Ottaviano v. Nautilus Ins. Co.

• Decision Date: 18 September 2009
• Docket Number: Case No. 8:08-CV-2204-T-33TGW.
• Citation: 660 F.Supp.2d 1315
• Parties: James OTTAVIANO, Plaintiff, v. NAUTILUS INS. CO., Defendant.
• Court: U.S. District Court — Middle District of Florida

660 F.Supp.2d 1315

James OTTAVIANO, Plaintiff, v. NAUTILUS INS. CO., Defendant.

Case No. 8:08-CV-2204-T-33TGW.

United States District Court, M.D. Florida, Tampa Division.

September 18, 2009.

Kim Edwin Wells, Well Law Group, P.A., Brandon, FL, for Plaintiff.

Charles M.P. George, George, Hartz & Lundeen, Coral Gables, FL, for Defendant.

ORDER

VIRGINIA M. HERNANDEZ COVINGTON, District Judge.

THIS CAUSE came on for consideration upon the Motion to Determine Entitlement to Award of Attorney Fees and Taxable Costs (Doc. 11).¹ Because the defendant's settlement of this case is equivalent to a confession of judgment, the plaintiff is entitled to an award of attorney's fees pursuant to Fla. Stat., § 627.428.

I.

The plaintiff, James Ottaviano, is a contractor who builds commercial swimming pools (Doc. 11-5, Ex. G, ¶ 2). He was insured by the defendant under a Commercial General Liability insurance policy (id., p. 8; id. at Ex. G, ¶ 2). The plaintiff paid an annual premium and fees totaling $2,046.67, for insurance for his business of installing, servicing and repairing swimming pools (Doc. 11-5, p. 8).

During the pertinent time period, the plaintiff contracted with the Girl Scouts to build a swimming pool for one of its facilities (id. at Ex. G, ¶¶ 2, 3). The plaintiff states that, due to improper construction of the swimming pool shell by subcontractors, the pool shell cracked and was therefore unable to retain water at an appropriate level (id., ¶¶ 4a, b). The Girl Scouts notified the plaintiff of the problem and that they were seeking from the plaintiff damages for breach of contract and breach of warranty (see id.).

The plaintiff informed the defendant of the Girl Scouts' claim against him (id., ¶ 4b). The defendant responded in correspondence dated April 15, 2008, that they "could not be of service" to the plaintiff because "there is no coverage for this claim under your Nautilus Insurance Company policy" (Doc. 11-4, pp. 1, 3). In this regard, it stated (id. at p. 3):

[t]his policy provides coverage for property damage arising from an "occurrence" during the policy period....

A crack in the pool you built does not meet the definitions of an occurrence per the policy definitions stated above. Therefore, Nautilus Insurance Company must respectfully disclaim coverage for this loss.

The plaintiff subsequently retained a public adjuster to assist him in handling the claim, but the defendant refused to change its position regarding coverage (Doc. 11-5, Ex. G, ¶ 4d). Consequently, the plaintiff retained counsel to represent him in this matter (id.).

In response, the defendant's counsel reiterated in correspondence dated August 21, 2008, that there is "no coverage" for this claim under the policy, elaborating that (Doc. 11-4, p. 6):

As we understand it, the leak was discovered during the final phase of the construction of the pool, not after its completion. Given this, the loss was not caused by Mr. Ottaviano's completed product. Since the loss did not arise out of the completed product, Exclusion j, Damage to Property, would apply and the Policy would not provide coverage for the loss claimed.

Assuming that the loss was caused by Mr. Ottaviano's completed product, there is no coverage for the loss. This is so because Mr. Ottaviano's product or "work" is defined by the Policy in a way that includes work performed by Mr. Ottaviano and/or on his behalf by others.... The definition of "work" also includes all warranties or representations given by or made by Mr. Ottaviano regarding the fitness, quality, durability, performance or use of the work. Given this, the Policy does not warrant or guarantee the soundness of Mr. Ottaviano's "work," not does it provide coverage to Mr. Ottaviano for the expense incurred by him in making warranty repairs to that work.

We understand that Mr. Ottaviano believes that Exclusion I creates coverage for the repair of the leak ... because Mr. Ottaviano had subcontractors working on the job.... When one applies the modified Exclusion I contained in Endorsement L291, its [sic] is clear that the Policy excludes coverage to Mr. Ottaviano for losses arising out of his work, as well as work performed for him by his subcontractors. Given this, there is no coverage for the repair of the pool even if the leak was caused by the defective workmanship of Mr. Ottaviano's subcontractors.

Due to the defendant's repeated denials of coverage, the plaintiff filed a lawsuit in state court against the defendant on September 30, 2008, alleging that it breached the insurance policy by denying coverage for claims made against him by the Girl Scouts regarding the defective swimming pool constructed by the plaintiff (Doc. 2; Doc. 11-5, Ex. G, ¶¶ 3, 5, 15, 16). After removing the case to federal court (Doc. 1), the defendant filed a motion to dismiss the plaintiff's claim, arguing, among other things, that there was no coverage for the claim (Doc. 3). The plaintiff argues that insurance policy endorsement L288 provides coverage for property damage caused by a subcontractor (Doc. 11-5, pp. 53-54; Doc. 11-7, Ex. H, ¶ 7).

On October 31, 2008, the plaintiff was served with a lawsuit by the Girl Scouts, claiming that he breached their contract by building a defective swimming pool (Doc. 11-5, Ex. G, ¶ 9). The plaintiff forwarded a copy of that lawsuit to the defendant, and an amended complaint demanding that the defendant defend and indemnify the plaintiff (id., ¶ 10).

On November 18, 2008, the defendant informed the plaintiff that it had "agree[d] to defend and indemnify [the plaintiff] in the lawsuit brought against him by the Girl Scouts" with no policy coverage defenses being reserved, and that the only remaining issue was attorney's fees (id., ¶ 11; Doc. 11-4, pp. 10, 13). The defendant added that "the parties should jointly advise the federal court that the coverage dispute has been settled" (Doc. 11-4, p. 10). Accordingly, the plaintiff filed with the court a "Notice of Partial Settlement Agreement," which stated that "the parties have resolved the coverage issues in this case" and that the only remaining issue is attorney's fees (Doc. 7).

Because the parties were unable to resolve the issue of attorney's fees without court intervention, they were directed to file memoranda on the issue of the plaintiff's entitlement to an attorney's fee (Docs. 8, 9, 10).² Accordingly, the plaintiff filed his Motion to Determine Entitlement to Award of Attorney Fees and Taxable Costs (Doc. 11). The defendant filed a memorandum in opposition to the motion (Doc. 12). The plaintiff, with leave of court, filed a reply (Doc. 18).

II.

The plaintiff asserts that he is entitled to an award of attorney's fees pursuant to Fla. Stat., § 627.428, which provides that:

(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 ... insured ... under a policy or contract executed by the insurer, the trial court ... shall adjudge or decree against the insurer and in favor of the insured ... a reasonable sum as fees or compensation for the insured's ... attorney prosecuting the suit in which the recovery is had.³

Furthermore, "the Florida Supreme Court has held that this rule also applies when the insured and the insurer settle an action." Canal Ins. Co. v. SP Transport, Inc., 272 Fed.Appx. 825, 827 (11th Cir.2008) (unpub. dec.) (citing Wollard v. Lloyd's & Cos. of Lloyd's, 439 So.2d 217, 218-19 (Fla.1983)). Thus, "[u]nder Florida law, the settlement is the equivalent of a confession of judgment and entitles the insured to attorney's fees because the insurer has `declined to defend its position in the pending suit.'" Canal Ins. Co. v. SP Transport, Inc., supra (quoting Wollard v. Lloyd's & Cos. of Lloyd's, supra.). See also United States v. Pepper's Steel & Alloys, Inc., 289 F.3d 741, 742 (11th Cir. 2002) (noting that, under Florida law, an insured may recover attorneys' fees incurred in reaching a settlement).

In this regard, the Florida Supreme Court stated that "it is neither reasonable nor just" that an insurer can avoid liability for statutory attorney's fees by settling the case after the lawsuit is filed but before judgment is entered. Ivey v. Allstate Ins. Co., 774 So.2d 679, 684 (Fla.2000). A contrary interpretation would obstruct the purpose of § 627.428, which "is to discourage insurance companies from contesting valid claims and to reimburse insureds for their attorney's fees when they must enforce in court their contract with the insurance company." Pepper's Steel & Alloys, Inc. v. United States, 850 So.2d 462, 465 (Fla.2003).⁴ Therefore, "[a]n insurer will owe attorney's fees to its insured where coverage is disputed and the insured prevails whether by judgment or a confession of judgment." First Floridian Auto & Home Ins. Co. v. Myrick, 969 So.2d 1121, 1123-24 (Fla.App.2007) (citation and quotations omitted).

Moreover, a monetary settlement is not required to establish an entitlement to fees under this statute. See O'Malley v. Nationwide Mut. Fire Ins. Co., 890 So.2d 1163, 1164 (Fla.App.2004). Rather, the pertinent inquiry is whether the insured received a benefit from the settlement. See, e.g., id. (The insurer provided a defense and settled the third-party claim, thereby providing the insured the precise relief the insurer claimed the insured was not entitled to).

III.

The plaintiff contends that he is entitled to an award of attorney's fees pursuant to Fla. Stat., § 627.428, because "the insurance company's change of its prior decision to deny insurance coverage and its later admission of the existence of coverage for the claim of the Girl Scouts after [the plaintiff] filed the lawsuit operates as a confession of judgment under Florida law" (Doc. 11, p. 8). The defendant argues that the plaintiff is not entitled to attorney's fees because the lawsuit was premature (Doc. 12). Under the circumstances of this case, the defendant's settlement of ...