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Florida Supreme Court rules that prevailing insured in homeowners' insurance case was entitled to payment of attorney's fees with contingency fee multiplier

On October 19, 2017, in Joyce v. Federated National Insurance Company, No. SC16-103, the Florida Supreme Court quashed the Florida Fifth DCA’s reversal of a trial court’s decision to apply a 2.0 contingency fee multiplier to an award of attorney’s fees to the prevailing plaintiffs in a case involving disputed coverage under a homeowners’ insurance policy. The plaintiffs had filed a water damage claim with their homeowners’ insurance company, which was denied based on alleged misrepresentations in the application process for the policy. The plaintiffs hired an attorney on a contingency fee basis to contest the denial of coverage and after months of litigation the parties settled the claim in the plaintiffs’ favor with a stipulation that the plaintiffs were entitled to recover reasonable attorney’s fees as provided in Section 627.428, which authorizes such fees to insureds who prevail in litigation against their insurers.

In determining the fees, the trial court calculated the “lodestar” amount – the number of hours reasonably incurred by the attorney multiplied by a reasonable hourly rate ($350/hour). The Court then applied a contingency fee multiplier of 2.0 to the lodestar amount using the factors set forth in Standard Guaranty Insurance Co. v. Quanstrom, 555 So. 2d 828, 834 (Fla. 1990) to determine whether the multiplier was warranted: (1) whether the relevant market requires a contingency fee multiplier to obtain competent counsel; (2) whether the attorney was able to mitigate the risk of nonpayment in any way; and (3) whether any of the factors set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985) are applicable, especially the amount involved, the results obtained, and the type of fee arrangement between the attorney and his or her client. In deciding that a multiplier was warranted, the Court noted that the fee expert who testified was unaware of any other attorney in the county who specialized in representing first party insurance plaintiffs and that the plaintiffs’ attorney testified that she would not have taken the case but for the possibility of a contingency fee multiplier.

On appeal, the Fifth DCA affirmed the lodestar amount but reversed the trial court’s use of a contingency fee multiplier based on previous Fifth DCA decisions which had concluded that that the federal lodestar approach includes a strong presumption that the lodestar represents the reasonable fee and that the multiplier should be applied only in rare and exceptional cases.

The Florida Supreme Court concluded that the Fifth DCA had misconstrued its previous decisions in Quanstrom and Rowe, neither of which broadly restricted use of the multiplier to rare and exceptional cases. Instead, the Florida Supreme Court in Quanstromhad distinguished the use of the multiplier in different types of cases, concluding that in tort and contract claims cases the two-step approach subsequently used by the trial court in this case was the correct methodology.