Insurance — Sinkhole claim —Trial court abused its discretion in including reimbursement for public adjuster and property management fees in taxable costs — Error to apply contingency risk multiplier where fee agreement guaranteed payment at a lesser hourly rate

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Fla. L. Weekly D788bTop of Form

Insurance
— Sinkhole claims — Multi-building condominium property — Insured prevailing
in action against insurer — Costs — Trial court abused its discretion in
including reimbursement for public adjuster and property management fees in
taxable costs, as property management fees and public adjuster fees were not
litigation costs — Trial court erred in awarding as taxable cost various
expenses and fees incurred in appraisal process where policy required insured
to pay its own appraiser and bear equal share of umpire and other appraisal
expenses — Attorney’s fees — Multiplier — Error to apply contingency risk
multiplier where fee agreement guaranteed payment at a lesser hourly rate,
which mitigated the risk of nonpayment, and evidence showed that attorney had
been paid under the contract — Trial court erred by limiting recovery of
attorney’s fees and prejudgment interest to only one building where suit
encompassed other buildings in condominium complex

CITIZENS PROPERTY INSURANCE CORP., Appellant/Cross-Appellee,
v. RIVER OAKS CONDOMINIUM II ASSOCIATION, INC., a/k/a RIVER OAKS II CONDO
ASSOCIATION, INC., Appellee/Cross-Appellant. 2nd District. Case No. 2D13-4331.
Opinion filed March 30, 2016. Appeal from the Circuit Court for Hillsborough
County; Christopher C. Sabella, Judge. Counsel: Kara Berard Rockenbach of Methe
& Rockenbach, P.A., West Palm Beach, for Appellant/Cross-Appellee. George
A. Vaka and Nancy A. Lauten of Vaka Law Group, Tampa, for
Appellee/Cross-Appellant.

(NORTHCUTT, Judge.) Citizens Property Insurance Corp.
appeals a final order awarding over $1.4 million in fees, costs, and
prejudgment interest to River Oaks Condominium II Association, Inc., following
the latter’s successful lawsuit on a sinkhole claim. River Oaks is dissatisfied
with the amount, and it cross-appeals. We affirm in part and reverse in part.

River Oaks is a multi-building condominium property that was
insured by Citizens under a policy that included sinkhole coverage. Damage was
initially noted in one building in February 2005. In April, River Oaks hired an
attorney (Richard Wilson), a public adjuster (Transco American Claims), and a
property management company (University Properties, Inc.) to address this
issue. About two weeks later, Transco gave notice to Citizens of possible
sinkhole losses at the property. After some delay, Citizens sent an independent
adjuster to perform an inspection. The adjuster was shown the building with the
most noticeable damage and was informed that other buildings in the complex
were also showing signs of sinkhole activity. Although the adjuster agreed that
a geotechnical engineer was needed for a sinkhole investigation, Citizens did
not retain one. Instead, Citizens took the position that the insurance policy
did not cover the cost of filling sinkholes.

River Oaks retained Central Florida Testing Laboratories,
which confirmed sinkhole activity as a cause of damage. In September 2005, it
filed suit against Citizens. The complaint alleged breach of contract based in
part on Citizens’ failure to conduct the investigation required by section
627.707, Florida Statutes (2004), for sinkhole claims. It also sought a
declaration that the insurance policy provided sinkhole coverage, including
stabilization costs.

River Oaks made specific allegations of damage to the one
building and general allegations regarding the other buildings. For example,
the complaint alleged:

On
or about March 2005, River Oaks discovered substantial damage occurring to
Building 19[1] caused by sinkhole activity, as
well as damage occurring to other buildings insured by Citizens. . . .

Despite
numerous requests by representatives of River Oaks, Citizens has failed to
engage an engineer or professional geologist as required by law to determine
the cause of the loss to the subject building and to investigate possible
damage to River Oaks other buildings. . . .

The
geotechnical engineering firm retained by River Oaks has concluded that
Building 19 has been damaged by sinkhole activity and has recommended that the
other buildings be investigated for possible loss caused by sinkhole activity.
. . .

WHEREFORE,
River Oaks demands judgment for damages, including investigative costs to
determine if sinkhole activity is occurring, costs to repair, restore or
replace the subject buildings . . ., together with all engineering or
architectural fees to repair or replace the subject buildings . . . .

Citizens sought an appraisal without admitting coverage. By
the time of a hearing on Citizens’ motion to dismiss or abate, River Oaks had
furnished a list identifying more buildings that showed sinkhole damage. The
court ordered appraisal for all affected buildings and required Citizens to
conduct inspections and subsurface testing. Over the next two years, the
testing and appraisal process resulted in awards totaling $4,777,607 for damage
to twelve buildings in the complex.

Midway through this process, the River Oaks’ board of
directors was replaced with a board that was inexplicably hostile to the
sinkhole claims, despite the experts’ confirmation of sinkholes. The new board
terminated attorney Wilson, Transco, and University Properties without
compensating them as required under their individual contracts; this resulted
in third-party claims.

The original board was later restored. The board hired
attorney Kennan Dandar in November 2008. By this point, Citizens had paid the
appraisal awards. River Oaks then settled or concluded the third-party claims.
It also sought attorneys’ fees, costs, and prejudgment interest from Citizens,
which brings us to this appeal.

Citizens challenges several items taxed as costs in addition
to the use of a multiplier for calculating attorney Dandar’s fee. We agree with
the circuit court that the wrongful act doctrine is inapplicable in this case. Cf.
Reiterer v. Monteil, 98 So. 3d 586, 588 (Fla. 2d DCA 2012) (explaining
that the doctrine allows for the recovery of certain costs and expenses as an
element of damages when the defendant’s wrongful act has involved the claimant
in litigation with others, necessitating the expenses).

Citizens argues that $759,578.56 in reimbursement for the
public adjuster and property management fees was improperly awarded to River
Oaks as a taxable cost. The Statewide Uniform Guidelines for Taxation of Costs
in Civil Actions provides guidance for trial courts, which have broad
discretion in the taxation of costs. In re Amendments to Uniform Guidelines
for Taxation of Costs, 915 So. 2d 612, 614 (Fla. 2005) (“The guidelines . .
. are not intended to be mandatory, and the appropriate assessment of costs in
any particular proceeding remains within the discretion of the trial court.”).
We conclude that the trial court abused its discretion in taxing the property
management fees and public adjuster fees because they were not litigation
costs. Further, as compared to expert witnesses, a public adjuster is more akin
to a consulting expert, whose costs should not be taxed according to the
guidelines. We agree with Citizens that these were not proper taxable costs,
and we reverse on this issue.

Citizens argues that $99,741.55 was improperly awarded to
River Oaks as a taxable cost for various expenses and fees in the appraisal
process. But under the insurance policy, River Oaks was required to pay its own
appraiser and bear an equal share of the umpire and other appraisal expenses.
We reverse on this issue.

Finally, Citizens challenges the fee award to attorney
Dandar, specifically the use of a 2.0 multiplier in calculating his fee. A
multiplier is appropriate when

(1)
the relevant market requires a contingency multiplier to obtain competent
counsel; (2) the attorney was unable to mitigate the risk of nonpayment in any
other way; and (3) use of a multiplier is justified based on factors such as
the amount of risk involved, the results obtained, and the type of fee
arrangement between attorney and client.

Bell v. U.S.B. Acquisition Co.,
734 So. 2d 403, 412 (Fla. 1999) (citing Standard Guar. Ins. Co. v. Quanstrom,
555 So. 2d 828, 834 (Fla. 1990)). The fee agreement in this case was not a true
contingency contract. Instead, it guaranteed payment at a lesser hourly rate,
which mitigated the risk of nonpayment, and the evidence showed that Dandar had
indeed been paid under the contract. See id. at 407 (“[W]e
recognized the economic reality that attorneys who work on a contingent fee
basis only receive compensation when they prevail, and thus must charge a
higher fee than if they had been guaranteed an hourly rate.” (citing Fla.
Patient’s Comp. Fund v. Rowe, 472 So. 2d 1145, 1151 (Fla. 1985), holding
modified by Quanstrom)). A multiplier was not appropriate here, and
we reverse on this issue.

On cross-appeal, River Oaks argues that the court erred by
limiting its recovery of attorneys’ fees and prejudgment interest to only
building 19. We agree that the suit encompassed the other buildings in the
condominium complex, and we reverse on this issue. As explained above, River
Oaks sued in part to enforce Citizens’ obligation to investigate the sinkhole
claim.2 Its complaint clearly alleged that
buildings other than building 19 were damaged, and it sought to recover
damages, including “costs to repair, restore or replace the subject buildings
[plural].” We conclude that the allegations were sufficient to include the
other buildings in the condominium complex because they were sufficient to
state a claim “with sufficient particularity for a defense to be prepared.” Arky,
Freed, Stearns, Watson, Greer, Weaver & Harris, P.A. v. Bowmar Instrument
Corp., 537 So. 2d 561, 563 (Fla. 1988). Accordingly, we reverse on this
issue and remand for the court to award prejudgment interest and attorney’s
fees connected with the other buildings.

On the issue of an expert witness fee for the fee hearing,
we affirm without further discussion.

Affirmed in part, reversed in part, and remanded for further
proceedings. (KELLY and BLACK, JJ., Concur.)

__________________

1Known locally as 19, this building
was identified in the policy as building 7, a fact that was clarified in an
amended complaint.

2Section 627.707 provided in part as
follows:

(1)
Upon receipt of a claim for a sinkhole loss, an insurer must meet the following
minimum standards in investigating a claim:

(b)
If, upon the investigation pursuant to paragraph (a), the insurer discovers
damage to a structure which is consistent with sinkhole activity or if the
structure is located in close proximity to a structure in which sinkhole damage
has been verified, then prior to denying a claim, the insurer must obtain a
written certification from an individual qualified to determine the existence
of sinkhole activity, stating that the cause of the claim is not sinkhole
activity, and that the analysis conducted was of sufficient scope to eliminate
sinkhole activity as the cause of damage within a reasonable professional
probability. The written certification must also specify the professional
discipline and professional licensure or registration under which the analysis
was conducted.

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