Dismissal Upheld but Monetary Sanctions Against Insured’s Attorney Reversed Based on Lack of Due Process

The insureds filed suit against their homeowner’s insurer for breach of contract seeking $22,877.02 in damages. During the litigation, the insurer sought to dismiss the lawsuit with prejudice, as a sanction for the insured’s attorney’s bad faith conduct during the proceedings. The trial court granted the motion after making oral findings supporting the requisite factors for dismissal as a sanction. The trial court also ordered the insured’s attorney pay his clients, the amount of damages alleged in the complaint. The Fourth District upheld the dismissal of the lawsuit but reversed the sanction order because it was not sought by the clients and was imposed without notice, thus depriving the insured’s attorney of due process. The Strems Law Firm v. Avatar Property & Cas. Ins. Co., 4th DCA, (June 3, 2020).

TIPS & LESSONS

• Prior to filing a motion to dismiss as a sanction, consider serving a 57.105 motion or proposal for settlement to preserve a claim for attorney’s fees against the attorney and/or the insured for their bad faith conduct during the proceedings.

Appellate Court Holds Claim Photographs and Underwriting File are Not Privileged Documents

The trial court ordered the insurer to produce photographs related to the claim, and reports and photographs in the underwriting file. The insurer claimed the documents were part of the claims file and, therefore, privileged work-product. The appellate court upheld the discovery order since the insurer did not prove the documents were prepared in anticipation of litigation and the trial court did not depart from the law. The court further held “there is no claims privilege” and this was not a case where the court ordered the production of the entire claims file. Avatar Prop. & Cas. Ins. Co. v. Simmons, 5TH DCA (June 12, 2020).

 TIPS & LESSONS

• The appellate court focused on the insurer’s failure to show the requested documents were privileged and did not address the relevancy of these documents in a first-party dispute.

• Know your district: some courts have approached this issue under a strict work-product analysis (whether litigation was anticipated), while other courts have held these documents are not relevant. However, claim photographs are generally discoverable.

Insurer May File a Proactive Declaratory Judgment Action Regarding its Obligation to Provide Coverage

An insurer filed a proactive declaratory judgment action against its insured seeking a coverage determination under a homeowner’s policy for property damage that the insurer believed occurred prior to the inception of the policy. The trial court dismissed the complaint finding a declaratory relief was inappropriate when the issue was not simply a matter of policy interpretation, but involved a factual dispute. The appellate court reversed and held there was a genuine dispute over the insurer’s right to deny coverage under the policy and the declaratory judgment statute was an available remedy to resolve the dispute. Security First v. Phillips, 5TH DCA (June 12, 2020).

TIPS & LESSONS

• When there is an issue of coverage, or an insured’s compliance with the policy terms, the insurer does not have to “wait for” the insured to file suit.
• The declaratory judgment act is an available tool for insurers to proactively resolve disputes with its customers.

About the Author – Amy L. Koltnow

Amy L. Koltnow, a Colodny Fass Shareholder, focuses her practice on insurance disputes from trial through appeals. She has represented insurance companies in federal and state courts, as well as in mediation and administrative forums. Ms. Koltnow oversees complex litigation matters and has successfully defended numerous class actions and insurance bad faith cases. She is a member of the Claims and Litigation Management Alliance, a national, invitation-only organization committed to furthering high standards of litigation and claims management in pursuit of client defense.

 To view Ms. Koltnow’s complete professional biography, click here.