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Florida Insurers and Their Duty to Defend

Wed Sep 30th, 2020 on     Insurance Claims,    

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In Florida, if a policyholder is potentially liable to a third-party (i.e., a liability claim has been brought against them and that claim is covered by the underlying insurance policy), then the insurer has a duty to defend the policyholder in the ensuing litigation.  As with most liability disputes, these disputes are likely to resolve through pre-litigation settlement — but the insurer must still adhere to their duties and take control of the defense.

Unfortunately, many insurers will take steps to avoid having to invest the funds and resources towards defending a policyholder in litigation, even if they are required to do so.  The insurer may argue that the underlying issues do not involve claims that would be covered by the insurance policy, for example, and use this argument to avoid their “duty to defend.”

This can pose significant challenges for a cash-strapped policyholder-defendant, as the policyholder would have to sustain additional costs by hiring an independent attorney to represent them in the liability dispute.  Quite obviously, this more costly path is not something the policyholder would have contemplated when purchasing insurance coverage — they no doubt purchased insurance with the assumption that it would lead to a reliable defense in the event of a lawsuit.

If you are being sued by a third-party and believe that the lawsuit is covered by your insurance policy, it’s important that you get in touch with a qualified Miami insurance coverage lawyer for guidance on how to proceed.  Your attorney will work to help you secure the defense owed by your insurance provider.

Let’s take a closer.

The Duty to Defend at a Glance

As discussed, in Florida, insurers have a duty to provide a policyholder (who has been sued in a liability dispute) with legal representation a defense for third-party claims that are covered by the insurance policy.

Oftentimes, insurers will argue that the facts point to the prospect of the third-party claims not being covered.  For example, suppose that you are being sued by a customer who was injured due to an employee’s negligence while browsing items in your store.  You have a Commercial General Liability (CGL) insurance plan and request your insurer to step in to defend you in the subsequent litigation.

The insurer may refuse to step in to defend, arguing that the employee was not negligent, but was actually acting intentionally to injure the customer — an act that, under the policy, is not covered.

This is not a reasonable argument against the “duty to defend,” however.  Florida law does not impose (or void) the duty to defend on the basis of the actual facts.  Instead, the duty to defend arises on the basis of the allegations — if the allegations potentially bring the suit in line with policy coverage, then the insurer must step in and provide a defense.  This duty to defend is required even if the allegations are ultimately deemed false.

Given this, the duty to defend in Florida is often described as broad.

The Duty to Indemnify is Distinct

Worth noting is that the duty to defend is broader than the duty to indemnify.  In other words, it’s entirely possible for an insurer to have a duty to defend, but — after litigation leads to factual revelations showing that the claims don’t fall within the policy coverage — not have a duty to payout.  These are two separate duties, and the duty to indemnify will not necessarily activate simply because the duty to defend is imposed on the insurer.

The Insurer Must Act Diligently in the Policyholder’s Best Interests

Insurers who step in to defend a policyholder must act diligently to further the policyholder’s best interests.  To that end, they must engage in reasonable conduct throughout every phase of litigation, communicating promptly with opposing counsel, performing full and adequate investigations, hiring experts where necessary, and resolving the case through early settlement if favorable conditions are offered.

Once the insurer steps in to provide a defense, they cannot act to further their own interests through litigation.  Doing so could give rise to a separate third-party bad faith claim, which could expose them to significant damages.

For example, suppose that your insurer steps in to provide a defense.  The insurer refuses to spend properly on the defense, however, and “goes cheap” by failing to hire necessary expert witnesses.  In doing so, your case is poorly argued, lacks sufficient persuasive strength, and leads to a negative result.  If you can show that the insurer acted in bad faith by refusing to hire certain expert witnesses, then you could ostensibly recover damages in a separate lawsuit against the insurer.

Contact a Miami Insurance Coverage Lawyer at VPM for Assistance

Insurers in Florida have dual duties, not only to consider and payout for covered claims but also to step in and defend policyholders who have been sued by a third-party (i.e., a CGL insurer stepping in to defend a business owner who is being sued by a customer in an injury lawsuit).  This secondary duty — the duty to defend — is broad, and an insurance provider’s failure to acknowledge and engage this duty should be addressed with the appropriate legal action.

Ver Ploeg & Marino, P.A. is a Miami insurance law firm with decades of experience working with policyholders to secure their rights against hostile insurers — including those who refuse to step in and defend the policyholder in a lawsuit brought by a third-party.

We are committed to comprehensive, thorough representation from an early stage, giving us insight into the best litigation strategy to employ given the unique circumstances of our client’s dispute.

If you’d like to speak to a Miami insurance coverage lawyer at our firm, we encourage you to contact VPM to schedule an initial consultation at your earliest convenience.  We look forward to assisting you.

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