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A Florida appellate court has reversed a trial court decision and ruled an insurer did not violate a 90-day bar on proposing a settlement to its policyholders, which may entitle the insurer to recover its attorney fees.

The Case

On Jan. 21, 2015, Joseph and Rhonda Tipton sued their insurer, Old Dominion Insurance Co., for breach of contract on a sinkhole claim. On Feb. 25, 2015, Old Dominion filed a notice of automatic stay pending completion of a neutral evaluation pursuant to Florida Statutes Section 627.7074.

The stay was lifted on May 5, 2015, and filings resumed.

Among other things, the Tiptons amended their complaint and Old Dominion answered and raised affirmative defenses.

On June 2, 2015, or 132 days after the Tiptons filed their lawsuit, Old Dominion served the Tiptons with a settlement proposal.

On June 10, 2015, the Tiptons moved to strike the proposal, contending it was both premature in light of the stay and not made in good faith. They did not seek any extension of time to accept the proposal pending the outcome of their motion.

The trial court agreed the proposal was premature and, on July 27, 2015, well after the 30-day time period for the Tiptons to accept the proposal had elapsed under Rule 1.442(f)(1) of Florida's Rules of Civil Procedure, the trial court granted the Tiptons' motion. The trial court explicitly did not reach the Tiptons' bad faith contention.

Ultimately, Old Dominion prevailed at trial and moved for attorney fees based on the rejected proposal.

The Tiptons opposed Old Dominion's motion. They argued that under Rule 1.442(b), “a proposal to a plaintiff shall be served no earlier than 90 days after the action has been commenced,” and a premature proposal was “invalid.”

In their view, the stay of court proceedings pending neutral evaluation also stayed the 90-day waiting period for serving the proposal, rendering Old Dominion's proposal roughly 30 days premature and  invalid.

They reasoned that a proposal for settlement was part of a court proceeding and related to the sinkhole litigation; the legislative purpose behind the stay was “to efficiently resolve sinkhole disputes … and to minimize, if not avoid, the costs associated with unnecessary litigation;” and refusing to stay the waiting period for serving a proposal for settlement frustrated that purpose.

The trial court denied the insurer's motion for attorney fees, and it appealed.

The Appellate Court's Decision

The appellate court reversed.

In its decision, the Second District Court of Appeal ruled that, regardless of whether the serving of a proposal was a “court proceeding,” the 90-day waiting period mandated before one could be served was “a rule of civil procedure.” The stay, therefore, did not stay that period.

Moreover, the appellate court said there was nothing within Rule 1.442 indicating a stay under Section 627.7074 stayed that period.

The appellate court rejected the Tiptons' contention that interpreting Section 627.7074(10) in this manner would lead to a result contrary to the legislative intent behind the neutral evaluation procedure: to “facilitate the timely and cost-effective resolution of sinkhole disputes.” Rather, the court found, the Tiptons' interpretation — which would stay the 90-day period and prolong the amount of time that a party must wait before serving a proposal for settlement — was the one contrary to legislative intent.

Accordingly, the appellate court concluded Section 627.7074(10) did not stay Rule 1.442(b)'s 90-day waiting period for serving a proposal for settlement. Because Old Dominion served the Tiptons with its proposal more than 90 days after the Tiptons filed suit, the trial court erred in striking the proposal as premature.

The case is Old Dominion Insurance v. Tipton, No. 2D18-24 (Fla. Ct. App. April 26). Attorneys involved include: Andrew A. Labbe of Groelle & Salmon, Tampa; and David R. Terry Jr. of Groelle & Salmon, Maitland, for appellant/cross-appellee. George A. Vaka and Nancy A. Lauten of Vaka Law Group, Tampa, for appellees/cross-appellants.

This story is reprinted with permission from the Insurance Coverage Law Center, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. Contact him at smeyerowitz@meyerowitzcommunications.com.