Insurance
— Attorney’s fees — Prevailing insured — In determining commercial general
liability insurer’s liability for fees incurred by insured, who prevailed in
coverage dispute with insurer, trial court erred in limiting recovery of
attorney’s fees under contingency fee agreement between insured and insured’s
attorney to those fees incurred in litigating coverage action against insurer,
thereby allowing no recovery for attorney’s fees incurred in defending the
insured in underlying personal injury action for which insured had sought
coverage and a defense — Insurer had no standing to advance a construction of
fee agreement to which it was neither a party nor a third-party beneficiary
and, accordingly, could not impose an interpretation of the agreement that ran
counter to the intent of the parties to the contract, who agreed that they
contemplated recovery of attorney’s fees incurred in defending underlying tort
action — Inclusion of these fees is consistent with subject matter and object
and purpose of contract between insured and attorney, which contemplated a
lawsuit against insurer for breach of its duty to defend insured in tort action

COMPANION PROPERTY & CASUALTY INSURANCE CO.,
Appellant/Cross-Appellee, v. CATEGORY 5 MANAGEMENT GROUP, LLC,
Appellee/Cross-Appellant. 1st District. Case No. 1D14-5863. Opinion filed March
17, 2016. An appeal from the Circuit Court for Escambia County. J. Scott
Duncan, Judge. Counsel: Peter D. Webster and Christine Davis Graves of Carlton
Fields Jorden Burt, P.A., Tallahassee, for Appellant/Cross-Appellee. Mark A.
Newell, Mobile, Alabama and Kevin F. Masterson, Daphne, Alabama, for
Appellee/Cross-Appellant.

(SWANSON, Judge.) This is an appeal and cross-appeal from a
final judgment awarding attorney’s fees to Category 5 Management Group, LLC
(“Category 5”) in an insurance coverage action. We affirm without discussion
the trial court’s decision to apply a contingency fee multiplier to enhance the
attorney’s fee award. However, for the reasons that follow, we reverse the
trial court’s determination that the contingency fee agreement did not
contemplate payment of attorney’s fees for the defense of Category 5 in the
underlying Alabama personal injury lawsuit, which was the subject of this
insurance coverage action.

Category 5, a company located in Pensacola, purchased a
commercial general liability policy from Companion Property & Casualty
Insurance Company (“Companion”) for a one-year period commencing June 1, 2007,
and ending June 1, 2008. In the summer of 2007, Companion was hired to
supervise subcontractors and their crews performing cleanup operations in New
Orleans following Hurricane Katrina. One of these subcontractors was Colonel
McCrary Trucking, which performed certain transportation-related services at
the project site. Joe Johnson, an employee of Colonel McCrary Trucking, worked
at the site. On July 11, 2007, while driving a pickup truck owned by R.D.
Construction (a subcontractor of Colonel McCrary Trucking), Johnson ran a stop
light in Alabama and struck a car occupied by the Stewart family, severely
injuring three family members.

On December 31, 2007, the Stewart family filed a five-count
personal injury lawsuit in Alabama state court against several defendants,
including Category 5. Companion denied Category 5’s request for defense and
indemnity, citing the “auto exclusion” of the policy as the sole basis for
denial. Category 5 subsequently retained Masterson & Newell, LLC, to defend
Category 5 against the allegations of the Alabama lawsuit and to seek insurance
coverage from Companion. The contingency fee agreement between Category 5 and
its counsel provided in pertinent part:

Attorney
Fees. This representation is made upon a contingency-fee basis. Therefore, if
no recovery is made, Client will not be indebted to Attorneys for any sum
whatsoever as Attorney’s Fees. If a recovery is made, the compensation to be
paid to said Attorneys by Client shall be a reasonable attorney’s fee as
determined by the Court or any appointed Master pursuant to Fla. Stat. Sec.
627.428, as supplemented by any multiplier which may be awarded thereon
pursuant to Florida law, and all accrued interest thereon. Attorneys may associate
with other attorneys to assist with these matters. However, under no
circumstances will Client be responsible for attorney’s fees in excess of the
fees specified above.

Eventually, a consent judgment was entered against Category
5 and in favor of the Stewart family for $6,000,000.00 in the Alabama lawsuit.
The Stewart family agreed not to record or execute the judgment against
Category 5 in exchange for Category 5’s promise to continue to prosecute its
coverage action against Companion and to pay the Stewarts any insurance
proceeds collected from Companion.

On July 15, 2008, Category 5 filed a complaint seeking a
declaratory judgment that the insurance policy issued by Companion provided
coverage to Category 5 for the personal injury action brought by the Stewart
family in Alabama. Companion filed a motion for summary judgment on the ground
that Category 5 was not entitled to a defense or indemnity due to the
“automobile exclusion” contained in the policy. The trial court granted
Companion’s motion for summary judgment and dismissed Category 5’s complaint
with prejudice. On appeal, this court reversed and remanded for further
proceedings after concluding that Companion breached its duty to defend. Category
5 Mgmt. Group, LLC v. Companion Prop. & Cas. Ins. Co., 76 So. 3d 20
(Fla. 1st DCA 2011).

On remand, the trial court granted Category 5’s motion for
summary judgment on the issue of coverage. However, the trial court granted
Companion’s motion for partial summary judgment, finding in pertinent part:

4.
The Court concludes the contingency fee agreement is plain and unambiguous in
all respects. Category 5 hired Masterson and Newell to represent it in all
litigation that related to the Alabama case and in any claims involving
liability insurance coverage. However, the attorney fee section of the
agreement plainly states that “If a recovery is made, the compensation to be
paid to said Attorneys by Client shall be a reasonable attorney’s fee as
determined by the Court or any appointed Master pursuant to Fla. Stat. Section
627.428, as supplemented by any multiplier which may be awarded thereon
pursuant to Florida law, and all accrued interest thereon.” The Court finds
that the phrase “as determined by the Court” is modified by the phrase
“pursuant to Fla. Stat. Section 627.428.” Thus, the plain meaning of the
contingency fee agreement is that the attorney’s compensation is to be
determined by the Court pursuant to Section 627.428. Further, there is nothing
in the contingency fee agreement that addresses the compensation that may be
owed to Category 5’s attorneys for defending the company in the Alabama
litigation. In fact, the agreement clearly states that “under no circumstances
will Client be responsible for attorney’s fees in excess of the fees specified
above.”

5.
The Court further finds that Section 627.428 is not a basis to award those
attorney fees which would be classified as the damages suffered by an insured
when its insurance company breaches its duty to defend. While the statute
clearly permits Category 5 to recover the attorney fees incurred in prosecuting
its Florida suit against Companion for coverage and duty to defend issues, it
does not provide for a recovery of the fees incurred in defending the Alabama
lawsuit (the underlying litigation). When Category 5 signed the fee agreement
it only obligated itself to pay its attorneys those fees that were awarded by a
court pursuant to Section 627.428. Because the fees incurred for the Alabama
litigation could not be awarded based upon Section 627.428, Category 5 would
not be obligated to pay such fees to its attorneys.

After holding hearings on the award of attorney’s fees
pursuant to section 627.428, the trial court entered a final judgment awarding
attorney’s fees to Category 5. This appeal followed.

The intent of the parties to a contract should govern the
construction of the contract. Am. Home Assurance Co. v. Larkin Gen. Hosp.,
Ltd., 593 So. 2d 195, 197 (Fla. 1992). To determine the intent of the
parties, a court should consider the language in the contract, the subject
matter of the contract, and the object and purpose of the contract. Id.
A court must construe a contract in a manner that accords with reason and
probability and avoids an absurd construction. Kipp v. Kipp, 844 So. 2d
691, 693 (Fla. 4th DCA 2003). The interpretation of a contract is a question of
law subject to de novo review. City of Tampa v. Ezell, 902 So. 2d 912,
914 (Fla. 2d DCA 1995).

In this case, Category 5 claims the trial court erred in
construing the contingency fee agreement as not contemplating payment of
attorney’s fees for defense of the Alabama tort litigation. Below, Companion
argued the language of the contingency fee agreement limited the recovery of
attorney’s fees to those incurred in litigating the Florida coverage action
thereby allowing no recovery for attorney’s fees incurred in defending Category
5 in the Alabama tort action. Even though Category 5 and its counsel disputed
that this was their intent when they entered the contingency fee agreement, the
trial court agreed with Companion and granted partial summary judgment in
Companion’s favor on this issue.

This ruling was in error because Companion had no standing
to advance a construction of the contingency fee agreement to which it was
neither a party nor a third-party beneficiary. See Gallagher v.
Dupont, 918 So. 2d 342, 347 (Fla. 5th DCA 2005) (“When a contract is
designed solely for the benefit of the contracting parties, a third party
cannot enforce its provisions even though the third party may derive some
incidental or consequential benefit from the enforcement.”). Because there is
nothing in the contingency fee agreement demonstrating any intent to benefit
Companion, it cannot impose an interpretation of the agreement that runs
counter to the intent of the parties to the contract, who agree that they
contemplated recovery of attorney’s fees incurred in defending the Alabama tort
action.

The inclusion of such fees is consistent with the subject
matter and the object and purpose of the contract, which contemplated bringing
a lawsuit in Florida against Companion for a breach of its duty to defend
Category 5 in the Alabama tort action. “The law is well established that when
an insurer unjustifiably refuses to defend its insured, the insurer is liable
to the insured for the reasonable attorney’s fees and other expenses incurred
in defending the action brought by the third party as damages for the breach of
contract.” Fla. Ins. Guar. Ass’n v. All the Way with Bill Vernay, Inc.,
864 So. 2d 1126, 1129 (Fla. 2d DCA 2003). Thus, by bringing suit against
Companion for breach of its duty to defend Category 5 in the Alabama tort
action, Category 5 and its counsel were seeking damages from Companion in the
form of attorney’s fees incurred in the Alabama tort action. However, under
Companion’s interpretation of the contingency fee agreement, Category 5 and its
counsel waived the legal right to recover these damages, depriving counsel of
substantial attorney’s fees and gifting Companion with an unwarranted windfall
by excusing it from the legal consequences of its failure to defend Category 5.
Such an interpretation is not compelled by the language of the contingency fee
agreement, is contrary to the intent of the parties to the contract, is not
consistent with the subject matter or object and purpose of the contract, and
borders on the absurd insofar as it would compel counsel to represent Category
5 pro bono in the Alabama tort action.

Concluding the trial court erred in construing the
contingency fee agreement, we reverse and remand for an award of reasonable
attorney’s fees incurred by Category 5 in defending the Alabama tort action. At
this point, we decline to address (1) whether Companion waived its right to a
jury trial on the issue of the reasonable amount of attorney’s fees incurred by
Category 5 in the Alabama tort action or (2) whether fees expended in pursuit
of a defense and indemnity from Colonel McCrary Trucking were a reasonable and
necessary part of Category 5’s defense in Alabama. Because they involve factual
issues, these matters should be resolved by the trial court on remand.

AFFIRMED in part; REVERSED in part; and REMANDED for further
proceedings. (LEWIS and WINOKUR, JJ., CONCUR.)

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