January 26th, 2018
Putting the Cart Before the Horse: Why Insureds Should Avoid Litigating Issues of Indemnity Prior to Determining Liability
By Meagan R. Cyrus, Esq.
Frequently in the context of third-party liability coverage disputes, an insured is battling on two fronts: 1) the underlying liability action and 2) the insurance declaratory judgment action. In some scenarios, the insured has little control over either, as the insurer, in anticipation of an insured seeking to judicially enforce its rights under the policy, will race to its preferred forum in order to seek a declaration as to the coverages afforded under the policy prior to significant factual issues being decided in the underlying liability action.
From the perspective of an insured seeking to have defense obligations determined as soon as possible, as the monetary resources expended in the underlying action can become burdensome without insurer participation, this route can be advantageous. However, insureds should be leery of allowing the carrier to proceed on claims regarding indemnity issues, as doing so could force it to take conflicting positions in the underlying liability action and the insurance declaratory judgment action. For example, many insureds in a construction defect matter take the position that property damage did not occur. However, in order to be afforded coverage under a standard commercial general liability policy for such claims, same is required.
It is well established that the duty to indemnity is separate and distinct from the duty to defend. See Northland Cas. Co. v. HBE Corp., 160 F. Supp. 2d 1348, 1360 (M.D. Fla. 2001). Therefore, courts will generally entertain a motion to stay indemnity claims, pending the outcome of the underlying matter. See e.g., Summit Contractors, Inc. v. Amerisure Mut. Ins. Co., No. 8:13-CV-295-T-17TGW, 2014 WL 936734 (M.D. Fla. Mar. 10, 2014); Great Lakes Reinsurance PLC v. Leon, 480 F. Supp. 2d 1306 (S.D. Fla. 2007); Cincinnati Ins. Co. v. Franck’s Lab, Inc., et al., No. 5:12-cv-406-Oc-10PRL (M.D. Fla. Sept. 17, 2013).
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.
April 21st, 2017
By, Meagan R. Cyrus
It is well established in Florida that ambiguities in policy language are to be strictly construed against the insurer, and in favor of broader coverage for the insured. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000). The Florida Supreme Court further expanded on this notion in Washington Nat’l Ins. Corp. v. Ruderman, 117 So. 3d 943 (Fla. 2013), again ruling in favor of policyholders, finding that insurers could not clarify an ambiguity through the use of extrinsic evidence. However, prior to the court’s determination as to the ambiguity of the language at issue, can extrinsic evidence be used to the advantage of the insured? The answer is possibly, and depending on the jurisdiction.
Interpretive and drafting history materials in the hands of the insurer can show that an insured’s interpretation is a reasonable one, creating ambiguity. It is difficult for an insurer to argue against an alternative interpretation that it itself considered in the writing of the policy. This battle is won at the discovery stage. The Middle District ruled in favor of the insurer on this issue, finding that an insured’s request for documents used to interpret the meaning of the policy were irrelevant to coverage issues, relying on Ruderman. Evanston Ins. Co. v. Frank’s Lab., Inc., No. 5:12–cv–603–Oc–UAMHPRL, 2013 WL 5556225, at *1 (M.D. Fla. Oct. 8, 2013). The Southern District, however, decided conversely, granting an insured’s discovery request for such materials: “[c]ontrary to [insurer’s] position, drafting history and extrinsic evidence of interpretive materials is discoverable at this early stage of the litigation when questions concerning ambiguity have not been resolved.” Viking Yacht Co. v. Affiliated FM Ins. Co., 07-80341-CIV-Marra/Johnson, 2008 WL 8715540, at *2 (S.D. Fla. Feb. 7, 2008).
The relevant inquiry at issue as to the discoverability and consideration of interpretative and drafting materials is whether or not the court has determined the policy to be ambiguous. If not, such materials are often crucial for an insured to prove an argument for reasonableness of interpretation. This is distinguishable from Ruderman, in which the court had made a determination of ambiguity, and the insurer sought to refute that finding.