August 14th, 2017
INSURER CANNOT HAVE ITS CAKE AND EAT IT TOO: FLORIDA SUPREME COURT INTERPRETS “AT OUR REQUEST” LANGUAGE IN THE ADDITIONAL PAYMENTS PROVISION
By Meagan R. Cyrus, Esq.
As insurance policies changed from, historically, ones of indemnity to those of liability, insurers commanded a greater control over settlements and the defense of the insured in the third-party context. Logically, as the insurers would ultimately pay the price of the defense and indemnity, it follows that insurers would accordingly find such control necessary to protect their own interests. Notably, this control takes form in the commonly included “Voluntary Payment Provision”, barring an insured from unilaterally settling a claim.
The Supreme Court of Florida recently recognized this control over defense and settlement in its July 13, 2017 decision, in GEICO v. Macedo, No. SC16-935. The Court affirmed the First District Court of Appeal in holding that the Additional Payments section of the policy covered costs and attorneys’ fees awarded against the insured. Following an automobile accident, the third-party claimant filed suit against the insured and later served the insured with a proposal for settlement that was rejected. After a verdict was entered in favor of the claimant, fees and costs were also awarded pursuant to Section 768.79, Florida Statutes.
GEICO contended, however, that the policy did not cover the fees awarded in the underlying action, because the Additional Payment section only made reference to costs incurred by an insured at GEICO’s request.
ADDITIONAL PAYMENTS WE WILL MAKE UNDER THE LIABILITY COVERAGES
- All investigative and legal costs incurred by us.
. . . .
- We will upon request by an insured, provide reimbursement for the following items:
. . . .
(c) All reasonable costs incurred by an insured at our request (emphasis added).
The Court disagreed, holding that not only was the section ambiguous, giving rise to an interpretation in favor of coverage, but that such an interpretation did not account for the “Voluntary Payment Provision” in which an insurer has the sole authority to settle a claim on behalf of an insured. Therefore, GEICO’s interpretation failed to construe the policy as a whole. Wash. Nat’l Ins. Corp. v. Ruderman, 117 So. 3d 943, 948 (Fla. 2013).
Because GEICO, under the policy, had the sole discretion to settle the case, and failed to do so, it did not have to “request” that the insured accept or reject the settlement offers. Furthermore, the insured did not even have the option to grant such a request, as the Voluntary Payment Provision granted GEICO complete control over the settlement process. Accordingly, “[i]t follows that any cost or fee incurred as a result of GEICO exercising its authority and control is something that it intended to pay.”
The Macedo decision further emphasizes the control wielded by the insured in the context of settlement. An Insurer justifiably cannot choose to exercise its control over settlement and simultaneously argue that it is not in control.