QUICK NOTE: INSURER’S DENIAL OF COVERAGE WAIVES RIGHT TO ENFORCE POST-LOSS POLICY CONDITIONS

Posted on October 29, 2017October 29, 2017 by Edward Garber

There is ostensibly a big difference between an insurance carrier DENYING coverage and simply asking for additional information, as permitted under the post-loss conditions of a property (first-party) insurance policy, right? Typically, the answer is yes and there is a big difference. If an insured refuses to comply with post-loss conditions under their insurance policy, they are shooting themselves in the foot (in most cases) by giving the insurer an out when it comes to coverage. If an insurance carrier denies coverage, however, the insurance carrier cannot then require its insured to comply with post-loss conditions in the property insurance policy.

In a recent decision, Ifergane v. Citizens Property Ins. Corp., 42 Fla. L. Weekly D12198a (Fla. 3d DCA 2017), the appellate court held that there was a factual issue as to whether a letter sent by the insurer constituted a denial of coverage versus a request for additional information per the post-loss policy conditions in the property insurance policy. This was a significant issue because the appellate court, in a prior appeal in the same case, found that the insured’s non-compliance with participating in an examination under oath would preclude coverage under the property insurance policy. But, if it turns out that the insurer actually denied coverage first, then the insurer, as a matter of law, waived its right to enforce post-loss policy conditions in the property insurance policy such as requiring the insured to participate in an examination under oath.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THERE CAN BE AN “OTHER INSURANCE” EXCLUSION IN YOUR AUTOMOBILE POLICY

Posted on October 15, 2017October 15, 2017 by Edward Garber

There is exclusionary language in all insurance policies (as you know) that can operate to bar coverage. In a recent case example, a company performed maintenance and construction services and had a company automobile liability insurance policy. The policy, however, excluded from coverage automobiles where there was OTHER INSURANCE available that afforded SIMILAR COVERAGE. One of the company’s members got into an automobile accident with his personal vehicle which resulted in the company being sued in a personal injury action. The member had a personal automobile liability insurance policy that insured the vehicle. The company’s policy had significantly higher limits of insurance than the member’s policy.

Unfortunately, the Eleventh Circuit Court of Appeals held the company’s insurer was NOT required to defend or indemnify the insured-company in the personal injury action because of the exclusionary language in the company’s policy. In particular, the company’s policy did not apply because the member’s personal automobile liability insurance policy (other insurance) insured the same risk (afforded similar coverage); it did not matter that the limits of liability in the policies were different. (For more information on this case, click here.)

This case, although dealing with an automobile liability insurance policy, discusses exclusionary language in a policy that deals with other insurance available that provides the same or similar coverage (again, in this case the personal automobile liability insurance policy that covered the member’s vehicle applied which barred coverage under the company’s policy).

QUICK NOTE: INSURER MUST COMPLY WITH FLORIDA’S CLAIMS ADMINISTRATION ACT

Posted on September 4, 2017September 4, 2017 by Edward Garber

As an insured, know YOUR rights under Florida’s Claims Administration Act (Florida Statute s. 627.426). I wrote an article on this exact topic. If a third-party claim is asserted, or in the process of being asserted, against you, do yourself a favor and consult a lawyer that can assist you with preserving your insurance coverage rights. You pay liability insurance premiums for a reason so make sure you are not doing anything that could jeopardize rights under applicable insurance policies.

A liability insurer must comply with the Claims Administration Act if it wants to deny coverage based on a coverage defense (e.g., the insured’s failure to cooperate with the insurer).

Once your liability insurer issues you a written reservation of rights letter (“[w]ithin 30 days after it knew or should have known of the coverage defense”), and it will typically issue this written letter, it has three options according to the Claims Administration Act:

1) It can refuse to defend you (i.e., deny coverage);

2) It can obtain a non-waiver agreement from you; OR

3) It can retain, independent mutually agreeable counsel to represent you.

Again, an insurer’s failure to comply with the Claims Administration will preclude it from raising a coverage defense to later deny coverage. See Geico General Ins. Co. v. Mukamal, 42 Fla.L.Weekly D1833a (Fla. 3d DCA 2017) (discussed here, and explaining that an insurer has only three options per the Claims Administration Act and it must select an option even if the insured’s conduct prevented the insurer from selecting one of the options).

ILLUSORY INSURANCE COVERAGE: REAL OR UNREAL?

Posted on August 18, 2017August 18, 2017 by Edward Garber

In insurance coverage declaratory relief actions, there are times an insured will argue that the insurance policy coverage is illusory. Typically, an insured will raise this illusory argument if its insurer is denying coverage based on an exclusion or limitation in the policy. If a court agrees and deems the coverage illusory, the court will construe the policy to afford coverage to the insured. This is the obvious value of the argument: coverage!

“A policy is illusory only if there is an internal contradiction that completely negates the coverage it expresses to provide.” The Warwick Corp. v. Turetsky, 42 Fla.L.Weekly D1797a (Fla. 4^th DCA 2017). Thus, if a policy grants coverage in one section but then excludes the same coverage in another section, the coverage would be deemed illusory. Id. quoting Tire Kingdom, Inc. v. First S. Ins. Co., 573 So.2d 885, 887 (Fla. 3d DCA 1990). An illusory policy was found in the following examples: (a) a policy covered certain intentional torts but then excluded intended acts; (b) a policy covered advertising injury but elsewhere excluded advertising injury; and (c) a policy covered parasailing but excluded watercrafts. Id. (citations omitted). In all examples, coverage in the policy was completely swallowed up by an exclusion rendering the coverage illusory. Stated differently, coverage was completely contradicted by an exclusion in the policy rendering the policy absurd.

However, if an exclusion or limitation in the policy does not entirely swallow up the coverage, the policy is not illusory. The Warwick Corp., supra. For example, if a policy covers advertising injury but excludes advertising injury caused by a violation of law, the coverage is not illusory. The exclusion does not completely swallow up the coverage as it only excludes advertising injury cased by a violation of law. Id. (citation omitted).

In The Warwick Corp., the insured argued that the excess commercial property insurance policy that covered four hotels was illusory because its coverage was limited to the value of the hotel, which equaled the amount payable under the primary property insurance policy. Although the court acknowledged that it would be very rare that the excess policy would ever be triggered for one of the hotels, it held that the policy was not illusory because the limitation did not completely swallow up the coverage (as there was an unlikely circumstance that could trigger coverage for the hotel). Additionally, the court noted that the insured was a sophisticated entity that paid a minimum premium for minimum coverage under the excess policy for the hotel, meaning it elected to buy the policy and coverage it bought which is a choice it cannot change after-the-fact.

As you know from reading my prior posts, insurance coverage is important so make sure you know what risks are covered and what risks are not for your business interests.

GOOD OLE DUTY TO DEFEND

Posted on July 30, 2017July 30, 2017 by Edward Garber

The good ole duty to defend. Certainly, a duty that should not be overlooked.

A commercial general liability insurer has two duties to its insured when it comes to third-party claims: 1) the duty to defend its insured and 2) the duty to indemnify its insured.

The insurer’s duty to defend its insured will always be broader than its duty to indemnify because this duty is triggered by the allegations in the lawsuit. (For this precise reason, insurers will oftentimes defend their insured under a reservation of rights.) The duty to defend is a very important duty as it is the first duty that typically comes into play when a third-party claim / action is initiated against the insured. Getting the insurer on board to provide a defense is an initial focus. One that cannot be neglected or overlooked.

If an insurer denies or refuses to defend its insured, this means the insurer is denying coverage outright. In other words, the insurer is coming out of the gate denying the duty to indemnify the insured and, as such, denying the duty to defend. There is no reservation of rights because the insurer is not going to provide a defense based on its denial of coverage. When this happens, it is imperative that the insured consult with counsel. Not later or tomorrow or down the road. But, now! Immediately. At a minimum, an insured wants to ensure that its insurer is picking-up the broader duty to defend and needs to make sure its rights are protected and preserved.

In Mid-Continent Casualty Company v. Flora-Tech PlantScapes, Inc., 42 Fla. L. Weekly D1649a (Fla. 3d DCA 2017), a general contractor initiated a third-party claim against a landscaper in a personal injury action. (It is uncertain whether the landscaper was hired by the general contractor or the developer.) The landscaper’s commercial general liability insurer denied coverage and, therefore, refused to defend the insured in the lawsuit. As a result, the landscaper initiated a fourth-party claim against its own insurer for coverage seeking a declaration that its insurer had a duty to defend it in the lawsuit and indemnify it for the third-party claims being asserted against it. Both the landscaper and its insurer filed motions for summary judgment and the trial court declared that the insurer had a duty to defend its insured, but that it was not making a determination as to the insurer’s duty to indemnify. From the insured-landscaper’s standpoint, this likely was fine because the landscaper was initially looking for a declaration that its insurer had a duty to provide it a defense in the personal injury action.

AMBIGUITY IN INSURANCE POLICY WILL BE INTERPRETED IN FAVOR OF INSURANCE COVERAGE

Posted on July 15, 2017July 15, 2017 by Edward Garber

An ambiguity in an insurance policy–after reading and interpreting the policy as a whole–will be construed against an insurer. This means an ambiguity will be construed in favor of insurance coverage (for the benefit of the insured) as opposed to against insurance coverage. This does not mean that every insurance policy contains an ambiguity. This also does not mean a court will interpret plain and ordinary words contrary to their conventional meaning or definition. But, as we all know, insurance policies are not the easiest of documents to decipher and ambiguities do exist relating to a particular issue or circumstance to the benefit of an insured. An insured that is dealing with specific insurance coverage issues should make sure they are working with counsel that looks to maximize insurance coverage, even if that means exploring ambiguities that will benefit an insured based on a particular issue or circumstance.

An example of an ambiguity in an insurance policy relating to a particular issue that benefitted an insured can be found in the Florida Supreme Court decision of Government Employees Insurance Co. v. Macedo, 42 Fla. L. Weekly S731a (Fla. 2017). This case involved an automobile accident and the interpretation of an automobile liability policy.

In this case, after an accident, a plaintiff sued the defendant that caused the accident. The defendant’s insurer GEICO provided a defense in accordance with the defendant’s automobile liability policy. During the litigation, the plaintiff served a proposal for settlement for $50,000, which is a procedural vehicle to create the argument for attorney’s fees if the defendant does not accept the proposal. The defendant—again, being defended by its insurer GEICO—did not accept the proposal. The case proceeded to trial and the plaintiff obtained a jury verdict of approximately $243,000. This meant the plaintiff had a basis to recover attorney’s fees since the defendant did not accept the proposal for settlement. The plaintiff moved to bind GEICO to a judgment, and the underlying issue was whether the defendant’s insurer GEICO was liable under the policy for attorney’s fees. If GEICO was not liable, then that meant the defendant was individually liable for the plaintiff’s incurred attorney’s fees.

This is a significant issue because by the defendant’s counsel not accepting the proposal for settlement, the defendant, individually, was exposed to substantial attorney’s fees incurred by the plaintiff. The defendant’s counsel was hired by GEICO and GEICO controlled any settlement of the case and the defendant was required to cooperate with GEICO.

The applicable language of the insurance policy as relied upon by the Florida Supreme Court was as follows:

ADDITIONAL PAYMENTS WE WILL MAKE UNDER THE LIABILITY COVERAGES

1. All investigative and legal costs incurred by us.

. . . .

4. We will upon request by an insured, provide reimbursement for the following items:

. . . .

Additionally, the index of the policy lists “Legal Expenses And Court Costs” as items that are covered under the Additional Payments section.

The Florida Supreme Court, interpreting the policy as a whole, found this language to be ambiguous relating to the insurer’s obligation to cover attorney’s fees incurred by the plaintiff due to GEICO’s defense counsel not accepting the proposal for settlement. This ambiguity was a big “W” for both the defendant-insured and the plaintiff because it meant that GEICO was liable for the plaintiff’s attorney’s fees.

First, the Court explained that the terms “Legal Expenses” and “Court Courts” signify that legal expenses in addition to court costs would be covered under the policy; otherwise, there would have been no reason to separately include the language “Legal Expenses” in the index of the policy.

Second, the Court explained that there are numerous reasonable interpretations that attorney’s fees are encompassed by the terms “costs” and expenses” as used in the policy.

And, third, the Court explained that the legal expenses (attorney’s fees) incurred by the insured were the product of GEICO electing not to accept the proposal for settlement, and thus, were incurred by the defendant-insured at GEICO’s direct request. GEICO had complete discretion under the policy to settle the case with the insured being required to cooperate with its insurer. “It follows that any cost or fee incurred as a result of GEICO exercising its authority and control is something that it intended to pay.” See Macedo, supra

TIMELY WRITTEN NOTICE TO INSURER AND COOPERATING WITH INSURER

Posted on June 16, 2017June 16, 2017 by Edward Garber

I harp on notifying a liability insurer in writing once a claim is asserted against you. As soon as possible. I harp on this because as an insured you want to remove any doubt or argument that the insurer was prejudiced due to a lack of timely notice.

In a recent opinion, Zurich American Insurance Co. v. European Tile and Floors, Inc., 2017 WL 2427172 (M.D.Fla. 2017), the insurer moved for summary judgment in a coverage action arguing that its insured failed to provide it timely written notice. Specifically, the insurer argued that the insured violated the clause in the liability policy that states:

2. Duties in the Event of Occurrence, Offense, Claim or Suit

b. If a claim is made or “suit” is brought against any insured, you must:

1. Immediately record the specifics of the claim or “suit” and the date received; and

2. Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or “suit” as soon as practicable.

c. You and any other insured must:

1. Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit”;

2. Authorize us to obtain records and other information;

3. Cooperate with us in the investigation, settlement or defense of the claim or “suit”; and

4. Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

Here, the insured claimed it orally called the insurer about the nature of the suit and a representative told it that there would be no coverage for the lawsuit. The insurer, however, claimed it has no record of such a call and only learned of the lawsuit after a judgment had already been entered against the insured. Particularly, a seven-figure judgment was entered against the insured and the judgment creditor then sued the insurer which prompted the insurer to file a coverage lawsuit.

The insurer argued that there should be no coverage because the insured violated the clause regarding being provided timely written notice of the lawsuit. An insured can forfeit otherwise valid coverage by failing to provide timely notice to the prejudice of the insurer.

Under Florida law, if an insured’s notice is untimely, a presumption of prejudice arises. European Tile and Floors, supra, at *5. The insured can only prevail if it rebuts the presumption of prejudice by demonstrating with competent evidence that the insurer was not prejudiced by the untimely notice. Id. However, although the policy required written notice, this requirement can be waived when the insurer has actual notice of the claim. Id.

In this case, the Middle District denied the insurer’s motion for summary judgment because there was a material fact dispute as to whether the insured provided notice of the lawsuit to the insurer—the insured claims it did so through an oral call which the insurer disputes.

The insurer also moved for summary judgment arguing the insured failed to cooperate with it. An insurer may deny coverage for an insured’s failure to cooperate when “(1) the lack of cooperation was material, (2) the insurer exercised diligence and good faith in bringing about the cooperation of its insured and itself complied in good faith with the terms of the policy and (3) the lack of cooperation substantially prejudiced the insurer.” European Tile and Floors, supra, at *6 quoting Mid-Continent Cas. Co. v. Basdeo, 477 Fed.Appx. 702, 706-07 (11^th Cir. 2012).

QUICK NOTE: PRIOR ACTS EXCLUSION IN INSURANCE POLICY

Posted on May 21, 2017May 21, 2017 by Edward Garber

As an insured, it is important to understand the prior acts exclusion in your liability insurance policy. The prior acts exclusion bars coverage for claims that arise out of an act prior to the policy period or specified date in the policy. Knowing this, an insured typically can get some prior acts coverage to cover claims that arise out of an act that precedes the policy period (e.g., after a retroactive date). Perhaps it is not full prior acts coverage (covering claims that arise out of acts that occur at any time) but coverage for claims arising out of an act after a retroactive date (date earlier than the policy period). This becomes important, particularly with claims made policies (such as professional liability policies or directors and officers liability policies) since these policies are triggered by a claim made during the policy period. With the prior acts exclusion or even with the retroactive date, if the claim arose out an act that pre-dates the policy period or retroactive date, the insurer has an argument that the policy does not cover the claim.

A recent decision (discussed here) pertaining to a directors and officers liability policy shows the application of the prior acts exclusion and how courts broadly construe “arising out of” language in the exclusion. In other words, in the recent decision, even though the claim pertained to a wrongful act that occurred during the policy, the underlying act that made it a wrongful act arose out of acts that occurred prior to the policy period. Thus, the court broadly construing “arising out of” language, maintained that the prior acts exclusion barred coverage for the directors and officers claim.

NEGLIGENT PROCUREMENT OF INSURANCE

Posted on May 13, 2017May 13, 2017 by Edward Garber

As you know, insurance is an important part of risk assessment for many, many business needs. Oftentimes, an insured relies on an insurance broker or agent to procure specific insurance to meet its express business objectives and risks. Notably, there is a potential negligence claim associated with an insurance agent or broker’s negligent procurement of insurance for an insured. While this is not the easiest claim to prove, a recent Third District case explained this standard:

It is well settled that “where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for . . . negligence. More specifically, and as applicable here, “[a]n agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs.” As explained by our sister court, “[t]his general duty requires the agent to exercise due care in correctly advising the insured of the existence and availability of particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope of the agents undertaking.”

Kendall South Medical Center, Inc. v. Consolidated Ins. Nation, Inc., 42 Fla. L. Weekly D1071a (Fla. 3d DCA 2017) (internal quotations omitted).

In this case, a leak occurred on commercial leased premises. The commercial tenant had a property insurance policy that provided $100,000 of coverage for the physical improvements and contents of the property. However, there was a 90% coinsurance provision. A coinsurance provision shifts risk to the insured when the insured purchases less coverage than the value of the property.

As a result of the coinsurance provision, the insured only received a fraction of its damages, and less than the $100,000 in coverage. The insured, however, claimed it was under the belief it would recover $100,000 in insurance proceeds as that was what it told its agent it needed. The insured sued its insurance agent claiming the agent’s failure to advise it that the procured policy did not address its expressed insurance needs. “[W]hen an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, the insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those expressed needs.” Kendall South Medical Center, supra.

Perhaps this could have been avoided had the insured reviewed the specific terms of the insurance policy. Perhaps there are e-mails or other records where the insurance agent explained that the coverage the insured was seeking could not be procured without a coinsurance provision that shifted the risk to the insured. Know your insurance and know the risks and coverage afforded to you!

QUICK NOTE: SUBMITTING CIVIL REMEDY NOTICE

Posted on May 5, 2017May 5, 2017 by Edward Garber

There are steps an insured or claimant need to take in order to assert a statutory bad faith claim. The first step is the obligatory Civil Remedy Notice. This obligation is set forth in Florida Statute s. 624.155. The Civil Remedy Notice is, in essence, written notice of the specific violation(s) that are being claimed against the insurer that give rise to potential bad faith and an opportunity for the insurer to cure the violation(s). Florida Statute s. 624.155 would not be confused as a model of clarity, so it is important that a insured or claimant work with an attorney regarding any bad faith claim including filling out the Civil Remedy Notice.

In Fox v. Starr Indemnity & Liability Co., 2017 WL 1541294 (M.D.Fla. 2017), an insured sued his property insurer for bad faith. Prior to suing, the insured submitted the required Civil Remedy Notice. However, the insurer moved to dismiss the lawsuit under the argument that the insured did not strictly comply with the statutory requirements based on how the insured filled out the Notice. The insurer argued this because if the Civil Remedy Notice was deficient than the statutory bad faith claim would not be triggered. The Middle District, reviewing this issue, maintained, that substantial compliance with the statutory requirements would suffice. The Middle District was not going to toss out a bad faith claim based on technicalities with how the Civil Remedy Notice was filled out when the insured substantially complied with the intent of the requirements.

Pursuing a bad faith claim against an insurer is not as easy as it may appear. There are steps and requirements that must occur before the bad faith claim can even be pursued. The first step is submitting the Civil Remedy Notice pursuant to Florida Statute s. 624.155. But, this is not the only step. Check out this article for more information on bad faith.