A Proposal for Settlement (“PFS”) is a common litigation tool used to resolve cases. They can add a “bite” to litigation by exposing the other side to attorney’s fees from the time the PFS is served if the Plaintiff doesn’t “beat” the offer. A PFS is governed by both section 768.79, Florida Statutes, and Florida Rule of Civil Procedure 1.442.

Under section 768.79, the defendant is entitled to recovery of their post-offer attorney’s fees and costs if the plaintiff doesn’t receive a final judgment that is at least 25% less than the offer in the so-called “judgment obtained.” This is the final amount awarded by the court in the final judgment, which could include plaintiff’s costs and interest, as well as the damages sought.

Florida Rule of Civil Procedure 1.442 controls the form of the PFS. Specifically, the rule requires that the party making the proposal “state whether the proposal includes attorneys’ fees and whether attorneys’ fees are part of the legal claim . . . .” Fla. R. Civ. P. 1.442(c)(2)(F).

The seminal case controlling the “judgment obtained” is White v. Steak & Ale of Fla., 816 So. 2d 546, 550 (Fla. 2002), where the Florida Supreme Court held that the “judgment obtained” is not limited to a jury verdict, but rather, “is the net judgment entered, plus any post-offer collateral source payments received or due as of the date of the judgment, plus any post-offer settlement amounts by which the verdict was reduced.” The “judgment obtained” also includes any attorney’s fees and pre-judgment interest that are owed to the Plaintiff when determining whether they beat the PFS by at least 25%.

The application of the “judgment obtained” rule has harsh consequences in insurance cases where the one-way attorney fee provision under section 627.428, Florida Statutes, still applies.

In SFR Services, an AOB company filed suit to recover damages for the repairs it made under a homeowner policy. The insurer served a $15,000 PFS stated to be “exclusive of all taxable costs and attorneys’ fees.” The PFS was not accepted, and the court entered a $9,000 judgment for damages ($20,000 jury verdict – $6,000 deductible – $5,000 interior damages excluded as a matter of law via directed verdict). The insurer argued that the AOB company failed to beat the PFS, while the AOB company argued that their pre-offer attorney’s fees needed to be included. The trial court determined that the insurer won and did not include the AOB company’s pre-offer attorney’s fees.

On appeal, the Sixth District reversed based on the Florida Supreme Court’s precedent. However, Judge Netcher concurred to discuss potential challenges to the interpretation of a “judgment obtained.” The judge begins by pointing to the language that section 768.79 refers to the judgment in the past tense: it is a judgment obtained or the judgment entered. Second, the judge discusses the use of the word, “the” to explain a specific, definitive article for a single judgment. Third, the statute itself focuses on “damages” because the statute applies to “civil action[s] for damages”, and the offer must include all damages. The judge explains that attorney’s fees and costs are not damages; they are incidental to the proceeding. Fourth, the rules of civil procedure provide an avenue to pursue attorney’s fees and costs after the judgment is entered. Under rule 1.525, the party must move to tax their fees and costs “no later than 30 days after filing of the judgment.” In his view, this refers to post-judgment fees and costs that are “collateral and independent” to the initial action for damages. Last, the judge points to language in another statute, section 45.061(2)(b), to show where the legislature specifically includes fees and costs to an offer of judgment statute: “the total amount of money damages awarded plus the amount of costs and expenses reasonably incurred by the plaintiff or counter-plaintiff prior to the making of the offer.”

The judge also finds that terms of fairness effect this construction. If the AOB company had accepted the exclusive PFS, they likely still could have sought their attorney’s fees and costs. Now, the insurer is out six figures in fees and costs defending a case when their offer of damages was $6,000 more than the amount ultimately recovered. The judge pointed to the Florida Supreme Court’s decision in CCM Condo. Ass’n v. Petri Positive Pest Control, Inc., 330 So. 3d 1, 7-8 (Fla. 2021) (Canady, J., dissenting), showing the disagreement between the justices.

Regardless, the current law stands (for now). A PFS issued on pre-tort reform cases that is made exclusive of attorney’s fees and costs will be construed, at best, as an offer to include the pre-offer fees and costs reasonably incurred. At worst, a judge could determine that the entire offer is invalid. Unless and until the Florida Supreme Court recedes on its interpretation of the “judgment obtained” under section 768.79, carriers must be careful when determining the language and terms of a PFS. Speak to a Dutton Law Group attorney today to discuss litigation strategies and other avenues to achieve a successful litigation outcome.