April 7, 2016

Fighting Denied Sinkhole Claim: Johnson v. Omega Insurance

The Supreme Court recently heard arguments in the case of Johnson v. Omega Insurance regarding a property insurance claim. Kathy Johnson came to our firm with a denied sinkhole claim. Despite severe damage to the building itself, the insurance company claimed that the damage was not covered under the policy and sinkhole activity was not discovered. We identified that certain tests were deficient and hired another engineering firm to do additional testing. After that testing, clear evidence of a sinkhole problem was identified and a lawsuit was filed against Omega to fight the denied sinkhole claim.

After the lawsuit was filed, Omega conceded that in fact there was sinkhole activity present that was not previously identified during their investigation and Ms. Johnson was able to get her home repaired at a cost of more than $300,000.

The appeals court

Our firm went to the trial judge in Ocala, Florida. and asked that he require Omega to pay our attorney fees and costs on behalf of Ms. Johnson. The trial judge agreed that it was fair and reasonable to do so. Omega filed an appeal. The appeal was heard by the Fifth District Court of Appeals who disagreed with the trial judge in Ocala. The appeals Court argued that the law in Florida is that an insured must prove that the insurance company “wrongfully” refused to pay benefits and that the new sinkhole statutes actually protected the insurance companies from being found “wrong” as long as they did an investigation of some sort. In other words, the appeals Court seemed to be more concerned with the process of the investigation than whether the actual result was right or not.

Corless-Barfield’s position

Our position regarding Johnson v. Omega Insurance was different. The law of Florida, as cited by the Supreme Court in a 2000 case, is that an insurance company should pay attorney fees when its decision regarding the denied sinkhole claim was “incorrect” despite the rationale on why it was incorrect. After all, the insurance company holds all the power to do the investigation including who it hires to do it. We appealed this ruling on behalf of Ms. Johnson to the Florida Supreme Court who accepted the case. The acceptance of a case like this is extremely rare.

At the Supreme Court arguments, it was clear the Supreme Court Justices did not agree with Omega’s position and reiterated that incorrectly denying someone insurance benefits is the same as wrongfully denying them insurance benefits. Arguments were also made that the sinkhole statutes were not intended to act as a shield to later protect the insurance companies if their decision to deny insurance benefits was incorrect. The opinion may take months to be released but the consensus amongst those who watched the arguments was that the Supreme Court was going to reverse the Appeals Court decision which would be a huge win for Florida homeowners.

Find out more about the Johnson v. Omega Insurance case here, and how it ended here.