Analysis and Interpretation by Michael A. Cassel

On March 23, 2016, the Fourth District Court of Appeals of the State of Florida (“4th DCA”) released their decision in State Farm Florida Insurance Company v. Lime Bay Condominium, Inc., Case No. 4D13-4802, 2016 Fla. App. LEXIS 4529 (4th DCA 2016) (hereinafter “Lime Bay”).  While this opinion apparently stems from the same insurance claim discussed in Lime Bay Condominium, Inc. v. State Farm Florida Insurance Co., 94 So. 3d 698 (Fla. 4th DCA 2012)[1], unlike the previous decision, the Lime Bay decision does not consider the bad faith implications of payment of an appraisal award after the 60 day cure period of a Civil Remedy Notice (hereinafter “CRN”); instead, the instant decision in Lime Bay opines on the requirement for providing notice of the right to participate in mediation pursuant to Section 627.7015, Florida Statutes, and discusses the filing of a lawsuit without first complying with the invocation of appraisal and the effects of payment of an appraisal award after suit has been filed as it pertains to the confession of judgement doctrine. [1] 


In Lime Bay, the Lime Bay Condominium Association sustained roof damage as a result of Hurricane Wilma.  During State Farm’s adjustment of the claim, Lime Bay presented a proposal for the replacement of said roofs without presenting evidence that the roof systems required replacement.  Once State Farm completed the necessary inspections, it determined that the roofs merely required repairs and, in September 2006, paid $6,940.46 after the applicable hurricane deductible(s).  In February 2007, Lime Bay filed a CRN which placed State Farm on notice that it intended to file suit.  State Farm responded by demanding that the claim be submitted to appraisal for finalization pursuant to the terms of the subject insurance policy.  Lime Bay refused to submit the claim to appraisal until State Farm provided documentation evidencing compliance with Section 627.7015, Florida Statutes, requiring that State Farm notify the insured of its right to submit the claim to mediation. 

Subsequently, in March 2007, Lime Bay filed a lawsuit alleging a breach of contract without having first submitted their claim to appraisal.  State Farm immediately moved to dismiss/abate the action and submit the claim to the appraisal process.  Said motion was granted by the court and the appraisal panel awarded an amount of $608,141.41 after application of prior payments and hurricane deductibles.  After the determination of State Farm voluntarily paid the appraisal award.  Lime Bay then moved to confirm the appraisal award and for an entry for final judgment and attorney’s fees arguing that the payment of the appraisal award constituted a confession of judgment.  Additionally, Lime Bay filed a motion for summary judgment with regards to State Farm’s alleged failure to provide notice of the insured’s right to mediation.[2]  The trial court agreed with Lime Bay and found that State Farm failed to comply with the mediation notification requirements of the above referenced statute and that the voluntary payment of the appraisal award after suit was filed constituted a confession of judgment entitling Lime Bay to attorney’s fees.  The instant appeal ensued. 

4th DCA Opinion 

Upon review, the 4th DCA determined that there we issues of material fact pertaining to the mediation notice requirement which prevented the entry of summary judgment.  Section 627.7015, Florida Statutes, holds that notification regarding the right to mediate must be provided “[a]t the time a first-party claim within the scope of the section is filed.”  Fla. Stat. § 627.7015(2) (2012).  The court, however, concluded that the requirement of notice regarding the right to participate in mediation under section 627.7015 does not ripen until the insurer is put on notice that there is a dispute in the claim relating to a material issue of fact.  Instead of isolating subsection 2 of the statute in question, the court read the statute in its entirety, specifically 627.7015(9), which states, in pertinent part, that “the term ‘claim’ refers to any dispute between an insurer and a policyholder relating to a material issue of fact…” unrelated to certain exceptions erroneous to the instant matter including suspicion of fraud, material misrepresentation, lack of coverage for the cause of loss, etc.  Fla. Stat. § 627.7015(9) (2012) 

State Farm contended that it was not placed on notice that Lime Bay was dissatisfied with its coverage determination until the CRN was filed.  In the alternative, Lime Bay argued that State Farm clearly knew that there was a dispute because it inspected the loss on three (3) separate occasions, never responded to Lime Bay’s request for a list of contractors who would perform the work at the estimated price, and State Farm’s admitted knowledge as to the disagreement of the nature of the necessary repairs.  These conflicting views were determined to sufficiently create issues of material facts requiring further evidentiary findings.  

Analysis, Impact, and Effect 

While the ruling in this matter mainly involves the mediation notice requirement, the Lime Bay court discussed numerous separate issues without rendering formal opinions on them.  First, the court examined whether the payment of the appraisal award was, in fact, a confession of judgment.  The main factor in the determination of a confession of judgment is not whether payment is tendered after the filing of a lawsuit; instead, a confession of judgment is effectuated in situations where the insured is forced to litigate in order to obtain the contractually owed payment.  In Clifton v. United, the court held that the confession of judgment doctrine operates to penalize an insurance company for wrongfully causing its insured to resort to litigation when the matter should have been otherwise resolved.  Clifton v. United Cas. Ins. Co. of Am., 31 So. 3d 826, 829 (Fla. 2d DCA 2010).  Similarly, in State Farm v. Lorenzo, the court held that the application of the confession of judgment doctrine in situations where the insured was not forced to file a lawsuit would “encourage unnecessary litigation by rewarding a race to the courthouse for attorney's fees even where the insurer was complying with its obligations under the policy.”  State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 398 (Fla. 5th DCA 2007) citing to Basik Exps. & Imps., Inc. v. Preferred Nat'l Ins. Co., 911 So. 2d 291, 294 (Fla. 4th DCA 2005).  

Likewise, the Lime Bay court discussed the right to recover attorney’s fees pursuant to Section 627.428, Florida Statutes.  The court stated that the timing of the appraisal request is not necessarily determinative of the right to fees; rather, the right to fees relies upon whether the filing of the suit served a legitimate purpose.  See Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009).  In Lewis v. Universal, more than a year after the loss, the insurer took the position that the majority of the damages alleged were not covered and that the insurer was closing its file.  After a failed attempt at mediation, the insured hired an attorney prompting the insurer to invoke appraisal; however, the insurer asserted that it was reserving its right to deny the claim after appraisal was completed.  The court in Lewis found that these circumstances did not amount to a race to the courthouse to simply obtain a fee award and, accordingly, the entitlement to attorney’s fees was found to be proper.  Comparably, in Travelers v. Meadows, the court held that attorney’s fees were properly awarded when, after long delays in adjustment by the insurer and numerous attempts by the insured to finalize terms of the insurer invoked appraisal, the insured was required to file a declaratory action.  Travelers Indemnity Insurance Co. of Illinois v. Meadows MRI, LLP, 900 So. 2d 676 (Fla. 4th DCA 2005).  In contrast, the court in Federated v. Esposito found that an award of attorney’s fees was not proper in a situation where the insurer actively attempted to participate in the appraisal process prior to the initiation of the lawsuit.  Federated National Insurance Co. v. Esposito, 937 So. 2d 199 (Fla. 4th DCA 2006). Based on these decisions, it seems as though an insurer’s actions towards its insureds with regards to the active and continuous adjustment of a claim are determinative factors of whether the insured’s attorney should be entitled to recover fees when appraisal is invoked and a lawsuit is filed. 

Finally, the Lime Bay court addressed the applicability of the “no action” clause in the subject policy.  State Farm argued that it was Lime Bay who, in fact, breached the terms of the policy by filing their lawsuit prior to participating in the appraisal process as the subject policy contained a clause preventing legal action until there has been full compliance with the terms of said policy.  Florida courts have held that “[a] no action clause in an insurance contract operates as a condition precedent that bars suit against the insurer until the insured complies with the relevant policy provisions.”  Wright v. Life Ins. Co., 762 So. 2d 992, 993 (Fla. 4th DCA 2000).  While failure to comply with a “no action” clause may not be fully dispositive, it may allow the insurer to complete its adjustment of its insured’s claim without fear of exposure to attorney’s fees and costs.  See generally Slayton v. Universal Prop. & Cas. Ins. Co., 103 So. 3d 934 (Fla. 5th DCA 2012) (Despite the entry of directed verdict regarding the portion of the insurance claim initially presented to the insurer and the claim for attorney’s fees associated with same, the court allowed the insured to file a supplemental claim stemming from the same loss.).  It must be noted, however, that, in line with the Cammarata decision, if there is an expired CRN, an insurer may still be exposed to a potential bad faith action if adjustment continues.  

It is the author’s opinion that the filing of a lawsuit which prevents the completion of adjustment in matters where CRNs have been filed constitutes an abuse of process and sanctions should be levied against the insured(s)/their attorney(s) in order to prevent unwarranted exposure to bad faith actions.  That said, it is unlikely that a trial court will entertain such a novel approach and, as such, the successful effectuation of this theory, if viable, would come through the decision of an appeals court and, therefore, is potentially many years away from being realized.  More realistically, perhaps, would be a legislative change to the CRN statute preventing arbitrary CRNs from being filed.  This may be possible through the insertion of a notice requirement into the CRN statute similar to that of a motion for entitlement to fees under Section 57.105, Florida Statutes.  While some may argue that the CRN serves as the notice and allows for a 60 day cure period, there is nothing stopping an attorney and/or public adjuster from delaying a properly requested appraisal in order to prevent an insurer from timely curing the allegations of bad faith. 

Ultimately, the Lime Bay opinion is not entirely groundbreaking in its findings, especially considering a seemingly universal recognition in modern adjusting practices wherein initial contact letters contain the notification regarding the insured’s right to mediate; however, the dicta regarding “no action” clauses and entitlement to fees may be persuasive on the trier of fact in comparable scenarios.  It is worth mentioning that, once the trial court has finalized the underlying case based on the directives of the 4th DCA, there may be an additional appellate decision further delineating these issues as established law.


[1] In Lime Bay v. State Farm, 94 So. 3d 698 (Fla. 4th DCA 2012), the 4th DCA upheld the dismissal of a bad faith action filed after the payment of an appraisal award stating that the insured “did not, and could not, allege that there had been a final determination of liability since the [insured's] breach of contract case was still pending.”  This opinion was overturned by the court in Cammarata v. State Farm Fla. Ins. Co., 152 So. 3d 606, 607 (Fla. 4th DCA 2014) which held that that settlement via the appraisal process effectively determines the existence of liability and the extent of the insured's damages and, thereby, fulfills the requirements for bad faith when a CRN has been filed and the cure period has run.  Please click here for a complete review of the decision in Cammarata v. State Farm.

[2] Lime Bay’s summary judgment is essential to its claim for attorney’s fees as the failure to provide notice of the right to participate in mediation alleviates the requirement to submit to or participate in appraisal as a precondition to legal action for breach of contract.  Fla. Stat. § 627.7015(7) (2012)