Insurance Co. of North America v. Lexow, 78376
| Citation | 602 So.2d 528 |
| Decision Date | 16 July 1992 |
| Docket Number | No. 78376,78376 |
| Parties | INSURANCE COMPANY OF NORTH AMERICA, Appellant, v. Clausson P. LEXOW, et al., Appellees. 602 So.2d 528, 17 Fla. L. Week. S453 |
| Court | United States State Supreme Court of Florida |
Charles M. Johnston and Ada A. Hammond of Taylor, Day & Rio, Jacksonville, for appellant.
Robert Paul Keeley of Ellis, Spencer, Butler and Kisslan, Hollywood, for appellees.
We review Insurance Co. of North America v. Lexow, 937 F.2d 569 (11th Cir.1991), in which the United States Court of Appeals for the Eleventh Circuit certified a question of law which is determinative of the cause and for which there is no controlling precedent in this Court. We have jurisdiction under article V, section 3(b)(6) of the Florida Constitution. See also Sec. 25.031, Fla.Stat. (1991); Fla.R.App.P. 9.150.
The pertinent facts and the history of this litigation are stated in the federal court's opinion as follows:
I. BACKGROUND
In 1981, Clausson Lexow and other family members organized United Storage Systems, Inc. (collectively, Lexow) to operate as a mini-warehouse or consumer storage facility in Ocala, Florida. Known as The Extra Closet of Ocala, Ltd., the business opened to the public in January, 1982. The business prospered, and renovation of the building commenced. When the work was near completion, an electrical fire occurred and totally destroyed the building and its contents on August 1, 1983. The damage to stored property generated customers' lawsuits and such unfavorable publicity that Lexow decided not to rebuild and to start the business anew.
Pursuant to Lexow's claim submitted to its insurer, Insurance Company of North America (INA), Lexow received $430,571.26 for which a subrogation receipt was executed. INA and Lexow jointly sued in state court the two tortfeasors deemed to be responsible for the fire. Each of the tortfeasors had insurance with policy limits of $100,000. During the litigation, one of the tortfeasors was placed in receivership. While Florida law precluded INA from recovery against an insolvent insurer, Lexow obtained $99,900 from the receivership. Thereby, Lexow increased the funds that it had recovered for the loss to $530,471.26. The insurance carrier for the other tortfeasor paid its policy limits of $100,000, which amount INA placed in an interest bearing account.
Based on diversity jurisdiction, INA subsequently instigated an action in federal court in the Middle District of Florida for a declaratory judgment regarding the rights and obligations of INA and Lexow with respect to the $100,000. Lexow filed a counterclaim requesting attorney's fees and costs if the court entered judgment in its favor. INA asserted its right to the $100,000 under the subrogation receipt. Lexow claimed the proceeds because the funds that it had received were insufficient to recompense its total loss. Consequently, Lexow has contended throughout this litigation that INA's subrogation right cannot be activated until Lexow has been reimbursed completely.
Following a nonjury trial, the district court determined that Lexow was entitled to the $100,000 because Lexow had sustained total damages in excess of $630,471.26, or the $530,471.26 already received plus the $100,000 in dispute. Using the common law subrogation principle, endorsed by Florida courts, the district court reasoned that the insured was entitled to be made whole before the subrogated insurer could participate in the recovery from a tortfeasor. The district court concluded that the subrogation receipt did not function as an assignment of Lexow's claim against the tortfeasors, but was an acknowledgment of INA's common law right of subrogation. Judgment was entered for Lexow, and Lexow's entitlement to the $100,000 is not an issue in this case.
Subsequently, Lexow filed a motion, requesting the district court to determine prejudgment interest as well as to award costs and attorney's fees. Under Florida law, the district court awarded Lexow prejudgment interest at the annual rate of 12% from February 23, 1988, the date that INA obtained the disputed $100,000, until July 12, 1989, the date that judgment was entered in Lexow's favor. The district court, however, denied Lexow's motion for attorney's fees. The parties appeal these district court rulings, which we address.
Id. at 570-71 (footnotes omitted).
The federal appeals court affirmed the award of prejudgment interest. However, with reference to the issue of attorney's fees, the court certified the following question:
DOES THE PHRASE "UNDER A POLICY OR CONTRACT" IN FLORIDA STATUTES, Sec. 627.428(1) INCLUDE SUBSEQUENT LITIGATION TO DETERMINE WHETHER THE INSURED OR THE SUBROGATED INSURER IS ENTITLED TO FUNDS OBTAINED BY THE INSURED FROM A TORTFEASOR AFTER THE INSURER HAS PAID THE INSURED ITS POLICY LIMITS, ALTHOUGH THESE FUNDS ARE INSUFFICIENT TO COMPENSATE THE INSURED'S LOSS, FOR THE PURPOSE OF AWARDING ATTORNEY'S FEES TO THE INSURED ACQUIRING A JUDGMENT AGAINST THE INSURER FOR THE FUNDS RECEIVED FROM THE TORTFEASOR?
The answer to this question requires an interpretation of section 627.428(1), Florida Statutes (1987), which reads as follows:
(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.
Lexow argues that section 627.428(1) reflects Florida's public policy that requires a litigious insurer to pay an insured's attorney's fees when the insured is forced to litigate in order to obtain payment under its insurance policy or to protect the benefits received from an insurer's performance of its policy obligations. Because INA unsuccessfully sought to recover a portion of what it was...
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