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A Florida Insurer’s Duty to Defend — Frequently Asked Questions

Mon Nov 30th, 2020 on     FAQs,    

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If you are a Commercial General Liability (CGL) policyholder, then you may be feeling a bit lost if your insurer has refused to defend you in the underlying litigation.  After all, you purchased insurance coverage in the hopes that — should a third-party sue — you would have a reliable ally to defend you and cover your losses.

In Florida, CGL insurers have a duty to defend their policyholders when the underlying litigation involves covered claims.  Despite this broad duty to defend, insurers often take the position that they are not required to step in to defend the policyholder — they are likely to argue that the claims are not covered by the policy.

This can put the policyholder in a vulnerable position.  They may not have the financial resources necessary to pay for legal assistance out-of-pocket, and may therefore be resigned to an unfavorable settlement with the plaintiff.  Worse still, paying for CGL insurance coverage would have been a waste.

Fortunately, an insurer’s refusal to defend you in the underlying litigation can be challenged with the help of an experienced Miami insurance coverage lawyer.

Here at Ver Ploeg & Marino, our team has decades of experience working with policyholders to secure their rights — including their right to have their insurer step in and defend them in the underlying litigation.  We are committed to client-focused representation and work closely with our clients at every step of litigation to meet their needs and expectations.

Ready to speak to a Miami insurance coverage lawyer at VPM?  Contact us today to schedule a consultation.

Under what circumstances does the insurer have a duty to defend me in the underlying litigation?

In Florida, insurers have a duty to defend their Commercial General Liability (CGL) policyholders in the underlying litigation if the plaintiff’s allegations involve claims that are covered by the policy.

It’s important to note that, in Florida, it’s not necessary for those allegations to be supported by the facts, or even by a consistent theory of liability.  The facts could later be proven false.  But the duty to defend will trigger so long as the allegations state a cause of action that is covered by the policy.

Even if the insurer does not have a duty to defend me, can they still be required to pay me for the losses I sustain?

If there is no duty to defend, then there cannot be a duty to indemnify (i.e., to pay the policyholder for the losses they sustained), as the duty to defend is based on whether there is the potential for coverage.  If no potential for coverage exists, then the duty to indemnify cannot be realized.

Worth noting: the duty to indemnify and the duty to defend are distinct, but the duty to defend is generally seen as “broader” than the duty to indemnify.  As such, it is quite possible for the insurer to step in and defend the policyholder in the underlying litigation, but have no actual duty to indemnify.

What’s the benefit of having my insurer handle the defense in the underlying litigation?

Insurers not only have extensive experience defending against such claims (after all, they provide insurance coverage to a large number of policyholders in similar positions), but they also have the resources to handle the defense effectively.

When an insurer steps in to defend you in the underlying litigation, you no longer have to worry about the out-of-pocket costs of legal assistance.  Your insurer will essentially advocate on your behalf without you having to pay anything out-of-pocket — after all, you already paid for these services through your insurance plan.

What happens if my insurer makes a mistake when handling my defense by failing to reach a settlement when it was reasonable to do so?

Insurers have a duty to use reasonable diligence when stepping in and handling their policyholder’s defense.  This may include a number of activities, from working with qualified experts to conducting a thorough investigation of the facts, and more.

In exercising proper diligence, insurers are required to settle the claim when a reasonable offer has been made.  In fact, insurers must act in their policyholder’s best interest when they are defending them in underlying litigation — if a reasonable settlement offer is on the table and the insurer refuses to settle due to their unwillingness to pay, then they could be sued for bad faith by the policyholder.

Could a duty to defend arise from the possibility of a covered claim later being asserted?

 No, it cannot.  Under Florida law, the “hypothetical possibility” of a covered claim later being asserted is not enough to trigger the duty to defend — even if the underlying facts could support a covered claim.  The complaint must “actually” allege a cause of action that would be covered by the insurance policy in order for the duty to defend to trigger.

This can seem a bit confusing, but it’s rather simple.  How does this work, exactly?

Suppose that you are being sued by a customer who was injured by an employee working for your business.  The customer does not allege in their complaint that you were negligent in hiring/supervising the employee.  As such, your insurer refuses to step in to defend the underlying lawsuit, as they believe that the only claims are based on the employee’s intentional misconduct (and are therefore not covered by the insurance policy).

Even if the injured customer could later amend their complaint and assert a claim based on your negligence, thus hypothetically causing the case to fall under the policy coverage, that is not enough to trigger the duty to defend (until the claim is actually asserted).

Contact us today if you have additional questions or for immediate assistance with your case.

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