Page 20 - Reservation of Rights - Special Edition

AIU Ins. Co. v. Block Marina Inv., Inc., 544 So. 2d 998, 1000 (Fla. 1989)).
Surplus Lines Statute
Surplus lines insurers shall provide, among other informa- tion, “a statement of any policy or coverage defense that such insurer reasonably believes is available to such insurer at the time of filing such statement” within 60 days after the written request of the claimant. Fla. Stat. § 626.9372(1)(d).
Content
A reservation of rights letter should state that the insurer is reserving its right to limit or deny coverage and specify the basis of a potential denial of coverage. Aguero v. First Am. Ins. Co., 927 So. 2d 894, 896 (Fla. 3d DCA 2005).
Consent
An insured may, but need not, accept the defense under a reservation of rights. If the insured objects to the defense, the insurer has not wrongfully failed to defend. Mid-Con- tinent Cas. Co. v. American Pride Bldg. Co., LLC, 601 F.3d 1143 (11th Cir. 2010) (citing Taylor v. Safeco Ins. Co., 361 So. 2d 743 (Fla. 1st DCA 1978)).
If the insured objects to the defense under a reservation of rights, the insured has the right in this situation to enter into settlement with the plaintiff, notwithstanding the provisions of the policy. The insurance company’s reservation of its assertion of non-liability, although privileged, relinquishes to the insured, at his election, control of the litigation and settle- ment. To recover such a settlement, however, the insured must prove the settlement was entered into without bad faith, fraud, collusiveness, or any effort to avoid liability. Fur- ther, since the insurance company did not violate any duty to defend, its maximum liability is limited to the amount
of a reasonable settlement up to a maximum of the policy limits. Taylor v. Safeco Ins. Co., 361 So. 2d 743 (Fla. 1st DCA 1978).
Prejudice/Estoppel
An insurer may provide a defense to its insured while reserv- ing the right to challenge coverage if timely notice of such reservation is given to the insured. Gemini II Ltd. v. Mesa Underwriters Specialty Ins. Co., 591 Fed. Appx. 803 (11th
Cir. 2014). However, a delay in informing the insured of a dispute as to coverage may, but need not, result in estoppel of the insurer. Estoppel exists only if the insured can show he has been prejudiced. Centennial Ins. Co. v. Tom Gustafson Indus., Inc., 401 So. 2d 1143 (Fla. 4th DCA 1981).
Reimbursement for Defense Costs
The reservation of rights letter may provide the insurer with the right to seek reimbursement for defense costs it pays if it later establishes that those costs were incurred in defend-
ing non-covered claims. Colony Ins. Co. v. G & E Tires & Serv., Inc., 777 So. 2d 1034 (Fla. 1st DCA 2000). The reason for allowing an insurer to seek reimbursement of the cost associated with defending non-covered claims is that the insurer is required to defend both covered and non-covered claims but does not receive a premium for defense of the non-covered claims.
In Halikoytakis, the court held that the insurer was entitled to reimbursement for attorneys’ fees and costs incurred in de- fending the insured. The court based its holding on the fact that Underwriters initially sent a letter to the insured reserv- ing its right to seek reimbursement if it was later determined that Underwriters owed no coverage under the insurance policy. The court noted that, in accepting the defense, the insured necessarily agreed to the terms on which the Un- derwriters extended the offer, including the reservation of rights. Certain Interested Underwriters at Lloyd’s, London v. Halikoytakis, 556 Fed. Appx. 932 (11th Cir. 2014).
Conflicts of Interest and Independent Counsel
Florida does not require that the insurer provide indepen- dent counsel as recognized by California in Cumis. How- ever, Florida addresses the conflict issue in Florida Statute
§ 627.426 (“Claims Administration”), which provides that mutually agreeable counsel must be provided under certain circumstances.
The statute provides that a liability insurer shall not be permitted to deny coverage based on a particular coverage defense unless:
(a) within 30 days after the liability insurer knew or should have known of the coverage defense, written notice of reservation of rights to assert a coverage is given to the named insured by registered or certified mail sent to the last known address of the insured or by hand delivery; AND
(b) within 60 days of compliance with paragraph (a) or receipt of a summons and complaint naming the in- sured as a defendant, whichever is later, but in no case later than 30 days before trial, the insurer:
(1) gives written notice to the named insured by registered or certified mail of its refusal to defend the insured;
(2) obtains from the insured a nonwaiver agree- ment following full disclosure of the specific facts and policy provisions upon which the coverage defense is asserted and the duties, obligations, and liabilities of the insurer during and following the pendency of the subject litigation; OR
(3) retains independent counsel which is mutually agreeable to the parties. Reasonable fees for the
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