Atain Specialty Ins. Co. v. Henry's Carpet & Interiors, Inc.

• Decision Date: 30 September 2021
• Docket Number: CASE NO. 20-62089-CIV-ALTMAN/Hunt
• Parties: ATAIN SPECIALTY INSURANCE CO., Plaintiff, v. HENRY'S CARPET & INTERIORS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

564 F.Supp.3d 1265

ATAIN SPECIALTY INSURANCE CO., Plaintiff,

v.HENRY'S CARPET & INTERIORS, INC., et al., Defendants.

CASE NO. 20-62089-CIV-ALTMAN/Hunt

United States District Court, S.D. Florida.

Signed September 30, 2021

Danielle Robinson, Stephen John Poljak, Marshall, Dennehey, Warner, Coleman and Goggin, Fort Lauderdale, FL, for Plaintiff.

Arya Attari Li, Ver Ploeg & Marino, P.A., Miami, FL, Maria E. Dennison, Dennison Law & Title, PLLC, Orlando, FL, for Defendant Henry's Carpet & Interiors, Inc.

Mark Andrew Boyle, Boyle & Leonard, P.A., Fort Myers, FL, for Defendant Grycon-Burling JV, LLC.

ORDER

ROY K. ALTMAN, UNITED STATES DISTRICT JUDGE

Florida law requires us to award attorneys’ fees to an insured who wins a judgment against its insurer. Because we dismissed this declaratory-judgment action—brought by an insurer against its insured—we have no discretion to deny an award of reasonable attorneys’ fees. And, since there's nothing left to litigate here, the question of fees is now ripe for adjudication. After careful review, we ADOPT Magistrate Judge Hunt's Report and Recommendation ("R&R") [ECF No. 58] and GRANT both the Motion to Tax Costs [ECF No. 39] and the Motion for Attorney's Fees [ECF No. 42].

BACKGROUND

Grycon-Burling sued Henry's Carpet & Interiors in state court. See Complaint [ECF No. 1] ¶ 12. Grycon was the general contractor for a construction project, and it alleged that Henry's—its subcontractor—installed defective flooring at the apartment. Id. (citing Grycon-Burling JV LLC v. Henry's Carpet & Interiors, Inc. , CACE-19-002573 (Fla. Cir. Ct.) (the "Underlying Action")). Henry's tendered the defense to its general liability insurer, Atain Specialty Insurance Co., which defended Henry's under a reservation of rights. Id. ¶¶ 13–15.

Atain then filed this lawsuit against both Grycon and Henry's, seeking a declaration that it had no duty to defend or indemnify the claims in the Underlying Action. Id. ¶ 24. The Complaint alleged that Grycon was pursuing compensation for the repair and replacement of the defective flooring —but insisted that Grycon wasn't claiming damages to the apartment itself. Id. ¶¶ 28–38. And, according to Atain, there was no coverage in the generally liability policy for the flooring. Id. Atain also invoked various policy exclusions for claims related to Henry's "work" or "product." Id. ¶¶ 39–51.

Shortly after Atain sued, Henry's moved to stay the duty-to-indemnify claim, arguing that it was premature while the Underlying Action was still pending. See Motion to Stay [ECF No. 13]. Atain opposed that request. See Response in Opposition to Motion to Stay [ECF No. 23]. A day before the hearing on the Motion to Stay, Atain sought leave to file an amended complaint, noting that Grycon had just amended its complaint in the Underlying Action to include "additional allegations" about "damages to the [apartment] which [had] never previously been alleged." Motion for Leave to Amend [ECF No. 32] ¶ 5. In its proposed amended complaint, Atain dropped the duty-to-defend claim and sought only a declaration that it had no duty to indemnify. See Proposed Amended Complaint [ECF No. 32-1] at 12.

At the hearing on the Motion to Stay, Atain represented that it no longer opposed a stay of its duty-to-indemnify claim. See Jan. 16, 2021 Hr'g [ECF No. 34]. Thus, because the duty-to-indemnify claim would be stayed—and because Atain had just dropped the duty-to-defend claim—Henry's made an ore tenus motion to dismiss the entire case without prejudice. Id. We didn't rule on that motion at the hearing, see id. , but later issued an order (1) staying the case, (2) giving Atain leave to file its amended complaint, and (3) requiring Atain to tell us whether it opposed the ore tenus motion to dismiss, see Order [ECF No. 35]. Atain filed its Amended Complaint [ECF No. 36] and then gave notice that it did not oppose the motion to dismiss, see Notice [ECF No. 37]. We therefore dismissed the case without prejudice. See Order of Dismissal [ECF No. 38]. After the dismissal, Henry's filed a Motion to Tax Costs, seeking $32.70 in printing expenses. It also filed a Motion for Attorney's Fees, asking for $50,299.00 in attorneys’ fees under FLA. STAT. § 626.9373.

Atain opposed the motions for fees and costs. In its Response to the Motion to Tax Costs [ECF No. 40], it claimed that, based on the original complaint in the Underlying Action, it didn't have a duty to defend or indemnify Henry's, id. at 5. And, Atain said, Grycon only amended its complaint in the Underlying Action because it recognized that its claims were not covered. Id. at 6. In Atain's view, then, Henry's never "prevailed" in this case and, as a result, shouldn't stand to benefit from Grycon's strategic amendment. Id.

In opposing Henry's request for fees, Atain similarly argued (1) that, when it filed the Complaint, its request for declaratory judgment was meritorious and (2) that Henry's request for fees is premature because this Court hasn't resolved the question of coverage. See Response to the Motion for Attorney's Fees [ECF No. 46] at 3. Atain also contended that, if this Court were to award fees, $50,299.00 was an "egregious" sum—given that the case had lasted only three months and involved "no discovery, one hearing, [and] one motion filed on behalf of Henry's." Id. at 4. To this last point, Atain appended the report of an expert who, based on a review of the billing records, concluded that the fees should be reduced to $18,900. Id. at 5 & Ex. A. In its Reply [ECF No. 49], Henry's added the fees and costs it incurred in (1) filing the Motions and (2) opposing Atain's motion for an extension of time to respond to the Motions, id. at 3 n.2—bringing its total request to $64,372.50, id. at 8.

After careful review, Magistrate Judge Hunt issued his R&R, in which he concluded that Henry's is entitled to reasonable costs and fees under FLA. STAT. § 626.9373, because the entire case was dismissed without prejudice. Id. at 4–5. As for the amount of the fees, Judge Hunt suggested some adjustments to the proposed hourly rates and the number of hours Henry's’ lawyers expended on the case. Id. at 6–11. In total, he recommended an award of $51,292.50 in fees and $32.70 in costs. Id. at 13.

Atain now objects to the R&R—arguing (again) that Henry's shouldn't benefit from Grycon's amendment and that an award of fees would be premature before the coverage question is resolved. See Objections [ECF No. 61] at 3–4. In the alternative, it asks us to modify the fee amount —citing its expert, who determined that the fees should be reduced to $18,900.00. Id. at 4–6. Henry's filed a response to the Objections, contending that the R&R was not clearly erroneous. See generally Response to R&R [ECF No. 62]. This Order follows.

STANDARD OF REVIEW

Although the parties seem to agree that our review of the R&R should be for clear error—see Objections at 2–3 (citing FED. R. CIV. P. 72(a) (addressing non-dispositive matters)); id. at 3 (claiming that the Magistrate Judge "clearly erred"); see generally Response to R&R (arguing that the Magistrate Judge did not "clearly err")—attorneys’ fees are treated as dispositive matters when referred to a magistrate judge, see FED. R. CIV. P. 54(d) (a district court "may refer a motion for attorney's fees to a magistrate judge under Rule 72(b) as if it were a dispositive pretrial matter" (emphasis added)). And, under Rule 72(b), "[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to." FED. R. CIV. P. 72(b). So, despite the parties’ agreement, we'll review the R&R de novo.

THE LAW

The applicable Florida statute provides as follows:

Upon the rendition of a judgment or decree by any court of this state against a surplus lines insurer in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer on or after the effective date of this act, the trial court or, if the insured or beneficiary prevails on appeal, the appellate court, shall adjudge or decree against the insurer in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the lawsuit for which recovery is awarded.

FLA. STAT. § 626.9373(1).¹ The purpose of the statute is to "discourage insurers from contesting valid claims and to reimburse successful insureds for attorney's fees when they must sue to enforce their insurance contracts." State Farm Fla. Ins. Co. v. Lorenzo , 969 So. 2d 393, 397 (Fla. 5th DCA 2007) (quoting Progressive Express Ins. Co. v. Schultz , 948 So. 2d 1027, 1029–30 (Fla. 5th DCA 2007) ). Accordingly, Florida courts award attorneys’ fees under the statute "even in cases where the insured party did not prevail ‘on the merits.’ " Prime Ins. Syndicate, Inc. v. Soil Tech Distribs., Inc. , 270 F. App'x 962, 964 (11th Cir. 2008) (collecting cases).

ANALYSIS

Atain's first argument—that it properly filed the declaratory-judgment action based on the original complaint in the Underlying Action—has some practical appeal. Why, after all, should we penalize an insurance company for filing a meritorious lawsuit and then backing out of that lawsuit once the underlying complaint, as amended, proves the lawsuit's unviability? Ultimately, though, the argument assumes too much. We, after all, never had occasion to say whether the allegations of the original complaint (in the Underlying Action) triggered the duty to defend—though we note that the standard is generally quite favorable to the insured. See Jones v. Fla. Ins. Guar. Ass'n, Inc. , 908 So. 2d 435, 443 (Fla. 2005) ("Any doubts regarding the duty to defend must be resolved in favor of the insured."); Sunshine Birds & Supplies, Inc. v. U.S. Fid. & Guar. Co. , 696 So. 2d 907, 910 (Fla. 3d DCA 1997) ("[W]here a complaint alleges facts that are partially within and partially outside the coverage of an insured's policy, the insurer is not only...