Pearson v. Scottsdale Ins. Co.

681 F.Supp.3d 1271

Rachel PEARSON, et al., Plaintiffs, v. SCOTTSDALE INSURANCE COMPANY, Defendant.

CASE NO. 8:22-cv-1530-SDM-AEP

United States District Court, M.D. Florida, Tampa Division

Signed July 10, 2023

Jessica Latrice Fletcher, Tampa, FL, Grant W. Krapf, Krapf Legal, P.A., Clearwater, FL, for Plaintiffs.

Sean William Rolland, Wilson Elser, Orlando, FL, for Defendant.

ORDER

STEVEN D. MERRYDAY, UNITED STATES DISTRICT JUDGE

After Tropical Storm Eta damaged Rachel Pearson's home, Pearson and her insurer, Scottsdale Insurance Company, disputed whether Pearson's roof leaked from wind damage, which the policy covers, or from "expansion and contraction," which the policy excludes. Despite invoking her contractual right to appraisal, Pearson sued Scottsdale in state court before the appraisal concluded and without complying with a recently enacted pre-suit notice requirement. Scottsdale promptly removed the action to federal court and moved to dismiss for failure to comply with the pre-suit notice requirement. Before Pearson responded to the motion to dismiss, Scottsdale and Pearson stipulated to abate this action pending conclusion of the appraisal, which awarded Pearson $123,545.92 and included an itemized award for the disputed damage to the roof. Scottsdale promptly paid the appraisal award.

Pearson contends (Doc. 29) that Scottsdale's payment constitutes a "confession of judgment" entitling Pearson to an attorney's fee. Scottsdale moves (Doc. 31) for "summary judgment" on Pearson's claim for an attorney's fee and renews the motion to dismiss for failure to comply with the pre-suit notice requirement. Each party responds (Docs. 32, 33) in opposition to the adversary's motion. Principally, the parties dispute whether the recently enacted pre-suit notice requirement applies "retroactively," which, as the parties use the term, means whether the requirement applies to a policy issued before the requirement became effective.

Enacted June 11, 2021, and effective July 1, 2021, Section 627.70152, Florida Statutes, among other things, requires pre-suit notice before suing "under a residential or commercial property insurance policy[.]" Specifically, subsection (3)(a) requires "as a condition precedent to filing a suit under a property insurance policy" that "a claimant must provide the [Florida Department of Financial Services] with written notice of intent to initiate litigation . . . ." The notice "must be given at least 10 business days before filing suit under the policy, but may not be given before the insurer has made a determination of coverage . . . ." If the insurer fails within ten business days to respond by accepting coverage, denying coverage, or asserting a right of inspection or appraisal, subsection (4) authorizes the insured to sue. Subsection (4)(b), however, tolls the response deadline for a maximum of ninety days pending appraisal. If an insured sues without pre-suit notice, subsection (5) requires dismissal without prejudice and subsection (8)(b), prohibits the award of an attorney's fee for services rendered before the dismissal.¹

The parties' papers recognize Menendez v. Progressive Express Insurance Co., 35 So. 3d 873 (Fla. 2010), as the leading authority on the "retroactivity" of a pre-suit notice requirement in insurance litigation. In Menendez, the insurer moved to dismiss after the insured failed to comply with the pre-suit notice requirement under Florida's Motor Vehicle No-Fault Law, which requires a motor vehicle policy to cover bodily injury "without regard to fault" and guarantees a "swift and virtually automatic recovery" for the insured. Although the insurer issued the personal injury policy before the pre-suit notice requirement became effective, the insured sued without pre-suit notice after the requirement became effective. Menendez, 35 So. 3d at 875.

Under Menendez, a pre-suit notice requirement applies "retroactively" if and only if (1) the statute reveals a legislative intent for the requirement to apply "retroactively" and (2) "retroactive" application is "procedural" rather than "substantive." Menendez, 35 So. 3d at 877-78. After summarily concluding that the legislature intended the pre-suit notice requirement to apply "retroactively," Menendez holds that the requirement is "a substantive change to the [no-fault law]" (1) because pre-suit notice impedes the right to a "swift and virtually automatic recovery" by creating a "safe period" extending the time in which an insurer can pay the claim, (2) because pre-suit notice affords the insurer the opportunity to withdraw a meritless denial of coverage and avoid paying an attorney's fee, and (3) because pre-suit notice requires the insured to "take additional steps beyond the filing of an application for [personal injury] benefits." Menendez, 35 So. 3d at 877-80. Accordingly, Menendez concludes that the pre-suit notice requirement under the no-fault law is not "procedural" but "substantive" and thus cannot apply "retroactively." Menendez, 35 So. 3d at 880.²

In her papers, Pearson marshals decisions of Florida trial courts and a federal district court, Dozois v. Hartford Ins. Co. of the Midwest, 595 F. Supp. 3d 1204 (M.D. Fla. 2022) (Corrigan, C.J.), which hold that under Menendez the pre-suit notice requirement of Section 627.70152(3)(a) is "substantive" and cannot apply "retroactively" to a property insurance policy issued before the statute's effective date. In response, Scottsdale marshals decisions of Florida trial courts and a federal district court, Art Deco 1924 Inc. v. Scottsdale Ins. Co., 2022 WL 706708 (S.D. Fla. 2022) (Moreno, J.), which distinguish Menendez by reasoning that "retroactive" application Section 627.70152(3)(a) impairs no "substantive" right under a property insurance policy.

After the parties' briefing, Cole v. Universal Property & Casualty Insurance Co., 363 So.3d 1089 (Fla. 4th DCA 2023) (Levine, J.) (petition for rehearing en banc pending), became the first decision of a Florida district court of appeal to analyze the "retroactivity" of Section 627.70152(3)(a).³ Although acknowledging that Menendez prohibits the "retroactive" application of the pre-suit notice requirement under Florida's no-fault law, Cole recognizes that the no-fault law's pre-suit notice requirement also "impose[s] a penalty," "implicate[s] attorney's fees," "grant[s] an insurer additional time to pay benefits," "delay[s] the insured's right to institute a cause of action," and impedes the no-fault statute's "swift and virtually automatic" recovery. Cole, 363 So.3d at 1094. Cole reasons that, because subsection (3) includes none of the additional impairments contained in the no-fault law's pre-suit notice requirement and prescribes only the manner by which an insured pursues a remedy under the property insurance policy, subsection (3) is "procedural" and applies "retroactively" to require dismissal of an action filed without pre-suit notice. Cole, 363 So.3d at 1093 (citing Haven Fed. Sav. & Loan Ass'n v. Kirian, 579 So. 2d 730, 732 (Fla. 1991) (observing that procedure "encompass[es] the course, form, manner, means, method, mode, order, process or steps by which a party enforces substantive rights or obtains redress for their invasion.")).

Although concluding that subsection (3) is "procedural," Cole remarks that subsection (8), which precludes an attorney's fee in the absence of pre-suit notice, impairs a "substantive" right and under Menendez and likely cannot apply retroactively. Cole, 363 So.3d at 1094. But because the trial court in Cole dismissed the action before the insured could claim entitlement to a fee, Cole reasons that "changes to the attorney's fees provision are not an issue in this case, and as such, not relevant to our determination." Cole, 363 So.3d at 1093. Relying on Leapai v. Milton, 595 So. 2d 12, 15 (Fla. 1992), Cole concludes that "[o]ne provision that is substantive in scope does not act as a bar to enforcement of another provision that is able to be applied retroactively." Cole, 363 So.3d at 1094. Accordingly, Cole affirms the dismissal of the insured's action.

A federal court exercising diversity jurisdiction applies the substantive law of the forum state. Salve Regina College v. Russell, 499 U.S. 225, 226, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991). "Absent a decision by the highest state court or persuasive indication that it would decide the issue differently, federal courts follow decisions of intermediate appellate courts in applying state law." Galindo v. ARI Mut. Ins. Co., 203 F.3d 771, 775 (11th Cir. 2000). Under Pardo v. State, 596 So. 2d 665, 666 (Fla. 1992), however, " '[t]he decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court.' Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts." Because Cole "represent[s] the law of Florida" and no district court of appeal conflicts with Cole, Section 627.70152(3)(a) applies in a federal district court and requires dismissal of a property-insurance action filed without pre-suit notice.⁴ Thus, Pearson's action, filed without pre-suit notice, warrants dismissal.

One wrinkle remains. In Cole, the trial court granted the insurer's motion to dismiss after the insured failed to afford pre-suit notice. Because the trial court dismissed the action before assessing the insured's entitlement to an attorney's fee, subsection (8), which prohibits the award of an attorney's fee in the absence of pre-suit notice, "w[as] not an issue." Cole, 363 So.3d at 1094. In this action, the parties promptly moved to abate the action before Pearson responded to the motion to dismiss. Accordingly, the abatement order denied "without prejudice" Scottsdale's motion to dismiss, which Scottsdale promptly renewed after Pearson demanded a fee. Unlike in Cole, in which the action was dismissed before the plaintiff could claim entitlement to an attorney's fee, Pearson has a...