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In a victory for policyholders statewide, the Florida Supreme Court ruled Thursday that claimants involved in disputes with insurance companies are entitled to attorney fees when they are forced to return to court to enforce a settlement. Under Florida Statute 627.428, policyholders are already entitled to attorney fees when they prevail in their claims against their insurance companies for coverage. Under the statute, policyholders can also recover fees incurred in reaching settlements. The question before the state Supreme Court, however, was whether the statute extended to fees policyholders had to spend in order to prove the validity of agreed-upon settlements. “We hold that it may,” the Florida Supreme Court said. “It would be incongruous to permit fees incurred in reaching a settlement agreement, but not to allow fees to determine whether the parties reached a binding settlement in the first place.” The state Supreme Court’s decision levels the playing field for policyholders trying to enforce valid settlement agreements with their insurance companies, said Cindy Ebenfeld of Hicks, Anderson & Kneale in Hollywood, Fla., who represented Medley, Fla.-based Pepper’s Steel & Alloys. “The decision is in accordance with the public policy of the state of Florida to promote settlement agreements,” said Ebenfeld, who handled the appeal with Richard Bales Jr. of Bales & Sommers in Miami. “In the past, it’s been unclear whether you’re entitled to these types of fees under the statute.” The case arose out of a dispute between Pepper’s Steel and its insurance company, United States Fidelity and Guaranty Co. (USF&G). In March 1985, the federal government filed suit against Pepper’s Steel, a scrap metal recovery facility, and other defendants in U.S. District Court in Miami. The government was trying to recover cleanup costs for toxic waste on Pepper’s Steel’s 30-acre site. Pepper’s Steel demanded coverage from USF&G. The insurance company refused, claiming the cleanup costs were not covered under Pepper’s Steel’s policy because of a pollution exclusionary clause. In 1991, USF&G offered to settle the claims for $2 million. Pepper’s Steel did not accept the offer until October 1993, months after the state Supreme Court issued an opinion in a case called Dimmit Chevrolet Inc. v. Southeastern Fidelity Ins. Corp. The high court’s interpretation of pollution exclusion clauses in its Dimmit Chevrolet decision was very favorable for insurance companies. When Pepper’s Steel accepted USF&G’s offer, however, the insurance company claimed it had been withdrawn. Pepper’s Steel then filed a motion to enforce the settlement agreement. After a two-day hearing, U.S. District Judge James Paine ruled that the settlement had never been revoked and was binding. Paine ruled, however, that each side was responsible for its attorney fees. On appeal before the 11th U.S. Circuit Court of Appeals, the court upheld Paine’s ruling on the validity of the settlement. The 11th Circuit remanded the case to the district court on the issue of attorney fees accrued during Pepper’s Steel’s fight to prove the settlement was valid. The settlement agreement already precluded Pepper’s Steel from recovery of attorney fees in the litigation leading up to the settlement. On remand, U.S. District Judge Adalberto Jordan again ruled that Pepper’s Steel was not entitled to attorney fees. Pepper’s Steel appealed again to the 11th Circuit, which referred the case to the Florida Supreme Court because of conflicting appellate decisions on the governing Florida law. In finding in favor of Pepper’s Steel, the Florida Supreme Court rejected a 1980 3rd District Court of Appeal opinion on the issue in Travelers Indemnity Co. of America v. Morris, which reversed an attorney fee award for post-judgment services. Instead, the high court adopted the reasoning in a 2000 5th District Court of Appeal decision in Bankers Security Insurance Co. v. Brady.

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