May 16th, 2018
By, Laura L. Locklair, Esq.
South Carolina and Florida are not always aligned in their treatment of issues affecting insurers and policyholders, but the states are in agreement that an insurer’s duty to defend is several, personal and not subject to division by or contribution from other carriers. Cont’l Cas. Co. v. United Pac. Ins. Co., 637 So.2d 270, 272-7 (Fla. 5th DCA 1994) (holding that insurer is not entitled, pursuant to right of equitable subrogation or contribution, to recover from another insurer costs of defending mutual insured); Sloan Constr. Co. v. Cent. Nat’l Ins. Co. of Omaha, 269 S.C. 183, 236 S.E.2d 818, 820 (1977) (an insurer is not entitled to divide duty to defend nor require contribution from another absent specific contractual right); Auto-Owners Ins. Co. v. Travelers Cas. And Sur. Co. of Am., No. 4:12-cv-3423, 2014 WL 3687338 (D.S.C. July 22, 2014 aff’d, 597 (4th Cir. 2015). As a result, where two or more insurers insure the same risk for the same insureds (be it a named insured or an additional insured) and the policies at issue provide for a defense, the insured is entitled to seek its costs of defense from any or all of the insurers but, absent other contractual rights, the defending insurer(s) cannot require contribution from the other carriers or seek to subrogate the expenses of that defense.
South Carolina and Florida, along with a few other states, find themselves in the minority in the refusal to grant insurers a right to recover portions of the defense costs paid from other carriers. Id.; Fid. & Cas. Co. of N.Y. v. Ohio Cas. Ins. Co., 482 P.2d 924, 926 (Okla. 1971). These minority courts recognize that each insurer contracted to defend, at its own expense, any suit within the terms of its policy. Sloan, 269 S.C. at 186 (finding that an insurer’s duty to defend is irrelevant to the rights and duties existing between the insured and another carrier). As a result, compelling each carrier to provide a full defense to its insured requires no more of the insurer than what it was obligated to do under its insurance contract with the insured. While potentially draconian from the carriers’ perspective, the minority rule protects the insured’s rights to the full benefits of the insurance policy and entitles the insured to recover 100% of its defense costs from any one carrier. Moreover, because insurers cannot sue one another seeking a pro-rata share of attorneys’ fees incurred in providing a defense to the mutual insured there is a corresponding reduction in the number of lawsuits and burden on the judiciary. Cont’l Cas. Co., 637 So.2d at 273. Courts in South Carolina and Florida also have reasoned that the threat of bad faith actions, and the corresponding exposure of policy limits and extra-contractual damages, are sufficient to prevent additional carriers from shirking their defense obligations after one carrier picks up the defense of the shared insured.
The majority of courts which recognize an insurer’s right to contribution or to have defense costs shared in some way include the following: (1) Alaska, Marwell Constr., Inc. v. Underwriters at Lloyd’s, London, 465 P.2d 298, 313 (Alaska 1970); (2) Arizona, Nat’l Indem. Co. v. St. Paul Ins. Cos., 150 Ariz. 458, 724 P.2d 544, 545 (1986); (3) California: Cont’l Cas. Co. v. Zurich Ins. Co., 57 Cal.2d 27, 17 Cal.Rptr. 12, 366 P.2d 455, 460-62 (1961); (4) Colorado: Nat’l Cas. Co. v. Great Sw. Fire ins. Co., 833 P.2d 741, 747-48 (Colo.1992); (5) Connecticut: Travelers Cas. & Surety Co. of Am. V. Netherlands Ins. Co., 312 Conn 714 (2014); (6) Cargill, Inc. v. Ace American Ins. Co., 784 N. W. 2d 341 (2010); (7) New Jersey: Marshall v. Raritan Valley Disposal, 398 N.J. Super. 168, 940 A.2d 315, 320 (2008); (8) North Carolina: Medical Mut. Ins. Co. of NC v. American Cas. Co. of Reading, PA, 721 F. Supp.2d 447, 464 (E.N. N. C. 2010); (9) Pennsylvania: J.H. France Refractories Co. v. Allstate Ins. Co., 534 Pa 29, 626 A.2d 502, 209 (1993); (10) Utah: Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127, 137-38 (Utah 1997); and (11) Washington: Mut. Of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash.2d 411, 191 P.3d 866, 872-74 (2008). These cases suggest that permitting contribution and/or subrogation between insurers guarantees that co-carriers honor their obligations to defend their mutual insured and that no one carrier is unfairly saddled with the burden of funding the entire defense. Specifically, such courts conclude that permitting coinsurers to recover from one another creates strong incentives for prompt and proactive involvement by all responsible carriers, reduces the incidence of carriers that avoid their duty to defend in the hope that other insurers will defend and relieve them of the expense, and promotes the efficient use of resources of insurers, litigants, and the court.
Insurers in South Carolina, Florida and like-minded states continue to look for opportunities to create a cause of action for equitable contribution, permit subrogation, or to otherwise alter the minority rule. However, the South Carolina District Court for the Charleston Division recently affirmed the Sloan rule in FCCI Insurance Company v. Island Pointe, LLC, et al., Case No. 2:17-cv-1976. In that declaratory judgment action arising out of the construction of a condominium complex in Charleston, South Carolina, FCCI sought declarations regarding the coverage available to its named insured and general contractor for the project, Complete Building Corporation (“Complete”). While FCCI agreed to defend Complete in the underlying action, FCCI also sought a declarations that Complete qualified as an additional insured under policies issued to Complete’s subcontractors and that the carriers for Complete’s subcontractors were required to contribute to Complete’s defense fees and costs. In granting motions to dismiss filed by the carriers for Complete’s subcontractors, the court determined that the doctrines set forth in Sloan and Auto-Owners applied and precluded FCCI’s claims. Specifically, the court opined that because “FCCI is not a party to any contract between [Complete’s subcontractors and their insurers]” FCCI “cannot compel the [subcontractors’ insurers] to defend Complete in the underlying suit. FCCI at *8-9. Importantly, while insurers may not have the right in South Carolina to compel participation of the other carriers in the defense of a shared insured, the Island Pointe case does not hold that a policyholder is prohibited from all implicated insurers even when another carrier is already defending it.
Ultimately, under either the majority or minority rule, the insured is entitled to payment of 100% of its defense costs per its policy/policies. However, the differences in the law can have practical and meaningful effects on the number and scope of the lawsuits to which the policyholder may be a party, its duties in those cases, and potentially even its tender obligations.
May 16th, 2017
By, Mark A. Boyle, Esq.
Under the law of South Carolina, a tort action for an insurer’s bad faith refusal to pay benefits does not extend to third parties who are not insureds under the policy. Kleckley v. Nw. Nat. Cas. Co., 526 S.E.2d 218, 219 (S.C. 2000). The South Carolina Supreme Court has not yet addressed whether a party who is not a named insured, but is an additional insured, is entitled to proceed in bad faith against an insurer which fails to honor its obligations under the insurance contract. In UFP Eastern Division, Inc. vs. Selective Insurance Company of South Carolina, 2017 WL499083 (SDSC 2017) the Court held that South Carolina law does permit an additional insured to bring a claim for bad faith. In so doing the Court noted:
“The South Carolina Court of Appeals addressed an additional insured’s bad faith claim in BMW of N. Am.,LLC v. Complete Auto Recon Services, Inc., 731 S.E.2d 902, 907 (S.C. Ct. App. 2012). The Court of Appeals held that defendant Colony Insurance Company was entitled to summary judgment on the bad faith claim brought by BMW, an additional insured under a policy issued by defendant, because the subject matter of the claim was not covered by the insurance agreement. There is no suggestion that BMW lacked standing to bring a bad faith claim against Colony Insurance at all. Further, this Court can discern no apparent reason why a party identified as an insured in the insurance contract should not be able to bring a bad faith claim regarding the handling of its claim for insurance benefits brought under the insurance contract. The many cases Selective cites to support its position are inapposite because they concern claims by third-party tort victims suing tortfeasors’ liability providers for coverage of underlying tort claims, not additional-insured tortfeasors suing their own insurers for breach of contract.”
Certainly, the ability of an additional insured to bring a bad faith claim should represent a powerful legal deterrent to insurers shirking their obligation to defend additional insureds under South Carolina Law.
November 12th, 2013
What is the Scope of Your Additional Insured Coverage?
by Amanda K. Anderson, Esquire
Boyle and Leonard P.A.
- Types of Additional Insured Endorsements
There are many variations when it comes to additional insured endorsements, but there are a couple main categories of additional insured endorsements. Additional insured endorsements can be separated into two main categories, scheduled and blanket. The most common scheduled endorsement is the 20 10 11 85, which commonly states “WHO IS AN INSURED is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of “your work” for that insured by or for you.” On the other hand, blanket additional insured endorsements are typically dependent on the existence of a written contract which has been executed prior to the loss. Blanket language typically consists of some iteration of the following: “Who is an insured is amended to include any person or organization that the insured has agreed or is required by contract to add as an additional insured.”
An examination of the particular language in the endorsement is vital. There are three phrases which are typically used: (1) “arising out of”; (2) “caused, in whole or in part”; and (3) “because of”. Additional insured endorsements which cover damages “arising out of” the subcontractor’s work are the broadest of all the endorsements. See Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528 (Fla. 2005). In Florida, courts have universally ruled that the additional insured is insured for its own liability under the “arising out of” language. See Koala Miami Realty v. Valiant Ins. Co., 913 So. 2d 25 (Fla. 3d DCA 2005); Monticello Ins. Co. v. City of Miami Beach, 2008 WL 906537 (S.D. Fla. April 3, 2008). Thus, the additional insured has coverage for its own negligence and not just the additional insured’s vicarious liability. The “in whole or in part” language gives coverage to the additional insured so long as there was any fault on the part of the named insured. See Zep Construction v. Interstate Fire & Cas. Co., 18 Fla. L. Weekly Supp. 65a (Fla. 12th Cir. 2010); Am. Empire Surplus Lines Ins. Co. v. Crum & Forster Specialty Ins. Co., 2006 WL 1441854 (S.D. Tex. May 23, 2006); and Penn Nat’l Mut. Cas. Ins. Co. v. Ipsco Steel (Alabama), Inc., 2008 WL 4183345 (S.D. Ala. Mar. 10, 2008). As such, additional insured coverage under this language is not limited to vicarious liability. Lastly, additional insured status providing coverage to additional insured “because of” named insured liability has been held to be limited to mere vicarious liability. See Garcia v. Federal Ins. Co., 969 So. 2d 288 (Fla. 2007).
- Ongoing Operations Limitation
Many additional insured endorsements contain language which limits coverage to damages arising out of the named insured’s “ongoing operations.” Whether that phrase is intended to remove coverage for damages included in the “products completed operations hazard” is unclear. However, most of the courts interpreting this language have found that without more limitation in the endorsement to make clear that there is no coverage for completed operations, the “ongoing operations” limitation is insufficient to removed completed operations coverage. See Tri-Star Theme Builders, Inc. v. OneBeacon Ins. Co., 426 Fed.Appx. 506 (9th Cir. 2011); McMillin Constr. Servs.,L.P. v. Arch Specialty Ins. Co., 2012 WL 243321 (S.D. Cal. Jan. 25, 2012); and Jaynes Corp. v. American Safety Indem. Co., 925 F.Supp.2d 1095 (D. Nev. 2012). But seeColorado Cas. Ins. Co. v. Safety Control Co., Inc., 288 P.3d 764 (Az. Ct. App. 2012).
III. 2013 ISO Amendments
In April 2013, the Insurance Services Office, Inc. (“ISO”) revised its standard CGL forms and endorsements, including 24 of its 31 standard additional insured endorsements. The revised ISO endorsements contain three significant modifications of particular concern to contracting parties: coverage is provided “to the extent permitted by law”; coverage “will not be broader than” the contract; and limits are the lesser of the contract requirement or the policy declarations.
One of the revised additional insured endorsements now states that the insurance afforded to the additional insured “only applies to the extent permitted by law.” This provision was presumably inserted to address state anti-indemnification statutes. Another additional insured endorsement option, which could be added to a policy, states: that if the coverage is required by a contract or agreement, the insurance afforded to the additional insured “will not be broader than” the coverage that the insured is “required by the contract or agreement to provide.” It seems likely that the new language is intended to incorporate into the insurance policy any express limits on additional insured coverage that the parties have specified in the contract; for example, where the contract specifies that additional insured coverage will only extend to vicarious liability. The last major change reflected in some endorsements states: that the most the insurer will pay on behalf of the additional insured is either the amount “[r]equired by the contract or agreement”; or the applicable Limits of Insurance shown in the Declarations, whichever is less. The intent of this language is to limit the insurer’s exposure to the lesser of the policy limits or the amount agreed to by the contracting parties.
Certainly, all general contractors and subcontractors should be aware of these changes and adjust their contracts accordingly.
May 21st, 2013
by Michael W. Leonard, Esquire
Boyle, Gentile, Leonard & Crockett, P.A.
As foreclosure actions have moved their way through the courts, some mortgagors and their respective mortgagees have elected to abandon their homes and collateral in favor of saving the additional expenses relevant to the maintenance of the property and the associated ad valorem taxes. This has resulted in an ever increasing number of tax deed sales in order to pay counties their much needed revenues. With the ever increasing number of tax deed sales, many purchasers have elected to enter the fray, not for the purpose of holding on to these acquisitions for the long run, but instead, reselling the acquired property in hopes of making a quicker profit. The purpose of this article is to address the need for a quiet title suit in the event that property is acquired with an eye on reselling the property in the short run.
Title based on a tax deed is considered insurable if: (1) the tax deed has been on record for more than 20 years; (2) all subsequent real estate taxes have been paid by the tax deed grantee and his successors; (3) there has been no adverse claim asserted of record, and; (4) there has been no possession adverse to the tax deed grantee or his successors. See Fund Title Notes, TN 30.01.02(2). Provided the above requirements can be proven, then title after the expiration of this 20 year period will be deemed insurable.
Many tax deed purchasers are unwilling to wait the 20 year period in order to have marketable title. In some situations, title underwriters have agreed to insure property acquired via tax deed after 4 years has elapsed since issuance of the tax deed by the Clerk of Court, pursuant to Florida Statute, section 95.191. This statute provides that:
When the holder of a tax deed goes into actual possession of the real property described in the tax deed, no action to recover possession of the property shall be maintained by a former owner or other adverse claimant unless the action commenced is begun within 4 years after the holder of the tax deed has gone into actual possession. When the real property is adversely possessed by any person, no action shall be brought by the tax deed holder unless the action is begun within 4 years from the date of the deed.
As one can see, section 95.191, Fla. Stat. is a two way street. This statute limits the prior owner and anyone under the prior owner from claiming possessory rights if the tax deed purchaser has been in actual possession for a period of 4 years. Likewise, even if a tax deed purchaser acquires title to the property but does not take actual possession, such tax deed holder is prohibited from instituting an action for possession after the expiration of 4 years. In either event, the party who is relying on this statute must present competent substantial evidence establishing continuous adverse possession as defined by section 95.16(2), Fla. Stat. This statute provides:
(2) For the purpose of this section, property is deemed possessed in any of the following cases:
(a) When it has been usually cultivated or improved.
(b) When it has been protected by a substantial enclosure. All land protected by the enclosure must be included within the description of the property in the written instrument, judgment, or decree. If only a portion of the land protected by the enclosure is included within the description of the property in the written instrument, judgment, or decree, only that portion is deemed possessed.
(c) When, although not enclosed, it has been used for the supply of fuel or fencing timber for husbandry or for the ordinary use of the occupant.
(d) When a known lot or single farm has been partly improved, the part that has not been cleared or enclosed according to the usual custom of the county is to be considered as occupied for the same length of time as the part improved or cultivated.
To be able to take advantage of the aforementioned statute, and therefore obtain title insurance for a subsequent sale, evidence must be recorded establishing that neither the prior owner nor anyone claiming under the prior owner retained or remained in possession for a year or more after issuance of the tax deed. Clearly, if one is looking to avoid a quiet title action, and instead rely on the above statutes, it becomes even more important to either remove the prior tenant of the owner or ensure that there is evidence that the prior occupant’s possession is not a continuation of his or her rights under the prior owner’s regime. One way to secure this evidence is by adding language to a new lease with the former tenant that says occupancy is not a continuation of occupancy under a prior ownership, but is instead an express acknowledgement that the occupancy is being undertaken by, through and under the new tax deed holder.
It is important to keep in mind that, even after the expiration of the 4 year period, title underwriters may remain skeptical or be otherwise unwilling to provide title insurance absent confirmation that the tax deed sale process was in conformance with Chapter 197 of Florida Statutes. As a result, many tax deed purchasers have elected to move forward with the filing of a quiet title action following the tax deed sale purchase. The filing of a quiet title action has the benefit of ensuring that title insurance can be obtained, following a successful quiet title action. Another added benefit of a quiet title action involves the situation when purchasers are confronted with hold-over owners or tenants who refuse to vacate the subject property. Fortunately, Florida Statute, section 197.562, allows the successful bidder to obtain possession of the property which is the subject of the quiet title action. A successful bidder is entitled to apply for a writ of assistance upon 5 days notice directed to the person refusing to deliver possession. Unlike actions in foreclosure and the safeguards put in place by the Protection Tenants at Foreclosure Act, there are no similar protections afforded to the occupants holding possession after a tax deed sale.
Unless a purchaser is intending to hold on to property purchased at a tax deed sale for a substantial period of time, the filing of a quiet title action is an excellent way in which to confirm title to the successful bidder and remove unwanted owners and tenants from possession thereof.