IN THE SUPREME COURT OF FLORIDA. No.: SC L.T. Nos.: 5D D NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Petitioner,

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1 IN THE SUPREME COURT OF FLORIDA No.: SC L.T. Nos.: 5D D NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Petitioner, v. PAMELA HOLIDAY and LEONARD SHEALEY, Respondents. BRIEF OF AMICUS CURIAE ALLSTATE INSURANCE COMPANY, SUPPORTING PETITIONER NATIONWIDE MUTUAL FIRE INSURANCE COMPANY Filed by Consent of All Parties FOWLER WHITE BOGGS BANKER P.A. P.O. Box 210 St. Petersburg, FL (727) Fax No: (727) Attorneys for Amicus Curiae ALLSTATE By: Charles W. Hall Florida Bar No: Mark D. Tinker Florida Bar No:

2 TABLE OF CONTENTS Table of Contents... i Table of Authorities...ii-v Preliminary Statement... 1 Statement of the Identity of the Amicus Curiae and Interest in the Case... 2 Summary of Argument Argument: I. SECTION DOES NOT AUTHORIZE THE USE OF MULTIPLIERS, AND THE STATUTE MUST BE STRICTLY CONSTRUED BECAUSE IT IS BOTH A PENAL STATUTE AND ONE IN DEROGATION OF THE COMMON LAW II. MULTIPLIERS CANNOT BE APPLIED TO FEE AWARDS UNDER SECTION BECAUSE THEY FUNCTION CONTRARY TO THE STATUTE'S PURPOSE Conclusion Certificate of Service Certificate of Compliance i

3 TABLE OF AUTHORITIES Page Adler-Built Industries, Inc. v. Metropolitan Dade County, 231 So. 2d 197 (Fla. 1970)... 9 Allure Shoe Corp. v. Lymberis, 173 So. 2d 702 (Fla. 1965)... 9 American Home Assur. Co. v. Keller Industries, Inc., 347 So. 2d 767 (Fla. 3d DCA 1977)... 7 B.C. v. Florida Dept. of Children and Families, 887 So. 2d 1046 (Fla. 2004) Bassette v. Standard Fire Ins. Co., 803 So. 2d 744 (Fla. 2d DCA 2001)...6,12 Butterworth v. National League of Professional Baseball Clubs, 644 So. 2d 1021 (Fla. 1994) City of Miami Beach v. Galbut, 626 So. 2d 192 (Fla. 1993)... 9 Dade County v. Pena, 664 So. 2d 959 (Fla. 1995)... 9 Doyle-Vallery v. Aranibar, 838 So. 2d 1198 (Fla. 2d DCA 2003) Equitable Life Assur. Soc. of U.S. v. Nichols, 84 So. 2d 500 (Fla. 1956)... 7 Fireman s Fund Ins. Co. v. Tropical Shipping and Const. Co., Ltd., 254 F.3d 987 (11 th Cir. 2001)... 7 Gershuny v. Martin McFall Messenger Anesthesia Professional Ass n., 539 So. 2d 1131 (Fla. 1989)... 9 ii

4 Government Employees Ins. Co. v. Battaglia, 503 So. 2d 358 (Fla. 5 th DCA 1987)... 6 Great Southwest Fire Ins. Co. v. DeWitt, 458 So. 2d 398 (Fla. 1 st DCA 1984)... 6 Holiday v. Nationwide Mut. Fire Ins. Co., 864 So. 2d 1215 (Fla. 5 th DCA 2004)... 5 Kittel v. Kittel, 210 So. 2d 1 (Fla. 1968)... 9 L. Maxcy, Inc. v. Mayo, 139 So. 121 (Fla. 1932)... 9 Leaf v. State Farm Mut. Auto. Ins. Co., 544 So. 2d 1049 (Fla. 4 th DCA 1989)... 6 Lollie v. General American Tank Storage Terminals, 34 So. 2d 306 (Fla. 1948)... 9 Manufacturers Life Ins. Co. v. Cave, 295 So. 2d 103 (Fla. 1974)... 7 Richardson v. Merkle, 646 So. 2d 289 (Fla. 2d DCA 1994) Roberts v. Carter, 350 So. 2d 78 (Fla. 1977)... 9 Sanchez v. American Ambassador Casualty Co., 559 So. 2d 344 (Fla. 2d DCA 1990)... 6 Sarkis v. Allstate Ins. Co., 863 So. 2d 210 (Fla. 2003)...8-9,11,13 Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990) iii

5 State v. J.M., 824 So. 2d 105 (Fla. 2002) Time Ins. Co. v. Arnold, 319 So. 2d 638 (Fla. 1 st DCA 1975)... 7 Transflorida Bank v. Miller, 576 So. 2d 752 (Fla. 4 th DCA 1991) Travelers Indem. Co. v. Chisholm, 384 So. 2d 1360 (Fla. 2d DCA 1980)... 6 Wollard v. Lloyd s and Companies of Lloyd s, 439 So. 2d 217 (Fla. 1983)... 7 OTHER AUTHORITIES: THE BLUEBOOK: A UNIFORM SYSTEM OF CITATION (Columbia Law Rev., et. al. 17th Ed. 2000)... 1 Fla. Jur. 2d Insurance 3584 (2004)... 7 Fla. R. App. P Fla R. App. P , Fla. Stat , Fla. Stat (3), Fla. Stat (5), Fla. Stat , Fla. Stat (2), Fla. Stat , Fla. Stat (7), Fla. Stat (4), Fla. Stat (3)(c)(1), Fla. Stat (2)(f), Fla. Stat , Fla. Stat (4), Fla. Stat (3)(a), Fla. Stat iv

6 (10), Fla. Stat , Fla. Stat (1)(b), Fla. Stat , Fla. Stat (3), Fla. Stat , Fla. Stat , Fla. Stat , Fla. Stat (3)(b), Fla. Stat (3), Fla. Stat (1), Fla. Stat (11), Fla. Stat (7), Fla. Stat (8), Fla. Stat (6), Fla. Stat (1)(e), Fla. Stat (2), Fla. Stat (6), Fla. Stat (2), Fla. Stat (2), Fla. Stat (1), Fla. Stat (2), Fla. Stat (4), Fla. Stat (6)(g), Fla. Stat , Fla. Stat , Fla. Stat , Fla. Stat (6), Fla. Stat (4), Fla. Stat v

7 PRELIMINARY STATEMENT This appeal arises out of an award of enhanced attorney's fees pursuant to Florida Statute Section The Petitioner, NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, was the defendant below. It will be referred to as "NATIONWIDE" in this Brief. Respondents, PAMELA HOLIDAY and LEONARD SHEALEY, were the plaintiffs and will be referred to collectively as "HOLIDAY." Amicus Curiae ALLSTATE INSURANCE COMPANY will be referred to as "ALLSTATE." References to the record on appeal will be designated by the symbol "R." followed by the appropriate page numbers. Legal citations contained in this Brief are intended to conform to Florida Rule of Appellate Procedure and THE BLUEBOOK: A UNIFORM SYSTEM OF CITATION (Columbia Law Rev., et. al. 17th Ed. 2000). All emphasis has been supplied by counsel unless otherwise noted. 1

8 STATEMENT OF THE IDENTITY OF THE AMICUS CURIAE AND INTEREST IN THE CASE Pursuant to Florida Rule of Appellate Procedure 9.400(b), ALLSTATE provides the following statements of its identity and interest in the case: Allstate Corporation is the United States' largest publicly-held personal-lines insurer, currently writing policies in 49 states including the State of Florida. This case raises an important issue regarding insurers' liability to pay multiplied/enhanced attorney's-fee awards to insureds' attorneys under Florida law. ALLSTATE is interested in this case because the Court's decision will have a substantial impact upon claims filed by ALLSTATE's insureds and upon the cost of insurance in the State of Florida. 2

9 SUMMARY OF ARGUMENT The District Court of Appeal for the Fifth District has asked whether multipliers may properly be applied to attorney's fees awarded pursuant to section The Court should answer that question in the negative for two reasons. First, section creates a statutory penalty to be imposed upon an insurance carrier when it causes its insured to resort to litigation in order to resolve a conflict. The penalty, or sanction, is that the insurer must pay a "reasonable sum as fees" to the insured's attorney. However, the statute does not mention, much less authorize, the use of fee multipliers to expand that penalty by up to 250%. It is the longstanding rule of this Court that penal statutes must be strictly construed, and that Florida's courts cannot extend such statutes to impose a penalty not specifically provided by the Legislature. Therefore, a multiplier may only be applied under section if the statute expressly authorizes it as part of the sanction to be imposed on the insurer. The statute grants no such authority. Therefore, the court should determine that multipliers do not apply to fee awards under section because any ruling to the contrary would necessarily require the Court to extend the statute's plain language to include additional punishment. Second, this Court has recognized that the use of multipliers "must be consistent with the purpose of the fee-authorizing statute or rule." In this case, multipliers are directly contrary to section 's purpose. As noted above, 3

10 section 's fundamental purpose is to help insureds avoid litigation with their insurers by encouraging the carriers to pay valid claims before suit is filed. Multipliers, on the other hand, serve only to promote litigation by encouraging attorneys to take and file suit on certain cases. Therefore, by promoting the filing of more lawsuits against insurers, the purpose behind multipliers directly conflicts with the purpose behind the section penalty provision. The Court should determine that multipliers cannot be applied to fee awards under section for that reason, as well. 4

11 ARGUMENT The District Court of Appeal for the Fifth District has certified the following question as one of great public importance: IN LIGHT OF THE SUPREME COURT'S DECISION IN SARKIS, MAY A MULTIPLIER BE APPLIED TO ENHANCE AN AWARD OF ATTORNEY'S FEES GRANTED UNDER A FEE-SHIFTING STATUTE SUCH AS SECTION , FLORIDA STATUTES (2002)? Holiday v. Nationwide Mut. Fire Ins. Co., 864 So. 2d 1215, (Fla. 5th DCA 2004). The Court should answer that certified question in the negative for two reasons: First, section is a penal statute which does not expressly authorize the use of multipliers and, accordingly, the Court should strictly construe its provisions and refrain from increasing the statutory penalty through judicial construction. Second, this Court's task is to give effect to the purpose behind section , and it should recognize that attorney's-fee multipliers are at odds with that legislative intent. I. SECTION DOES NOT AUTHORIZE THE USE OF MULTIPLIERS, AND THE STATUTE MUST BE STRICTLY CONSTRUED BECAUSE IT IS BOTH A PENAL STATUTE AND ONE IN DEROGATION OF THE COMMON LAW. Section creates a statutory penalty to be imposed upon an insurance carrier when it causes its insured to resort to litigation in order to resolve a conflict. The penal nature of that statute has been expressly recognized by every Florida 5

12 District Court of Appeal. E.g. Bassette v. Standard Fire Ins. Co., 803 So. 2d 744, 746 (Fla. 2d DCA 2001)("As we observed in Sanchez v. American Ambassador Casualty Co., 559 So. 2d 344 (Fla. 2d DCA 1990), the purpose of section is to penalize an insurance company for wrongfully causing its insured to resort to litigation in order to resolve a conflict with its insurer when it was within the company's power to resolve it."); Leaf v. State Farm Mut. Auto. Ins. Co., 544 So. 2d 1049, 1050 (Fla. 4th DCA 1989)("the purpose of section , Florida Statutes is to penalize a carrier for wrongfully causing its insured to resort to litigation to resolve a conflict when it was reasonably within the carrier's power to do so")(internal quotation omitted); Government Employees Ins. Co. v. Battaglia, 503 So. 2d 358, 360 (Fla. 5th DCA 1987)("The purpose of section is to penalize a carrier for wrongfully causing its insured to resort to litigation to resolve a conflict when it was reasonably within the carrier's power to do so."); Great Southwest Fire Ins. Co. v. DeWitt, 458 So. 2d 398, 400 (Fla. 1st DCA 1984)("Section is in the nature of a penalty against an insurer who wrongfully refuses to pay a legitimate claim, and the statute must be strictly construed.") Travelers Indem. Co. v. Chisholm, 384 So. 2d 1360, 1361 (Fla. 2d DCA 1980)("In an action on an insurance policy, the jurisdiction of the trial court to require the insurer to pay a reasonable attorney's fee for the insured exists only as provided by statute. Such a fee award pursuant to statute is recognized as a 6

13 penalty provision.... This statute must be strictly construed."); American Home Assur. Co. v. Keller Industries, Inc., 347 So. 2d 767, 769 (Fla. 3d DCA 1977)("Such a fee award made pursuant to the statute is recognized as a penalty provision, in the use and exercise of which the statute is to be strictly construed.")(disapproved on other grounds by Wollard v. Lloyd's and Companies of Lloyd's, 439 So. 2d 217 (Fla. 1983)); Time Ins. Co. v. Arnold, 319 So. 2d 638, 640 (Fla. 1st DCA 1975)("The statutory provision for assessment of reasonable attorney's fees for the benefit of a beneficiary who successfully obtains a judgment on his policy is in the nature of a penalty, to discourage wrongful refusals to pay policy benefits."). Likewise, this Court has acknowledged that both section and its predecessor, section , are in place to sanction insurers for "wrongfully" withholding payment of policy proceeds. Manufacturers Life Ins. Co. v. Cave, 295 So. 2d 103, (Fla. 1974); Equitable Life Assur. Soc. of U.S. v. Nichols, 84 So. 2d 500, (Fla. 1956). See also, Fireman's Fund Ins. Co. v. Tropical Shipping and Const. Co., Ltd., 254 F.3d 987, 1010 (11th Cir. 2001)("However, because section is in the nature of a penalty against an insurer who wrongfully refuses to pay a legitimate claim, we strictly construe its language.")(internal quotation omitted); Fla. Jur. 2d Insurance 3584 (2004)("The general attorney's fees provision of the Insurance Code, that has consistently been 7

14 upheld against constitutional challenges, becomes a part of the insurance contract, and, since it is in the nature of a penalty, must be strictly construed."). Section 's penalty, or sanction, is that the insurer must pay a "reasonable sum as fees" to the insured's attorney (1), Fla. Stat. That sanction applies regardless of the insured's relative degree of success in the suit if the insured recovers one penny in the litigation, the carrier is automatically compelled to pay for all of the insured's attorney's fees. However, the statute does not mention, much less authorize, the use of fee multipliers to expand that penalty by up to 250%. Id. It is the longstanding rule of this Court that penal statutes must be strictly construed, and that Florida's courts cannot extend such statutes to impose a penalty not specifically provided by the Legislature. E.g. Sarkis v. Allstate Ins. Co., Unlike the overwhelming majority of fee-shifting statutes, which provide fee entitlement to the prevailing party, section contains a one-sided fee provision. Compare, 83.48, Fla. Stat.; , Fla. Stat.; (3), Fla.Stat.; (5), Fla.Stat.; , Fla. Stat.; (2), Fla. Stat.; , Fla. Stat.; (7), Fla. Stat.; (4), Fla. Stat.; (3)(c)(1), Fla. Stat.; (2)(f), Fla. Stat.; , Fla. Stat.; (4), Fla. Stat.; (3)(a), Fla. Stat.; (10), Fla. Stat.; , Fla. Stat.; (1)(b), Fla. Stat.; , Fla. Stat.; (3), Fla. Stat.; , Fla. Stat.; , Fla. Stat.; , Fla. Stat.; (3)(b), Fla. Stat.; (3), Fla. Stat.; (1), Fla. Stat.; (11), Fla. Stat.; (7), Fla. Stat.; (8), Fla. Stat.; (6), Fla. Stat.; (1)(e), Fla. Stat.; (2), Fla. Stat.; (6), Fla. Stat.; (2), Fla. Stat.; (2), Fla. Stat.; (1), Fla. Stat.; (2), Fla. Stat.; (4), Fla. Stat.; (6)(g), Fla. Stat.; , Fla. Stat.; , Fla. Stat.; , Fla. Stat.; (6), Fla. Stat.; (4), Fla. Stat.. 8

15 So. 2d 210, 223 (Fla. 2003); City of Miami Beach v. Galbut, 626 So. 2d 192, 194 (Fla. 1993); Adler-Built Industries, Inc. v. Metropolitan Dade County, 231 So. 2d 197, 200 (Fla. 1970); Allure Shoe Corp. v. Lymberis, 173 So. 2d 702, 704 (Fla. 1965); Lollie v. General American Tank Storage Terminals, 34 So. 2d 306, 308 (Fla. 1948); L. Maxcy, Inc. v. Mayo, 139 So. 121, 125 (Fla. 1932). Likewise, it is the longstanding rule of this Court that statutory authorizations for attorney's fees are to be strictly construed because they are in derogation of the common law. Sarkis, 863 So. 2d at 223; Dade County v. Pena, 664 So. 2d 959, 960 (Fla. 1995); Gershuny v. Martin McFall Messenger Anesthesia Professional Ass'n, 539 So. 2d 1131, 1132 (Fla. 1989); Roberts v. Carter, 350 So. 2d 78, (Fla. 1977); Kittel v. Kittel, 210 So. 2d 1, 3 (Fla. 1968). In Sarkis, this Court applied those established precedents to conclude that multipliers cannot be applied to fee awards made pursuant to section a penal attorney's-fee statute. Sarkis, 863 So. 2d at 223. Specifically, the Court observed: "[T]he detailed history of our cases construing the offer of judgment statutes and the adoption of rule reflect that an award of attorney fees authorized by section is a sanction against the rejecting party for the refusal to accept what is presumed to be a reasonable offer. This is a sanction levied against the rejecting party for unnecessarily continuing the litigation." Id. at

16 The Court then recited the long-standing rules, stating: "[W]e have recognized that statutory authorization for attorney fees is to be strictly construed. We have also recognized that a statute imposing a penalty must be strictly construed in favor of the one against whom the penalty is imposed and never extended by construction." Id. at 223(internal citation omitted, emphasis added). Applying those guiding principles, the Court concluded that multipliers may not be awarded under section because the statute does not expressly describe them as part of the applicable sanction. Id. Specifically, the Court reasoned: Throughout the statutory and rule history of offers of judgment, the use of a multiplier has never been expressly authorized. Neither section nor rule authorizes the use of a multiplier in determining the amount of attorney fees as a sanction for the rejection of an offer. Applying a strict construction of the statute and rule, a multiplier therefore cannot be applied under section or rule 1.442, and the trial court's application of a multiplier in this case was error. Id.(emphasis added). In a concurring opinion, Justice Wells emphasized that analysis: It is the long-standing precedent of this Court that statutes and rules authorizing attorney fees or imposing penalties are to be strictly construed as written and not extended by implication. Since neither the statute nor the rule authorizes a fee multiplier, an authorization for the use of a multiplier would have to be by implication in violation of both long-standing and very recent precedent of this Court. Id. at 224(Wells, J., concurring). 10

17 This Court observes "rule stare decisis." E.g. Butterworth v. National League of Professional Baseball Clubs, 644 So. 2d 1021, 1024 n.7 (Fla. 1994). Under that doctrine, the Court adheres to the same legal standard or test when analyzing equivalent situations. Id. Accordingly, the Court should again engage in a strict construction of section because it too is a penal attorney's fee statute. Following the Sarkis rule, therefore, a multiplier may only be applied under section if the statute expressly authorizes it as part of the sanction to be imposed on the insurer. The statute grants no such authority , Fla. Stat. The only way the Court could award a multiplier under that section would be to extend the statutory language by construction or implication to include an additional punishment. Because the statute is both penal in nature and in derogation of the common law, the Court should decline to do so. Further, the district courts have concluded that multipliers may not be used to increase the penalty of liability for "a reasonable attorney's fee" imposed by Florida Statute Section E.g. Richardson v. Merkle, 646 So. 2d 289, 290 (Fla. 2d DCA 1994); Transflorida Bank v. Miller, 576 So. 2d 752, 753 (Fla. 4th DCA 1991). Thus, even if a litigant presents a patently frivolous defense to a meritorious claim, the penalty imposed is strictly limited to the opponent s fees calculated based upon reasonable hours at a reasonable rate. It is absolutely 11

18 illogical to conclude that the Legislature intended that an insurer who merely loses one penny in litigation while asserting a good-faith defense should be subjected to a more severe penalty than is imposed upon a litigant who presents an entirely frivolous defense. For those reasons, this Court should determine that multipliers are not authorized and accordingly cannot be applied under section II. MULTIPLIERS CANNOT BE APPLIED TO FEE AWARDS UNDER SECTION BECAUSE THEY FUNCTION CONTRARY TO THE STATUTE'S PURPOSE. "This Court's purpose in construing a statutory provision is to give effect to the 'polestar' of legislative intent." B.C. v. Florida Dept. of Children and Families, 887 So. 2d 1046, 1051 (Fla. 2004)(citing State v. J.M., 824 So. 2d 105, 109 (Fla. 2002)). Fulfilling that purpose, the Court should recognize that the use of attorney's-fee multipliers is directly contrary to the intent behind section As outlined above, section 's fundamental purpose is to help insureds avoid litigation with their insurers. As stated in Bassette v. Standard Fire Ins. Co., 803 So. 2d 744, 746 (Fla. 2d DCA 2001), "the purpose of section is to penalize an insurance company for wrongfully causing its insured to resort to litigation in order to resolve a conflict with its insurer when it was within the company's power to resolve it." The statute has no effect unless and until the insurer compels the insured to resort to litigation. At that point, the insurer is subject to a sanction, in the form of attorney's fees, if the insured obtains any 12

19 recovery under the policy, no matter how small. Thus, the statute is intended to limit litigation by encouraging insurers to pay valid claims before suit is filed. Multipliers, on the other hand, undoubtedly are designed to promote litigation. See Sarkis, 863 So. 2d at (quoting Doyle-Vallery v. Aranibar, 838 So. 2d 1198, (Fla. 2d DCA 2003)(Altenbernd, J., concurring)). By their very nature, multipliers encourage attorneys to take and file suit on certain cases. Therefore, by promoting the filing of more lawsuits against insurers, the purpose behind multipliers directly conflicts with the purpose behind the section penalty provision. In Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828, 834 (Fla. 1990), this Court recognized that the use of multipliers "must be consistent with the purpose of the fee-authorizing statute or rule." Since multipliers are not consistent with section 's purpose, but rather are directly adverse, the Court should determine that they cannot be applied to fee awards under the statute for that reason, as well. 13

20 CONCLUSION For all of the foregoing reasons, the Court should answer the certified question in the negative, determining that multipliers cannot be applied under section Respectfully submitted, FOWLER WHITE BOGGS BANKER P.A. P.O. Box 210 St. Petersburg, FL (727) Fax No: (727) Attorneys for Amicus Curiae ALLSTATE By: Charles W. Hall Florida Bar No: Mark D. Tinker Florida Bar No:

21 CERTIFICATE OF SERVICE I HEREBY CERTIFY that an original and seven copies have been furnished by Federal Express this March 29, 2005, to THE SUPREME COURT OF FLORIDA, Supreme Court Building, 500 South Duval Street, Tallahassee, FL ; and one copy each by U.S. Mail to BRANDON S. PETERS, ESQUIRE and RANDY E. SCHIMMELPHENNIG, ESQUIRE, Attorneys for HOLIDAY, 20 North Orange Avenue, Suite 1607, Orlando, FL 32801; and HINDA KLEIN, ESQUIRE, Attorney for NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, 3440 Hollywood Boulevard, Floor 2, Hollywood, FL , this March 29, FOWLER WHITE BOGGS BANKER P.A. P.O. Box 210 St. Petersburg, FL (727) Fax No: (727) Attorneys for Amicus Curiae ALLSTATE By: Charles W. Hall Florida Bar No: Mark D. Tinker Florida Bar No:

22 CERTIFICATE OF COMPLIANCE Pursuant to Florida Rule of Appellate Procedure 9.210, the undersigned counsel certifies that this Brief is printed in Times New Roman 14-point font. FOWLER WHITE BOGGS BANKER P.A. P.O. Box 210 St. Petersburg, FL (727) Fax No: (727) Attorneys for Amicus Curiae ALLSTATE By: Charles W. Hall Florida Bar No: Mark D. Tinker Florida Bar No: