Deirdre Levesque v. Government Employees Insurance Company

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[DO NOT PUBLISH] In the United States Court of Appeals For the Eleventh Circuit

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No. 21-12257 Non-Argument Calendar ____________________

DEIRDRE LEVESQUE, TIMOTHY LEVESQUE, Plaintiffs-Appellees, versus GOVERNMENT EMPLOYEES INSURANCE COMPANY,

Defendant-Appellant. ____________________

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 2:15-cv-14005-KAM ____________________

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Before WILLIAM PRYOR, Chief Judge, ROSENBAUM, and BRASHER, Circuit Judges. PER CURIAM: This is a diversity case in which Government Employees In- surance Company (“GEICO”) appeals from the district court’s cal- culation of attorney’s fees as damages. Because we agree with GEICO that the district court improperly calculated the damages award, we vacate and remand. BACKGROUND We have previously detailed the factual background of this case the first time it came before us. See Levesque v. Gov’t Emps. Ins. Co., 817 F. App’x 670 (11th Cir. 2020) (“Levesque I ”). For con- venience, we summarize it again here. In August 2011, Deirdre Levesque was injured while work- ing as a receptionist at an animal hospital. She was crouched down inside a client’s open car door when another client backed her car into the door, pinning Levesque. As a result of the accident, Levesque suffered a fractured clavicle and scapula, a fractured and rotated sternum, a punctured lung, and fractured ribs. At the time of the accident, Levesque and her husband had non-stacking uninsured motorist (“UM”) coverage from GEICO. When Levesque contacted GEICO to tell it that she would likely make a claim on her UM policy, it delayed its investigation into the exact scope of Levesque’s injuries and instead spent the next

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several months focused mainly on Levesque’s ability to recover from other sources. After GEICO learned that another insurer had agreed to pay Levesque, it immediately wrote to Levesque, stating that “it appears that you have been fairly compensated” and asking Levesque to “advise if you are seeking uninsured motorist cover- age from GEICO.” The Levesques sued GEICO in Florida state court seeking to require GEICO to tender its policy. After almost two years of liti- gation, GEICO decided to “confess judgment.” So the court en- tered judgment for the Levesques for the $100,000 policy limit. In that case (“UM Case”), the Levesques had agreed with their attorneys to a contingency-fee agreement with an “alternative fee recovery clause.” An alternative fee recovery clause “provides for an attorney’s fee of the greater of either (i) a specified fee if the fee is paid by the client, or (ii) a court-awarded reasonable fee if the fee is paid by a third-party pursuant to a fee-shifting provision.” First Baptist Church of Cape Coral, Fla., Inc. v. Compass Constr., Inc., 115 So.3d 978, 981 (Fla. 2013). The clause in the Levesques’ contract stated, I hereby agree to pay for the cost of investigation, and should it be necessary to institute suit, court costs and other costs paid on my behalf, but only if a recovery is made on my behalf. As compensation for their ser- vices, I agree to pay my said attorneys, or an amount awarded by the Court, whichever is greater:

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[Providing for percentage contingencies based on the stage of litigation, including 40% if judgment is en- tered for less than $1 million] e) In the event attorney[’]s fees are recovered pursu- ant to any state or federal statute, I agree to pay my attorneys the greater of the statutory fee or contin- gency fee stated above. ... If there is a statute, rule or other authority which en- titles the client to recover attorney’s fees from a de- fendant under any circumstances, and the court awards fees, client shall not be limited by this fee agreement in any award of fees by the court, as client agrees to pay attorney a reasonable attorney’s fee. Any fee awarded by the court that exceeds the amount of the fee paid by the client under the contin- gency fee agreement shall become the property of the attorney. Because the Levesques obtained a judgment against GEICO for $100,000, they owed their attorneys the greater of 40% of $100,000 or any attorney’s fees awarded by the court. The court did not award any attorney’s fees in the UM Case, so under the Levesques’ agreement with their counsel, they owed their attor- neys $40,000. In the meantime, though, the Levesques sued GEICO again, alleging it had acted in bad faith in violation of Florida Statutes § 624.155 (“Bad-faith Case”). In a bad-faith action, the recoverable

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damages “shall include the total amount of the claimant’s damages, including the amount in excess of the policy limits, any interest on unpaid benefits, reasonable attorney’s fees and costs, and any dam- ages caused by a violation of a law of this state.” Fla. Stat. § 627.727(10) (emphasis added). The parties stipulated pretrial that the “total amount of dam- ages sustained by Deirdre Levesque and Timothy Levesque as a direct and proximate result of the collision” was a fact to be deter- mined by the jury, while the “amount of any attorney’s fees and costs reasonably incurred by the Levesques” was an issue of law reserved for the court. At trial, the jury found that GEICO had acted in bad faith and awarded the Levesques damages totaling $317,200. But the district court determined that setoffs from collateral sources of re- covery reduced the jury award to $0, and it entered judgment for GEICO. The district court also denied the Levesques’ motion for attorney’s fees, holding that the amount of attorney’s fees ex- pended in the UM Case was an aspect of damages that needed to have been proven and submitted to the jury. The Levesques ap- pealed. On appeal, a panel of this Court affirmed the reduction of the award to $0 but determined that the district court was wrong to hold that the issue of attorney’s fees had to be submitted to the jury. Levesque I, 817 F. App’x at 675. We explained that the pre- trial stipulation allowed the court to determine the attorney’s fee award, even when it was an element of damages. Id. at 674. Then

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we vacated the entry of judgment in GEICO’s favor and remanded to allow “the district court [to] determine the amount of any rea- sonable attorneys’ fees the Levesques incurred in [the UM Case].” Id. at 675. On remand, the Levesques asked the district court to use the lodestar method to calculate the attorney’s fees that they incurred in the underlying UM Case and argued that “the amount of attor- ney’s fees is not limited to the contingency fee because the retainer agreement includes an alternative fee recovery clause.” GEICO disagreed. It asserted that the Levesques were entitled to an award in only the amount they actually owed to the UM Case attorneys. The district court agreed with the Levesques. Ultimately, it used the lodestar method to calculate a reasonable attorney’s fee award from the UM Case—$94,542.50 in attorney’s fees and $2,465.54 in costs. GEICO appeals. STANDARD OF REVIEW This case requires us to determine the correct construction of the Florida statutes—a question of law we review de novo. Equal Emp. Opportunity Comm’n v. STME, LLC, 938 F.3d 1305, 1313 (11th Cir. 2019). DISCUSSION A. The Relevant Florida Statutes We begin by summarizing the relevant Florida statutes, starting with Fla. Stat. § 627.428. Under that statute, generally, an

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insured who wins a suit against her insurer may recover reasonable attorney’s fees. But the general provision for attorney’s fees does “not apply to any action brought . . . against the uninsured motorist insurer unless there is a dispute over whether the policy provides coverage for an uninsured motorist proven to be liable for the ac- cident.” Fla. Stat. § 627.727(8); see also State Farm Mut. Auto. Ins. Co. v. Petersen, 855 So. 2d 1248, 1250 (Fla. 4th DCA 2003). So but for the disputed-coverage exception, fee-shifting is not statutorily available when an insured successfully sues her UM insurer to obtain benefits under the policy. No one argues that the disputed-coverage exception is implicated here, so in the UM Case, the Levesques had no statutory right to recover their attorney’s fees from GEICO. But as we have noted, if the plaintiff believes that her UM insurer acted in bad faith, she may file a separate lawsuit, as the Levesques did here. See Fla. Stat. § 624.155; Levesque I, 817 F. App’x at 672. And in the second, bad-faith suit, the recoverable damages include attorney’s fees and costs expended in the original action: The damages recoverable from an uninsured motor- ist carrier in an action brought under s. 624.155 shall include the total amount of the claimant’s damages, including the amount in excess of the policy limits, any interest on unpaid benefits, reasonable attorney’s fees and costs, and any damages caused by a violation of a law of this state. The total amount of the

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claimant’s damages is recoverable whether caused by an insurer or by a third-party tortfeasor. Fla. Stat. § 627.727(10) (emphases added). Section 627.727(10), though, must be read alongside Fla. Stat. § 624.155(8). That provision explains that the “damages re- coverable [in a bad-faith action] shall include those damages which are a reasonably foreseeable result of a specified violation of this section by the authorized insurer and may include an award or judgment in an amount that exceeds the policy limits.” Id. § 624.155(8). Another subsection of § 624.155—subsection (4)—provides for fee-shifting in the bad-faith action when the plaintiff is success- ful. Id. § 624.155(4) (“Upon adverse adjudication at trial or upon appeal, the authorized insurer shall be liable for damages, together with court costs and reasonable attorney’s fees incurred by the plaintiff.”). B. Florida law requires the conclusion that the Levesques may recover their attorney’s fees from the UM Case only as a part of their damages, and so they are limited to recovering only what they were liable to pay their attorneys. With that statutory framework in mind, we move on to how Florida has applied it in cases like the Levesques’. After all, the Levesques sued GEICO under Florida law, so as a federal court

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sitting in diversity jurisdiction, we are bound under Erie 1 to apply the law as Florida courts would. See Fox v. Ritz-Carlton Hotel Co., 977 F.3d 1039, 1049 (11th Cir. 2020). We start by considering whether the Florida Supreme Court has addressed the issue. Id. If it has not, we must “adhere to decisions of the state’s intermediate appellate courts absent some persuasive indication that the state’s highest court would decide the issue otherwise.” Id. (quoting Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, 746 F.3d 1008, 1021 (11th Cir. 2014)). Our research reveals no Florida Supreme Court case ad- dressing the precise issue here. But a recent intermediate appellate- court case—Milling v. Travelers Home & Marine Ins. Co., 311 So. 3d 289 (Fla. 2d DCA 2020)—does consider it. The facts of Milling are much like those here. Indeed, just as the Levesques sued GEICO after it denied her claim for UM ben- efits, Milling sued Travelers after it denied her claim for UM bene- fits. Milling, 311 So. 3d at 290. And similar to GEICO’s ultimate position, Travelers did not contest coverage. Id. Then just as the Levesques asserted here about GEICO, Milling alleged that Trav- elers failed to settle her claim in good faith. Id. And once again, like the verdict the Levesques received against GEICO, Milling ul- timately obtained a jury verdict for more than her policy limit. Id. In Milling, the parties entered into a partial stipulated judgment that resolved the liability for the bad-faith claim but reserved the

1 Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). USCA11 Case: 21-12257 Date Filed: 05/05/2022 Page: 10 of 17 10 Opinion of the Court 21-12257

issue of attorney’s fees and costs for the court to determine. Id. at 290–91. The parties both filed motions for summary judgment on attorney’s fees. Id. at 291. Milling argued that under sections 624.155(8) and 627.727(10), she was entitled “to all fees incurred in the underlying UM Suit as damages in the first-party, bad-faith ac- tion against Travelers.” Id. She also claimed prevailing-party fees in the bad-faith action under § 624.155(4). Id. Travelers responded, asserting that attorney’s fees incurred in furtherance of a UM action were not recoverable in a bad-faith suit. Id. The court denied Mill- ing’s motion in part and granted Travelers’ motion in part. Id. On appeal, the Second District reversed in part. The court first clarified that § 624.155(4) “provides for prevailing party fees that a plaintiff incurs prosecuting the bad faith action.” Id. at 292. Then, it explained that “the [bad-faith] statute also provides for fees [from a UM case] as a form of damages.” Id. (citing § 624.155(8)). And it further stated that § 627.727(8) “precludes an award of pre- vailing party attorney’s fees in favor of an insured in a UM action unless UM coverage was disputed.” Id. at 293. The court disagreed with the trial court’s conclusion that “Milling’s position [that she could recover fees as damages] would render section 627.727(8) meaningless.” Id. As the court explained, “Because UM coverage was not contested, the trial court was cor- rect insofar as Milling is not entitled to recover prevailing party at- torney’s fees incurred in the underlying UM case . . . .” Id. But

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because Milling sought fees as compensatory damages, she should have been allowed to pursue them. Id. So when a plaintiff wins a bad-faith action after she previ- ously won an action where she sued her UM insurer to obtain ben- efits under her policy, attorney’s fees for each case—though recov- erable only in the bad-faith action—are handled differently. The fees from the UM case are part of the damages award in the bad- faith case and are subject to the rule that they must be “a reasona- bly foreseeable result of a specified violation.” Fla. Stat. § 624.155(8). In contrast, the fees incurred in prosecuting the bad- faith case are awarded under a fee-shifting statute that entitles the insured to “reasonable attorney’s fees.” Id. § 624.155(4). The question remaining is the measure of those damages awarded under § 627.727(10), which Milling also answers. The court explained that “Milling is only entitled to recover as compensatory damages those attorney’s fees that would make her whole.” Id. at 294. “In other words, unless she was obligated to pay her UM Attorneys for their legal services, she wasn’t dam- aged at all, and any fees for such services are therefore not award- able as damages even if she was the prevailing party in the bad faith action.” Id. Milling’s agreement with her UM attorneys had an alternative fee recovery clause substantively the same as the Levesques’. See id. As the court explained, Under this agreement Milling is responsible for pay- ment to her UM Attorneys of forty percent of the re- covery. If her UM Attorneys obtained a court-

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awarded fee that was higher than forty percent of the recovery, then Milling agreed to pay them the higher amount. While Milling is entitled to compensatory damages, under the agreement she is not liable to her UM Attorneys for an hourly rate beyond the forty percent. Id. Milling was entitled to recover as damages only the amount that she had to pay her UM attorneys. The alternative fee recovery clause didn’t change that amount because Milling didn’t recover a higher attorney’s fee award in her UM action (as there was no stat- utory basis to do so). So Milling could get as damages in her bad- faith action only the 40% of her recovery that she was bound to pay to her UM attorneys. And the same must be true here—the Levesques’ attorney’s fees damages recovery is limited to the contingency fee—unless we find “some persuasive indication that [Florida’s] highest court would decide the issue otherwise.” Fox, 977 F.3d at 1049. We find no such indication and instead find it likely that the Florida Su- preme Court would interpret the relevant statutes in the same way as the Second District. The texts of § 627.727(10) and § 624.155(8) reveal that attor- ney’s fees in a bad-faith action are to be treated as compensatory damages (rather than as fees subject to a fee-shifting provision). Section 627.727(10) calls the fees from a UM case “damages.” And § 624.155(8) says that the claimant can recover “damages which are

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a reasonably foreseeable result” of the insurer’s bad faith. Expend- ing attorney’s fees to initiate an original action to obtain the in- surer’s payment under a UM policy is a reasonably foreseeable re- sult of an insurer’s bad-faith failure to pay. See Levesque I, 817 F. App’x at 674 (“[A]ny attorneys’ fees incurred while bringing the in- itial suit were proximately caused not by the collision, but by GEICO’s decision not to immediately pay the Levesques under the terms of the policy.”). So the attorney’s fees referenced in § 627.727(10) comprise an element of compensatory damages. That is, they are intended to make the plaintiff whole. As the Florida Supreme Court has ex- plained, “[T]he damages awarded should be equal to and precisely commensurate with the injury sustained.” MCI Worldcom Net- work Servs., Inc. v. Mastec, Inc., 995 So. 2d 221, 224 (Fla. 2008) (ci- tation and quotation marks omitted). Compensatory damages should not “bestow a windfall on plaintiffs.” Id. Nor does the alternative fee recovery clause in the Levesques’ agreement with their UM Case attorneys change the fact that the attorney’s fees awarded under § 627.727(10) as dam- ages must be limited to the amount needed to compensate the Levesques. The Levesques agreed to pay their UM Case attorneys the greater of 40% of their recovery or any court-awarded fee. Florida “follows the ‘American Rule’”, so a court may award attor- ney’s fees only in accordance with a statute or an agreement of the parties. Dade Cnty. v. Pena, 664 So. 2d 959, 960 (Fla. 1995). As we have discussed, no statute provided a basis for a court-awarded fee

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in the Levesques’ UM Case—UM cases are generally excepted from fee-shifting in insurance cases, Fla. Stat. § 627.727(8)—so the Amer- ican Rule applied and the Levesques did not receive a court- awarded fee in the UM Case. 2 The Levesques argue that the alternative fee recovery clause contractually obligated them to assist their attorneys in the recov- ery of a reasonable attorney fee and that they are therefore now entitled to an award of reasonable attorney’s fees expended in the UM Case. This is circular reasoning. To be sure, the Levesques would have to pay their attorneys a recovery of reasonable attor- ney’s fees based on the lodestar method if the court awarded those fees in the UM Case. But the Levesques’ alternative fee recovery clause cannot create its own basis for fee-shifting. See Forthuber v. First Liberty Ins. Corp., 229 So.3d 896, 899 (Fla. 5th DCA 2017) (ex- plaining that, if a party wishes to recover a fee in excess of the amount he was “contractually obligated to pay [his] lawyer,” he must first establish his entitlement to recovery “under a fee-shifting statute”). Only the legislature (or the parties, if they so agree in a contract) can do that. So the alternative fee recovery clause in the Levesques’ con- tract with their attorneys has no effect on the fees the Levesques may recover, in the Bad-faith Action, as damages incurred in the UM Case. The Levesques were obligated to pay their attorneys

2And no one has argued that there is a contractual provision between the Levesques and GEICO that provided fee-shifting.

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40% of their $100,000 recovery. And now, in the Bad-faith Action, they can recover that $40,000 as damages under § 627.727(10) and § 624.155(8) because expending those fees on their attorneys was a reasonably foreseeable result of GEICO’s bad faith. 3 The Levesques can recover as damages in the Bad-faith Ac- tion the amount expended as attorney’s fees in the UM Case that would make them whole. They cannot make their attorneys whole for time and expenses above the amount that the attorneys agreed the Levesques would pay them. C. There is no basis under Florida law for offsetting the fee award against benefits received by the Levesques. GEICO also argues that the district court erred by failing to reduce the attorney’s fee award to account for insurance benefits the Levesques received from third-party sources. If GEICO is cor- rect, that reduction would wipe out the entire value of the award.

3 In addition, and not at issue in this appeal, under § 624.155(4)—the fee-shift- ing statute for the Bad-faith Action—the Levesques can recover the reasonable attorney’s fees they expended in pursuit of the Bad-faith Action. The Milling court explained the measure of those fees as well: “Litigation of the existence and amount of Milling’s damages—including whether and how much of the fees incurred litigating the UM action were the natural, proximate, probable, or direct consequence of the insurer’s bad faith actions—was a part of the pros- ecution of the Bad Faith Suit. As such, attorney’s fees incurred for such litiga- tion should be awardable as prevailing-party fees in the bad faith case.” Mill- ing, 311 So. 3d at 293. That, however, is not relevant to the issue here and should instead be considered by the district court when it resolves the Levesques’ pending motion for attorney’s fees under § 624.155(4).

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The Levesques respond that GEICO forfeited this argument by fail- ing to raise it in the district court. And, in any event, they argue that neither provision of Florida law on which GEICO relies, see Fla. Stat. §§ 627.727(1), 768.76(1), entitles GEICO to a reduction in the award. We need not determine whether GEICO preserved its setoff argument because we agree with the Levesques that the argument lacks merit. Under section 627.727(1), “GEICO [is] entitled to a credit against the Levesques’ damages to the extent the . . . award duplicate[s] the benefits available to the Levesques from workers’ compensation or personal injury protection.” Levesque I, 817 F. App’x at 674 (citing State Farm Mut. Auto. Ins. Co. v. Siergiej, 116 So. 3d 523, 528 (Fla. 2d DCA 2013)). “‘Benefits’ in the automobile casualty insurance context traditionally means the amount an in- surer must pay on account of an insured’s injuries that fall within the scope and limits of coverage.” Ellison v. Willoughby, 326 So. 3d 214, 222 (Fla. 2d DCA 2021). Although GEICO lists the benefits available to the Levesques, it does not argue that any of those ben- efits included the payment of attorney’s fees “within the scope . . . of coverage.” See id. So, it has not satisfied its burden of proving an entitlement to a set-off. See Aetna Cas. & Sur. Co. v. Langel, 587 So. 2d 1370, 1373 (Fla. 4th DCA 1991) (“[T]he burden is on the UM carrier to demonstrate that the [benefits] to whatever extent constituted a duplication of the amount awarded by the [court].”). Section 768.76 does not assist GEICO either. That section requires a court to “reduce the amount of [a compensatory

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damages] award by the total of all amounts which have been paid for the benefit of the [plaintiff], or which are otherwise available to the [plaintiff], from all collateral sources.” Fla. Stat. § 768.76(1). But GEICO does not dispute the Levesques’ contention that “[s]ec- tion 768.76 has no application here” because the section is located “in chapter 768 of the Florida Statutes regarding ‘negligence,’” is limited in “its application to negligence claims,” and does not apply to “bad faith suit[s].” CONCLUSION For these reasons, we vacate the judgment and remand for further proceedings consistent with this opinion. VACATED and REMANDED.