Florida Supreme Court Issues Landmark Opinion in

First Party Insurance Discipline Case

The Florida Supreme Court recently issued a consolidated opinion in the landmark case of The Florida Bar v. Strems, SC20-806 and SC20-842. The respondent was disbarred for conduct in relation to first party litigation claims against insurers involving storm caused property damage. There were also two additional related cases against Mr. Strems in which the Court affirmed a not guilty recommendation by the referee.

There were a multitude of issues addressed in the opinion and the two related cases. In this article, I will only address the issue of the contingent fee agreement at issue in SC20-842.

As noted in my article in June 2022, reporting on The Florida Bar v. Saldamando, SC20-844, the Court had left unresolved issues regarding contingent fee agreements involving first party insurance claims. The Bar took the position that the plaintiff’s lawyers had an inherent conflict in negotiating attorney’s fees in a “global settlement.” Such a settlement includes both damages to the client and statutory fees for the attorney.

The fee agreement in both Strems and Saldamando provided for a contingency or the negotiated fees with the insurance company, whichever was greater. The Bar contended that such an arrangement created an unwaiveable conflict because a lawyer has an incentive to negotiate against their client in order to increase their own payment of fees.

In Strems, the Court rejected the Bar’s request for an outright prohibition of the disputed fee agreement provisions. Instead, the Court stated it focused on the application of the fee provisions. In finding a violation of Rule 4-1.5 (Fees and Costs) and Rule 4-1.7 (Conflict of Interest – Current Clients), the court observed that “Strems attempted to collect attorney’s fees exceeding an amount that is allowed under his contingency fee agreement. We therefore … find Strems guilty…”

The Court addressed the issue of whether the fee-shifting statute applied to negotiated “global settlements.” It pronounced that “we reject Strems’ argument that any amount supposedly negotiated with [the insurance company] is equivalent to courtordered attorney’s fees.” The Court stated that “there was a clear conflict of interest, with Strems unilaterally seeking to take a higher percentage of the global settlement, entirely at his client’s expense.”

It appears the Court has authorized a fee agreement to provide for a contingency on the total settlement recovery that combines damages to the client and fees for the attorney. Surprisingly, the issue of whether this constitutes impermissible fee sharing with a non-lawyer was not briefed, despite the fact that the Bar has previously taken the position this would be prohibited fee sharing with a non-lawyer. Although the opinion provides important guidance, it leaves unresolved many practical issues faced by the first party insurance practitioner. What is certain is that the opinion will dramatically impact the first party insurance practice and likely result in additional litigation to clarify the unresolved issues.

Practitioners should consider seeking further guidance on such issues from the Ethics Hotline.