Yesterday, the Florida Supreme Court affirmed Florida’s longstanding legal principle that an insurer may have to pay as much as 2.5 times the usual attorney fee when a homeowner has to sue his or her own insurance company and wins. The basis for this rule, called a “multiplier,” and its effect on homeowner’s claims is especially timely given the recency of Hurricane Matthew and Hurricane Irma.
The case involved a St. Augustine couple who suffered water damage to their home and presented a claim against their homeowner’s insurer, Federated National Insurance Company. The insurance company denied their claim based on its position that the homeowners failed to accurately list prior claims when they completed the application for insurance. The homeowners retained an attorney on a contingency basis, meaning that the attorney agreed she would only get paid if she was successful.
After litigating the case for months, it was determined that the disputed prior claims were disclosed by the homeowners to Federated National, and, as a result, it agreed to pay the claim. The homeowners’ attorney was to be paid a reasonable fee to be determined by the St. Augustine court pursuant to Florida Statute 427.428. The judge determined that the attorney’s time at a customary hourly rate came to $38,150.00. Then, the judge applied a “multiplier” of 2 and thus, doubled the fee to $76,300.00. The insurance company appealed.
The use of fee multipliers in contingency cases has been part of Florida jurisprudence for decades. The rationale for awarding a multiplier is to encourage attorneys to accept these types of cases on a contingency basis which provides access to the courts for people who cannot afford to hire an attorney.
From the attorney’s perspective, taking these cases on a contingency basis involves a big risk of time and money. The attorney is not going to win every case. As such, if the attorney is awarded only a normal hourly fee when he or she does win, then, with respect to the caseload as a whole (with some cases being lost), the attorney would be working for a less than a reasonable wage. As a result, few, if any, qualified attorneys would agree to handle cases against insurance companies.
The multiplier can range from 1.1 to 2.5 depending on the likelihood of success at the outset. A low multiplier is to be applied to cases where winning at the outset was likely – meaning that the attorney had a strong incentive to take the case. The higher multipliers are to be applied where the likelihood of winning at the outset was low.
On appeal, the Fifth District Court of Appeal struck the multiplier portion of the attorney fee award citing federal law for the proposition that multipliers are to be applied only in “rare and exceptional circumstances.” The Florida Supreme Court rejected this holding and explained that it never limited the application of multipliers to “rare” or “exceptional” circumstances.
In the wakes of Hurricanes Matthew and Irma, this is very good news for homeowners in the St. Augustine and Jacksonville areas. For one, it makes insurance companies more likely to fairly evaluate claims at the start even before an attorney is hired. This, of course, is because the insurer is aware that not adjusting the claim fairly could result in a significant financial loss if the homeowner later hires a lawyer to sue the insurance company. Second, it helps homeowners hire an attorney without having to pay out-of-pocket, an important consideration as many of these homeowners are already financially distressed due to the costs associated with dealing with hurricane damage. Continue reading