amount of $6,000.

GeoVera also stated that, “[u]nless additional information is provided to us and we notify you that we are agreeing to reopen your claims and consider the matter further, you should treat this correspondence as being our formal notification to you of our position.” The letter was copied to the Bryants' public adjuster.

On June 20, 2014, the Bryants' public adjuster conducted its own inspection of the property and issued a repair estimate of $44,731.49.

Thereafter, the Bryants sued GeoVera for (1) breach of contract; (2) an appraisal; and (3) statutory bad faith in violation of Florida Statutes Section 624.155. The Bryants also provided GeoVera with a sworn proof of loss.

GeoVera moved to stay Counts I and II and to abate Count III. The trial court entered an agreed order on the motion, (1) directing that the parties comply with the policy's appraisal provision; (2) ordering that the appraisal award include an itemization of any damages coming within the leakage sublimit, any damages coming within the mold sublimit, and any covered damages that did not fall within those sublimits; and (3) staying Counts I and II until the appraisal award was issued and GeoVera had sufficient time to pay the award; and (4) abating Count III until Counts I and II had been adjudicated.

The appraisal award was issued in January 2016. It itemized the damages as $30,963.62 for “dwelling,” $14,477.99 for “mold,” and $6,600 for “EMS.” The appraisal award did not identify any damages as being subject to the $1,000 leakage sublimit.

In February 2016, instead of continuing to litigate the coverage issue of whether the $1,000 leakage sublimit applied to the loss, GeoVera paid $29,963.62 to the Bryants and $6,600 to the water mitigation company. The total amount paid represented the balance due under the appraisal award after taking into account the $6,000 prior payment and the $5,000 sublimit for mold.

After the trial court lifted the stay, GeoVera moved for summary judgment.

The trial court granted GeoVera's motion for summary judgment, and the Bryants appealed. Among other things, they contended that GeoVera's payment of the appraisal award constituted a confession that it had breached the policy by erroneously invoking the $1,000 leakage sublimit.

The Appellate Court's Decision

The appellate court reversed, ruling that GeoVera's payment of the appraisal award constituted a confession that it had breached the policy by applying the $1,000 leakage sublimit in its formal response to the claim.

In its decision, the appellate court explained that payment of a previously denied claim following the initiation of an action for recovery, but prior to the issuance of a final judgment, constituted the “functional equivalent of a confession of judgment.” The confession-of-judgment doctrine, the appellate court added, applied where the insurer had 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.”

Moreover, the appellate court said, an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, was sufficient to constitute a confession of judgment – and to allow the insured to recover attorneys' fees.

Here, the appellate court reasoned, although GeoVera had not completely denied coverage for the Bryants' loss, it had denied coverage above the $1,000 leakage sublimit and the $5,000 mold sublimit. In other words, the appellate court said, GeoVera's formal response to the Bryants' claim was “not merely a valuation of the loss – it was a partial denial of coverage.” In the appellate court's opinion, GeoVera's payment of the appraisal award of $37,563.62 demonstrated that GeoVera had abandoned its pre-suit coverage position that the claim was subject to the $1,000 sublimit for long-term water leakage.

In addition, by invoking the $1,000 leakage sublimit, GeoVera raised a coverage issue that only a court could resolve, the appellate court noted. It pointed out that this coverage issue “went beyond a mere dispute about the valuation of the loss, so the insureds could not have simply invoked the policy's appraisal provision before filing suit.”

The appellate court then ruled that, once GeoVera had incorrectly invoked the $1,000 leakage sublimit and notified the Bryants that it would not pay any non-mold-related water damage above that amount, “GeoVera committed an anticipatory breach of the policy and created an immediate right of action for the insureds, even though GeoVera's repudiation took place before the time prescribed for the promised performance under the policy's loss-payment provision.”

In sum, the appellate court decided that GeoVera's payment of the appraisal award constituted a confession that it had incorrectly denied benefits by erroneously invoking the $1,000 leakage sublimit in its formal response to the claim before the lawsuit.

After finding that GeoVera had waived the proof-of-loss requirement by denying coverage above the sublimits based on grounds other than the Bryants' failure to furnish a notice or proof of loss, the appellate court concluded that the Bryants' bad faith claim was ripe and should not have been dismissed because GeoVera's liability for coverage and the extent of the damages had been established.

The case is Bryant v. GeoVera Specialty Ins. Co., No. 4D18-189 (Fla. Ct. App. May 8, 2019). Attorneys involved include: David P. Pakula of David P. Pakula, P.A., Pembroke Pines, and David A. Neblett and James M. Mahaffey of Perry & Neblett, P.A., Miami, for appellants. Maureen G. Pearcy and Andrew E. Grigsby of Hinshaw & Culbertson LLP, Coral Gables, for appellee.