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Insurers Want REIT Attorney Fees Resolved in Arbitration

October 30, 2019 | Posted in : Coverage of Fees / Duty to Defend, Fee Dispute, Fee Dispute Litigation / ADR, Fee Entitlement, Fee Request, Hourly Rates / Hourly Billing, Prevailing Party Issues

A recent Law 360 story by Joyce Hanson, “Insurers Say REIT’s Atty Fees Must Be Resolved in Arbitration,” reports that Lloyd's of London underwriters and other insurers have asked a Florida federal court to deny a real estate investment trust's bid for attorney fees after closing out the REIT's lawsuit over a $20.6 million insurance claim, saying an arbitration panel should decide fees.

The underwriters and insurers said that The Cornfeld Group LLC wrongly asserts that the question of attorney fees must be decided by the court and not by the arbitration tribunal that has reviewed all coverage and loss issues between the parties in the REIT's suit seeking coverage for five properties damaged during Hurricane Irma.  They pointed to The Cornfeld Group's insurance policy in making their argument, saying the parties signed off on an agreement that all matters related to the policy would be referred to an arbitration tribunal.

"This court previously found that this agreement constituted a valid delegation clause, representing the parties' clear and unmistakable intent to allow issue of arbitrability to be decided by the arbitration tribunal," the underwriters and insurers said.  "Indeed, the court specifically ruled that the arbitration tribunal shall review all issues between the parties and held that the arbitration tribunal will have the power to issue any orders on any matter."

The Cornfeld Group on Oct. 15 asked for $39,108.50 in total fees, calculating that Stephen A. Marino Jr. of Ver Ploeg & Marino PA was due $23,820 for 39.7 hours of work at an hourly rate of $600, while his colleague, S. Alice Weeks, was due $13,200 for 44 hours at an hourly rate of $300.  In addition, The Cornfeld Group sought $2,088.50 for about eight hours of paralegal work.

According to the January complaint, The Cornfeld Group submitted proof of loss to support its estimate of approximately $20.6 million in damages caused by the 2017 hurricane at five properties.  However, the insurers only paid out $1.25 million in coverage under the commercial property insurance policy — which ran from March 22, 2017, through March 22, 2018 — and indicated there were coverage issues, although they had yet to specify what they are, according to case records.

The five South Florida properties covered collectively by the insurer defendants were: Margate Commerce Center-Lakeview Warehouse and Banks Road Commerce Center, both in Margate, Newport Beachside Resort in Sunny Isles Beach, Peary Court Units 101-149 in Key West and Stock Island Business Center on Stock Island near Key West.  On March 15, the insurers said they agreed with the REIT that the suit should be arbitrated, but they claimed they do not owe coverage under the policy.

U.S. District Judge William P. Dimitrouleas appointed Cornfeld's nominee to serve as the third member of an arbitration panel and break an impasse over the REIT's $20.6 million claim for insurance coverage for hurricane property damage.  In selecting Florida-based independent umpire, appraiser and adjuster Paul E. Middleton to join the arbitration panel, Judge Dimitrouleas said he chose the Cornfeld candidate over the professionals suggested by the insurers, because Middleton's "experience and qualifications appear to meet the requirements of the policy's language and spirit, as well as the interests set forth by the parties."

The Cornfeld Group moved on July 22 for entry of final judgment, and Judge Dimitrouleas on Aug. 16 signed an order partly granting the REIT's motion.  The motion asked for an award of attorney fees and costs, but Judge Dimitrouleas said any request for attorney fees and costs would have to be filed in compliance with local rules and referred to a magistrate judge.  The insurers reiterated in opposing Cornfeld's fees motion that they don't believe they owe coverage under the policy, and they also asserted that "there is simply no basis" for the fee claim.

Cornfeld can't sue in Florida, because the policy calls for New York law to apply, and the REIT is falsely attempting to establish itself as the "prevailing party" in the Florida suit, the insurers said.  They also questioned Marino's proposed $600 hourly rate, calling it "excessive."