Your Insurance Company Failed to Defend You—What Now?

A critical component of many insurance policies is a duty to defend the policyholder when a lawsuit is filed against them. That lawsuit could be a class action filed against the officers of a corporation, a claim for damages in a car or truck accident, or a premises liability case filed against the owner of commercial or residential property. When an insurance company has a duty to defend, its attorneys should be taking the lead in defending the lawsuit on behalf of the policyholder.

However, insurance companies are reluctant to invest money in legal defense if they believe they can avoid it. So they often refuse to assist with defense. They may claim that the issues in the lawsuit are beyond the scope of policy coverage, so that they have no duty to defend. Alternatively, they may argue that the lawsuit involves wrongdoing that renders policy obligations null and void. They may not even provide a reasonable explanation at all.

When an insurance company refuses to comply with defense obligations in litigation, then it is time to talk to a knowledgeable Miami insurance coverage lawyer. Even if the lawsuit is expected to settle out of court, as most civil lawsuits do, the case will still require legal work from the defense team. The policyholder should not be required to bear the burden of that expense when the insurer has a duty to defend.

Key Documents Establish the Obligation

Although insurance obligations may differ somewhat in different states, there is generally an obligation to defend a lawsuit when the complaint filed against the policyholder alleges claims that fit under the coverage provided by the insurance policy. In Florida, for instance, the Supreme Court has held that an insurance company’s “duty to defend a claim against an insured party . . . is triggered when the complaint alleges facts that fairly and potentially bring the action within policy coverage.”

One of the critical issues in a dispute over an insurance company’s obligation to defend a lawsuit involves the allegations directly contained in the plaintiff’s complaint that initiated the lawsuit. If the complaint does not assert facts that fall within the scope of insurance coverage, then courts have held that the insurance company does not have an obligation to defend the policyholder in the lawsuit. For instance, if the claim involves a loss that is specifically excluded from coverage under the terms of the policy, then the insurer is absolved of a duty to defend.

The starting point for a Miami insurance coverage lawyer assessing an insurance company’s duty to defend is a detailed examination of the complaint filed in the case and the terms of the insurance policy. Facts alleged beyond what is contained in the complaint should not impact the duty to defend. For instance, if a shopper in a grocery store filed a claim for injuries caused by negligence alleging that store employees allowed a tripping hazard to remain in the aisle, the insurance company could not refuse to defend the claim on the grounds that a store employee was acting with intent to harm the shopper rather than negligence and that therefore the loss would not be covered under the policy. The duty to defend is based on the allegations in the complaint, and if the complaint said nothing about a deliberate, harmful act, then the insurance company cannot use that assertion as grounds to avoid the obligation to defend the claim.

The Duty to Defend is Not the Same as the Duty to Pay a Claim

While an insurance company’s duty to defend a policyholder in a lawsuit is based on the unproven allegations in the complaint, the same is not true about the insurer’s obligation to indemnify the policyholder and pay for losses. The insurer may fulfill its obligation to defend the policyholder in court; however, during the course of the lawsuit, facts may come to light that reveal the loss at issue in the case is actually not covered by the insurance policy. In that case, a Miami insurance claim lawyer understands that the company is not obligated to pay damages or cover any losses that fall outside of the policy’s coverage.

Insurance Companies Have a Duty to Be Reasonable

Often, legal obligations are not straightforward issues of right and wrong. To determine how a company or individual should have acted in a particular situation, the court will consider what would be “reasonable” under the circumstances. This is true with the duty to defend. An insurer must take a reasonable interpretation of the facts alleged in the case to determine whether the company has a duty to defend. And when a duty to defend exists, the insurer must act reasonably in fulfilling that obligation.

That means the insurer is expected to defend the case with reasonable diligence. Attorneys are expected to respond to requests, communicate with opposing counsel, investigate the issues, and engage in reasonable settlement negotiations. The obligation could include a duty to bring in experts.

What does this mean for policyholders? It means that they should be prepared to seek help from an insurance coverage attorney in Miami in two situations:

• The insurer refuses to provide defense in a lawsuit based on a loss covered by the policy
• The insurer does an inadequate, unreasonable job when undertaking defense efforts, such as failing to file responses or engage in any investigation to refute the plaintiff’s claims

An unreasonable approach to defense could be considered an act of bad faith or a violation of contractual obligations of the insurance company.

Ver Ploeg & Marino Works to Hold Insurance Companies Accountable

Insurance coverage is a significant investment, and when you’ve made that investment to protect yourself from unnecessary liability, you deserve to receive full and effective service from your insurance company. That includes a reasonable defense in litigation involving losses that should be covered under your policy.

When the insurance company fails to fulfill its obligations, the team at Ver Ploeg & Marino works to hold the company accountable and enforce the policyholder’s rights. If you have concerns about the duty to defend involving any type of insurance coverage, we invite you to schedule a confidential consultation to learn about the assistance our team can provide.

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