A recent Law 360 by Ganesh Setty, “11th Circ. Says No Attorney Fees for Cos. In Tossed Insurance Suit,” reports that a home builder and contractor accused of faulty stucco work can't seek attorney fees from their insurance company after a Florida federal court found the insurer lacked standing to litigate whether it had a duty to defend the companies, the Eleventh Circuit ruled. Under the circuit's 1984 decision in Certain British Underwriters at Lloyds of London v. Jet Charter Serv. Inc. , statutory attorney fees are an element of damages and are therefore part of the merits of a case itself, U.S. Circuit Judge Elizabeth L. Branch wrote in the court's unpublished opinion.
Thus, when U.S. District Judge Timothy J. Corrigan tossed Southern-Owners Insurance Co.'s suit because it failed to meet the federal $75,000 amount-in-controversy threshold, the court lacked the subject-matter jurisdiction to hear any ensuing dispute over attorney fees, Judge Branch found. U.S. Circuit Judge Gerald Bard Tjoflat penned a separate concurrence, while U.S. Circuit Judge Britt C. Grant issued a dissent.
According to the decision, the dispute began in August 2013, when the home builder, Maronda Homes Inc. of Florida, sold a house to a couple who later complained of various construction defects related to the home's stucco installation. Maronda had hired JROD Plastering LLC to perform the installation, which held a commercial general liability policy with Southern-Owners that listed Maronda as an additional insured.
The insurer subsequently sued Maronda and JROD in Florida federal court seeking a declaration it had no coverage obligations over the alleged construction defects. But Judge Corrigan dismissed the suit for lack of subject-matter jurisdiction, finding that the insurer failed to meet the $75,000 amount-in-controversy threshold for federal litigation.
Maronda and JROD sought attorney fees under the now-repealed Florida statute § 627.428, which allowed a court to award attorney fees to insureds who prevailed in coverage litigation against their insurer. The district court further dismissed those motions, citing in part the Jet Charter decision. In that case, the Eleventh Circuit ruled that "attorney's fees recovera[bl]e by statute are to be regarded as 'costs' only when made so by statute," and are otherwise "treated as an element of damages," according to excerpts included in Friday's decision.
Though the Eleventh Circuit in Prime Insurance Syndicate Inc. v. Soil Tech Distributors Inc. ruled the opposite way in 2008, finding that attorney fees are "collateral issues" within the court's purview even if the underlying case isn't, that decision was not published, Judge Branch noted. And even if it were, circuit precedent holds that in the case of conflicting published panel decisions, the oldest one controls, she said.
"All in all, while some Florida courts have reached a different result than we did in Jet Charter, these decisions are too varied to constitute a definitive change in law," Judge Branch added in a footnote. "As such, we decline to exercise our discretionary power to rewrite our circuit's precedent which means that we are bound to follow Jet Charter."