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Enforceability of Proposals for Settlement in Actions Requesting Declaratory Relief

December 1, 2016

Defense Digest, Vol. 22, No. 4, December 2016

 

By Danielle N. Robinson, Esq.*

Key Points:

  • Proposals for settlement are a useful tool.
  • The Faith Freight decision may allow insurers to utilize proposals for settlement in breach of contract cases that also include a claim for declaratory relief.

 

The enforceability of proposals for settlement served upon plaintiffs continues to be a concern in first-party property cases. Florida’s courts continue to find issues they consider to be ambiguous within proposals themselves, including the failure to apportion offers made to husband and wife plaintiffs where the damages are indivisible. However, a growing concern has developed with regard to enforcing proposals for settlement in cases that seek monetary damages as well as equitable relief.

Florida Statute § 627.428 allows an insured to recover attorneys’ fees in a lawsuit against an insurer if there is a judgment in favor of the insured. However, an insurer is not entitled to fees by Florida statute if it prevails in an action brought by an insured. Florida Statute § 768.79 allows a defendant to recover attorneys’ fees “[i]n any civil action for damages filed in the courts of this state” if an offer made in the form of a proposal for settlement “[i]s one of no liability or the judgment obtained by the plaintiff is at least 25 percent less than such offer.” Thus, proposals for settlement have become an extremely useful tool in first-party property cases.

On occasion, insurers are faced with insureds who refuse to consider reasonable settlement offers or negotiate settlement. The enactment of Florida Statute § 768.79 has been an effective tool in dealing with insureds in these situations. A plaintiff who feels she has nothing to lose by refusing a reasonable settlement offer may now feel that she does have something to lose because, in the event an offer is rejected and there is a defense verdict (or recovery by the plaintiff of at least 25% less than such offer), the defendant can move for recovery of its attorneys’ fees and costs from the plaintiff.

In 2013, the Florida Supreme Court issued its opinion in Diamond Aircraft Indus., Inc. v. Horowitch, 107 So. 3d 362 (Fla. 2013). In Diamond Aircraft, the Florida Supreme Court held proposals for settlement were unenforceable in cases in which both equitable and monetary damages were sought “[a]nd in which the defendant has served a general offer of judgment that seeks release of all claims.” Since the issuance of the Diamond Aircraft ruling, there has been a substantial increase in the number of first-party property lawsuits that include a count for declaratory relief, in addition to the count for monetary damages, for an alleged breach of the policy. The purpose of such pleadings is to seemingly frustrate the insurer’s ability to serve an enforceable proposal for settlement in the case.

However, recent case law has provided some relief to insurers in cases involving proposals for settlement served in cases in which both monetary damages and equitable relief are sought. On September 7, 2016, the Third District Court of Appeal issued its decision in Faith Freight Forwarding Corp. v. Anias, 2016 Fla. App. LEXIS 13401 (Fla. 3d DCA. Sept. 7, 2016). In Faith Freight, the court found a proposal for settlement to be valid and enforceable in cases in which the “the ‘real issue’ before the court” was whether monetary damages were owed. The Faith Freight case utilized the “real issue” analysis employed in DiPompeo Constr. Corp. v. Kimmel & Assocs., 916 So. 2d 17 (Fla. 4th DCA 2005). In DiPompeo, the court “looked behind the procedural vehicle used to bring a lawsuit and focused on whether the ‘real issue’ in the case is one for damages.” In Faith Freight, the court found the “real issue” was the claim for monetary damages and found the proposal for settlement to be valid and enforceable.

Based upon the recent Faith Freight case, insurers can now argue the “real issue” involved in the lawsuit is the plaintiff’s claim for monetary damages related to the alleged breach of the policy. Because the real issue is damages, the proposal for settlement is valid. Thus, regardless of whether the lawsuit also includes a second count for declaratory relief, the “real issue” to be determined in the lawsuit is whether the insurance policy was breached and, if so, the amount of damages (if any) owed to the insured.

The Faith Freight decision is promising and provides some assistance to insurers who would like to utilize proposals for settlement in breach of contract cases that include a count for declaratory relief for the sole purpose of invalidating proposals for settlement.

*Danielle is an associate in our Fort Lauderdale, Florida office who can be reached at 954.847.4939 or dnrobinson@mdwcg.com.

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Defense Digest, Vol. 22, No. 4, December 2016. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2016 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

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Danielle N. Robinson
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(954) 847-4939
dnrobinson@mdwcg.com

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