This story is reprinted with permission from FC&S Legal, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe. A Florida appellate court has ruled that an insured in a first-party insurance dispute may be awarded an attorney’s fee that exceeds the amount the insured actually paid to his attorneys. The Case David Forthuber was represented by three different law firms during the course of his first-party insurance fight with First Liberty Insurance Corporation, although the same lawyer, Hewett G. Woodward, handled the case throughout the six-year dispute. Initially, Mr. Woodward worked for Latham, Shuker, Eden & Beaudine, LLP. He then switched to another law firm and subsequently started his own firm. The fee agreements between Mr. Forthuber and all firms were contingent on a successful outcome and required payment of the greater of a percentage of the recovery or a statutory reasonable fee. When Mr. Woodward left the Latham firm, the firm advised Mr. Forthuber in writing that he had two options: (1) Hire Mr. Woodward to complete the case, or (2) Engage a different lawyer of his choosing. The letter did not offer Mr. Forthuber the option of continuing with the Latham firm. Mr. Forthuber signed and returned the letter to the Latham firm, indicating his intent to continue with Mr. Woodward as his attorney. After Mr. Forthuber and First Liberty settled their dispute, First Liberty agreed that Mr. Forthuber was entitled to a reasonable fee. It contended, however, that the trial court should disregard the 247.2 hours logged by Mr. Woodward while he was employed by the Latham firm because as a matter of law that firm had forfeited or waived its entitlement to a fee by withdrawing from Mr. Forthuber’s representation before the occurrence of the contingency in its fee agreement with Mr. Forthuber. The trial court agreed. Accordingly, it refused to consider whether all or any portion of those 247.2 hours had been reasonably incurred and could be included in its determination of a reasonable fee payable to Mr. Forthuber under Section 627.428, Florida Statutes. Mr. Forthuber appealed. Florida Law Section 627.428 provides that a trial court: shall adjudge or decree against the insurer and in favor of the insured [who prevails] . . . a reasonable sum as fees or compensation for the insured’s . . . attorney. (Emphasis added.) The Appellate Court’s Decision The appellate court reversed. In is decision, the appellate court explained that Section 627.428 did not specify the methodology of calculating the “reasonable sum [or] fees” to which the insured was entitled, but that courts typically determined the amount by multiplying the reasonable number of hours expended by a reasonable hourly rate. The appellate court stated that the fee agreement between a lawyer and client, “no matter how reasonable,” did not control the amount of fees assessed against a third-party under a fee-shifting statute. For example, it continued, even though a lawyer and client might appropriately agree to a percentage-based fee agreement, where the contractual fee resulted in an effective hourly fee that greatly exceeded a customary and reasonable hourly rate, a third party could not be assessed a fee based on the percentage formula. However, the appellate court said, the converse also was true: When a party was “not contractually obligated” to pay his or her lawyer or was obligated to pay the lawyer less than market rate, “the party may still recover a reasonable fee” under a fee-shifting statute. Moreover, the appellate court said, although there were circumstances where the contractual relationship between a lawyer and client “might cap the fees that may be recovered under a fee-shifting statute,” the fee agreements signed by Mr. Forthuber did not establish a cap because they contained “alternative fee recovery clauses” under which Mr. Forthuber agreed to pay the greater of a percentage of the recovery or the statutory fee. Under this fee arrangement, the appellate court ruled, the contractual agreement did not operate as a cap on statutory fees. The appellate court then held that the trial court should have considered all of the hours reasonably expended by all of Mr. Forthuber’s attorneys in its calculation of a fee to be awarded to him. The entitlement to a reasonable fee was Mr. Forthuber’s right, not his attorney’s, the appellate court said. His legal obligation to his attorneys “had no bearing on the methodology for calculating a reasonable fee.” The appellate court rejected First Liberty’s argument that the statute only permitted a court to “reimburse” Mr. Forthuber for the attorney’s fees he had incurred, stating that that argument “ignore[d] the plain language of the statute and distort[ed] its objective.” According to the appellate court, indemnity was “not the objective of this statute.” Rather, the appellate court concluded, the statute was calculated “to level the playing field so that aggrieved insureds can find competent counsel to represent them,” especially in “small cases” such as Mr. Forthuber’s, “where a percentage formula alone would not provide the incentive for a lawyer to undertake a case involving the potential commitment of many hours and substantial costs.” The case is Forthuber v. First Liberty Ins. Corp., No. 5D16-2599 (Fla. Ct.App. Nov. 17, 2017). Attorneys involved include: James C. Hauser, Maitland, of The Woodward Law Firm, Orlando, for Appellant/Cross-Appellee. C. Ryan Jones of Traub Lieberman Straus & Shrewsberry, LLP, St. Petersburg, for Appellee/Cross-Appellant. About The Author Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.