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Florida Construction Law News

22JAN 2016

Attorney’s Fees Constitute Covered “Court Costs”

by David S. Harrigan, Esq.

In Mid-Continent Casualty Company v. James T. Treace, 41 Fla. L. Weekly D60c (Fla. 5th DCA Dec. 31, 2015), Florida’s Fifth District Court of Appeal recently held that attorney’s fees awarded to a Plaintiff in a construction defect action against an insured contractor were covered under a supplementary payment provision in a commercial general liability (“CGL”) policy. In an underlying construction defect suit, homeowners, James and Angelina Treace (the “Treaces”), successfully sued the contractor that built their home and obtained a judgment “for the cost to access and repair water damage caused by faulty construction.” In addition to these compensatory damages, the trial court also awarded attorney’s fees and costs in favor of the Treaces.

The Treaces then filed a garnishment proceeding against Mid-Continent Casualty Company (“MCC”)—which insured the contractor under a CGL policy—to collect the $810,280 in damages and $397,076 in attorney’s fees and costs. The trial court in the garnishment proceeding found that the damages were covered under the CGL policy, but the attorney’s fees and costs were not.

The Treaces appealed and the Fifth District reversed the portion of the trial court judgment pertaining to the attorney’s fees and costs. In other words, the Fifth District held that, under this particular CGL policy, attorney’s fees and costs were covered. The relevant portion of the CGL supplementary payment provision required MCC to pay, “with respect to any claim [it] investigate[s] or settle[s], or any ‘suit’ against an insured [it] defend[s] … all costs taxed against the insured in the ‘suit.’”

The Fifth District reasoned that the term, “costs,” includes not only court costs and litigation costs, but also attorney’s fees. The Court relied upon two prior cases: Geico General Insurance Co. v. Hollingsworth, 157 So. 3d 365 (Fla. 5th DCA 2015), and Geico General Insurance Co. v. Rodriguez, 155 So. 3d 1163 (Fla. 3d DCA 2014). In Hollingsworth, the Fifth District concluded that a similar provision provided coverage for attorney’s fees. The relevant provision in Hollingsworth stated in the “Additional Payments” section that the carrier would pay “[a]ll court costs charged to an insured in a covered lawsuit.” Similarly, in Rodriguez, the Third District analyzed the same policy provision and concluded that attorney’s fees were covered as “court costs.” The attorney’s fees in Hollingsworth were awarded pursuant to Florida’s Offer of Judgment Statute (§ 768.79, Fla. Stat.) and the attorney’s fees in Rodriguez were awarded as sanctions for a discovery violation.

Crucially, the court explained, “[b]oth courts [in Rodriguez and Hollingsworth] noted that the insurer did not, but could have, defined ‘court costs’ to specifically exclude attorney’s fees.” For example, the Rodriguez court reasoned (and the Hollingsworth court quoted with approval):

Given this court’s precedent that (i) costs may be chargeable to a liability insurance carrier and (ii) insurance policies are to be liberally interpreted in favor of coverage, coupled with the fact that the instant policy does not define court costs, we cannot find error in the trial court’s holding that the Geico policy provides coverage for sanctions entered against the insured as an additional cost of the litigation.

… we are aware of no impediment which would have prohibited Geico from clarifying in its liability policy that monetary sanctions resulting from an insured’s intentional misrepresentations … are not considered a “court cost” under the ‘additional payments’ provision of the Geico policy.

The Hollingsworth court added, “Likewise, here, Geico could have provided a definition of ‘court costs’ that explicitly excluded attorney’s fees sought under the Offer of Judgment Statute.”

Thus, in evaluating potential damages or potential liability, be mindful of the policy language at issue. If a policy sets forth that “costs” or “court costs” are covered, then Rodriguez, Hollingsworth, and Treace suggest that attorney’s fees may be covered damages.

Posted By David S. Harrigan, Esq.

David S. Harrigan is a Partner in CSK’s Construction Group and practices in the Orlando office. Mr. Harrigan is a Board Certified Specialist in Construction Law. He concentrates his practice primarily on construction litigation matters, including construction defect and contract claims, on behalf of architects, engineers, developers, contractors, and subcontractors, professional liability claims and general business disputes on behalf of design professionals, and premises liability claims on behalf of property owners.