The simple issue in Mohnkern v. The Professional Ins. Co. was: does a Florida statute automatically award attorneys' fees upon a successful outcome by the beneficiary/insured? Or does the statute require the insurer to have wrongfully caused the insured/beneficiary to resort to litigation before attorneys' fees can be awarded?
The Florida attorneys' fee statute reads, in part, "upon rendition of a judgment . . . against an insurer and in favor of any . . . named beneficiary under a policy, the trial court . . . shall adjudge . . . in favor of the . . . beneficiary a reasonable sum as fees or compensation for the beneficiary's attorney." Fla. Stat. 627.428. This statute is not too far off from the Hawaii statute that awards fees to successful policyholders: "Where an insurer has contested its liability under a policy and is ordered by the courts to pay benefits under the policy, the policyholder . . . shall be awarded reasonable attorney's fees and the costs of suit, in addition to the benefits under the policy." Haw. Rev. Stat. 431:10-242.
The facts in Mohnkern are a bit convoluted, so bear with me. Professional Insurance Company ("PIC") issued a life insurance policy to Blacknell in the amount of $100,000. When Blacknell had health problems, he sold the policy in return for a sum less than policy limits.
Meanwhile, Mohnkern invested $100,000 with Alpha Capital Group to purchase a life insurance policy sold by the policyholder, known as a viatical settlement. She was later assigned the Blacknell policy in exchange for $49,995 of her initial $100,000 investment.
Alpha subsequently sued its escrow agent, alleging misappropriation of funds. The federal district court appointed a receiver, who was instructed to satisfy claims of creditors and investors, including all interests in insurance policies funded by investors which were in the name of the defendant escrow agent.
Blacknell died in November 2000. Mohnkern submitted her claim on the Blacknell policy to PIC. PIC informed Mohnkern the policy was wrapped up in the receivership in the Alpha lawsuit. Consequently, there was a delay in making payment as the receiver filed a motion for directions from the court. Mohnkern intervened in the Alpha suit to get the funds released. Her suit was dismissed, but the Sixth Circuit reversed and remanded for a hearing on the ownership of the Blacknell policy proceeds. Mohnkern and the receiver finally settled in December 2005, when Mohnkern received $105,000.
Mohnkern then sued PIC for delay in payment and for attorney fees under the Florida statute. The district court denied fees. Mohnkern argued on appeal that because she was forced to litigate her entitlement to payment under the policy, the attorney fee statute was automatically triggered. The Sixth Circuit agreed the statute's purpose was to place the insured where she would have been if the insurer had seasonably paid the claim without forcing the insured to file suit and incur fees. Here, however, the insurer did not contest her valid claim. Instead, PIC acted pursuant to a court order when it paid the Blacknell proceeds into the receiver's escrow account instead of to Mohnkern. Because the insurer was without power to resolve Mohnkern's claim, the attorneys' fee statute did not apply.
