A recent insurance coverage dispute involving an automobile liability insurance policy contains a worthy discussion, particularly on the difference between a policy defense and a coverage defense.  In this case, the carrier did not provide a defense to the defendant and the plaintiff and defendant entered into a Coblentz agreement.  The plaintiff, as assignee of the insured, filed a lawsuit against the automobile liability policy for coverage. Summary judgment was granted in favor of the insurer finding there was no coverage under the terms of the policy. This was affirmed.

1. Scope and Extent of Insurance Coverage

The scope and extent of insurance coverage is determined by the language of the insurance policy. Thus, the policy’s text is paramount and must be the starting point of our analysis. Parrish v. State Farm Florida Ins. Co., 356 So. 3d 771, 774 (Fla. 2023); see also State Farm Mut. Auto. Ins. Co. v. Menendez, 70 So. 3d 566, 569 (Fla. 2011) (“In interpreting an insurance contract, we are bound by the plain meaning of the contract’s text.”); § 627.419(1), Fla. Stat.

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The policy must be enforced as written. Courts are without power to rewrite insurance contracts or create insurance coverage where none exists. Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So. 2d 938, 942 (Fla. 1979); U.S. Fire Ins. Co. v. Morejon, 338 So. 2d 223, 225 (Fla. 3d DCA 1976) (“Florida courts adhere to the principle that a court should not rewrite a contract of insurance extending the coverage afforded beyond that plainly set forth in the insurance contract.”).

Fojon v. Ascendant Commercial Ins. Co., 49 Fla.L.Weekly D1799b (Fla. 3d DCA 2024)

2. Florida’s Claims Administration Statute and Difference between Coverage Defenses and Policy Defenses

An argument that was raised by the plaintiff (as assignee of the insured) was that the liability insurer waived its right to deny coverage because the insurer failed to comply with Florida’s Claims Administration Statute.

Florida’s Claims Administration Statute is embodied in Florida Statute s. 627.427, which provides in material part in subsection (2):

(2) A liability insurer shall not be permitted to deny coverage based on a particular coverage defense unless:

(a) Within 30 days after the liability insurer knew or should have known of the coverage defense, written notice of reservation of rights to assert a coverage defense is given to the named insured by registered or certified mail sent to the last known address of the insured or by hand delivery; and

(b) Within 60 days of compliance with paragraph (a) or receipt of a summons and complaint naming the insured as a defendant, whichever is later, but in no case later than 30 days before trial, the insurer:

1. 1. 1. 1. Gives written notice to the named insured by registered or certified mail of its refusal to defend the insured;
         2. Obtains from the insured a nonwaiver agreement following full disclosure of the specific facts and policy provisions upon which thecoverage defenseis asserted and the duties, obligations, and liabilities of the insurer during and following the pendency of the subject litigation; or
         3. Retains independent counsel which is mutually agreeable to the parties. Reasonable fees for the counsel may be agreed upon between the parties or, if no agreement is reached, shall be set by the court.

Importantly, as reflected in the statute, it pertains to coverage defenses. Not policy defenses.

A policy defense is an assertion that the terms of the insurance contract do not provide for coverage. AIU Ins. Co. v. Block Marina Inv., Inc., 544 So. 2d 998, 1000 (Fla. 1989). For example, a policy defense exists where the insuring agreement is not triggered, such as when a person does not qualify as an insured or when a vehicle does not qualify as a covered auto. Other examples include where an exclusion applies, or when a loss occurs outside of the policy period.

On the other hand, a coverage defense involves forfeiture of insurance coverage that otherwise exists. Coverage defenses arise where the insured fails to comply with a condition or duty required by the policy, such as failing to cooperate, committing fraud, or failing to provide prompt notice. It is based on some action or inaction of the insured after the loss. Grigsby, supra, at 8 (“It focuses on the insured’s behavior, post-loss in particular.”).

Fojon, supra.

When it comes to a coverage defense, an insurer must comply with Florida’s Claims Administration Statute. “If it does not, it is estopped from asserting the coverage defense – a breach of a policy condition that would forfeiture coverage. It can still, however, assert a policy defense – a defense of no coverage.”  Fojon, supra (internal citation omitted).

However, in this coverage dispute, the insurer relied on a policy defense in denying coverage and its defense of the insured, not a coverage defense . “Therefore, the Claims Administration Statute does not apply, and it does not bar [insurer] from denying coverage.” Fojon, supra.

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.