An Insurance Carrier’s Duty to Defend Under Florida Law

The duty to defend based on an insurance policy under Florida law is very straightforward.  Florida applies a test that the duty to defend is determined strictly by the allegations in the complaint as compared to the insurance policy. See Higgins v. State Farm Fire & Cas. Co., 894 So.2d 5, 9-10 (Fla. 2004). An insurer must defend only when the complaint includes allegations that “fairly and potentially” bring the transaction within the coverage provisions of the policy. Trizec Properties, Inc. v. Biltmore Constr. Co., 767 F.2d 810, 811 (11th Cir. 1985). When an exclusion in the policy applies, there is no duty to defend.  Acceptance Ins. Co. v. Bates, Dunning & Assocs., Inc., 858 So.2d 1068, 1069 (Fla. 3d DCA 2003). 

What does the “duty to defend” mean?  Essentially, it means that if an insured party is sued, the insurance carrier will “defend” it against the lawsuit.  In other words, they will hire and pay for an attorney to defend the insured.  When an insurance company hires an attorney to defend the insured party, the hired attorney finds himself in sort of a dual role.  On the one hand, the attorney represents the insured party as that is his client.  On the other hand, the insurance company is paying the attorney’s fees.  So, although the attorney must zealously represent the interest of his client (the insured party), he must also report to the insurance carrier and let them know how the case is going.

This dual role is usually not a cause for concern because both the insured party and the insurance company want the same thing: for the insured party to get out of the lawsuit with as little damage as possible.  If there are coverage issues, this may become a little more complicated.   But still, even with coverage issues the insurance carrier and the insured both still have aligned interest when it comes to getting the insured out of the lawsuit unscathed.  For more on the role of the attorney when an insurance company is defending under a reservation of rights, check out The Dance of the Porcupines, by Andy Grigsby.  (It’s linked at the bottom under “Download PDF.”)

Insureds Are Not Entitled to Mutually Agreeable Defense Counsel in Florida

Often times attorneys become confused when reading Florida Statute Section 627.426(2), and think that insureds are entitled to mutually agreeable defense counsel when an insurer agrees to defend under a reservation of rights.  That is generally not the case.  Section 627.426(2) applies to “coverage defenses” which include such things as late notice or other “defenses” to otherwise legitimate coverage.  The exclusions and exceptions to coverage that insurers usually reserve their rights on are not considered “coverage defenses” and are not governed by this statute.  An insurer in Florida is permitted to unilaterally select defense counsel for its insured.  For more explanation, see Travelers Indem. Co. of Ill. v. Royal Oak Enterprises, Inc., 429 F. Supp. 2d 1265 (M.D. Fla. 2004). 

Contrary to Royal Oak’s assertion, this statute does not create a duty to provide mutually agreeable counsel. First, the statute is implicated only when the insurer raises a “coverage defense,” defined by the Florida Supreme Court as “a defense to coverage that otherwise exists.” So defined, a “coverage defense” does not include a disclaimer of liability based on an express coverage exclusion in the policy.²³ Second, the only penalty for noncompliance provided for in the statute is that the insurer is precluded from denying coverage “based on a particular coverage defense.” It does not provide that the insurer’s failure to obtain mutually agreeable counsel in the event of a coverage dispute entitles the insured to recover the fees and costs of its separately retained counsel. Accordingly, § 627.426(2) cannot serve as a basis for imposing a duty on Travelers to obtain mutually agreeable counsel for Royal Oak.

Travelers Indem. Co. of Ill. v. Royal Oak Enterprises, Inc., 429 F. Supp. 2d 1265, 1272 (M.D. Fla. 2004)