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What Is The Time for Responding to a Defense Tender?

The insurer has 14 days to acknowledge the receipt of a claim notice, Fla. Admin. Code Ann. r. 4-166.024(1) and must begin its investigation within 10 days of receipt of proof of loss.  Fla. Admin. Code Ann. r. 4-166.024(3.)

The insurer has 30 days to issue a reservation of rights after it knows or should have known of coverage defenses.  Fla. Stat. § 627.426(2).

Does Reserving Rights Create a Conflict of Interest? 

Absent some evidence to suggest that the potential conflict between the insurer and the insured actually affected counsel’s representation so it could be said that counsel elevated the interests of the insurer over the client, there is no presumption of a conflict of interest in a reservation of rights. Travelers Indem. Co. of Illinois v. Royal Oak Enterprises, Inc., 344 F.Supp. 2d 1358, 1374 (M.D. Fla. 2004) (applying Florida law).

Insured is not entitled to reimbursement of the costs of its independent counsel unless it can prove that the potential conflict of interest actually affected the representation, i.e., elevating the interests of the insurer over those of the insured. Travelers Indem. Co. of Illinois v. Royal Oak Enterprises, Inc., 344 F.Supp. 2d 1358, 1376 (M.D. Fla. 2004)(applying Florida law).

Does a Reservation of Rights Create Additional Duties?

None found.

What Must Be Done If A Conflict of Interest Exists?

When an insurer asserts a coverage defense and the insured rejects the reservation of rights defense or refuses to enter into a nonwaiver agreement, the insurer must provide “mutually agreeable” independent counsel to defend the insured.  Fla Stat. § 627.426(2).

Who Is Responsible for Fees of Independent Counsel?

If an insurer offers to defend under a reservation of rights, the insured may, at its election, reject the defense and retain its own attorneys without jeopardizing its right to seek indemnification from the insurer for liability and defense costs.  Taylor v. Safeco Ins. Co., 361 So.2d 743, 745 (Fla. 1st DCA 1978).

What Are Independent Counsel’s Obligations?

None found.

What Settlement Duties Exist?

Insurer must act in good faith and be diligent in its efforts to negotiate settlement in action by third party against insured.  Anna Rue Camp v. St. Paul Fire & Marine Ins. Co., 616 So.2d 12, 14 (Fla. 1993). 

What Actions May Result in a Claim for Bad Faith?

Insurer’s failure to settle third party claim against insured in good faith is actionable under common law.  Anna Rue Camp v. St. Paul Fire & Marine Ins. Co., 616 So.2d 12, 14  (Fla. 1993). 

By statute, unfair claim settlement practices may include: (1) not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests; (2) Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made; or (3) Except as to liability coverages, failing to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.  Fla Stat. § 624.155(b).

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

Attorney’s fees may be awarded in favor of insured against insurer where insured successfully obtains judgment on the policy.  Fla. Stat. § 627.428(1).

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

Yes.  When insurer fails to make payments as a general business practice constituting willful, wanton, malicious and reckless disregard, punitive damages may be sustained when no compensatory damages are alleged.  Scott. v. Progressive, 932 S.2d 475. 479 (Fla. 4th DCA 2006).  Punitive Damages may be awarded under certain circumstances under statutory actions. Fla. Stat. § 624.155(5).

Alternative Coverage Options

An insurer may use declaratory judgment action to determine its duty to defend, indemnify, and all other coverage issues including facts, which would otherwise be resolved in the underlying tort action.  Higgins v. State Farm Fire and Cas. Co., 894 So.2d 5, 9 (Fla. 2004).

Relevant Statutes

Declaratory Judgment – Fla. Stat. § 86.011. 

Provided for under Fla. Stat. Ch. 86.011, which states in relevant part; “[t]he circuit and county courts have jurisdiction within their respective jurisdictional amounts to declare rights, status, and other equitable or legal relations whether or not further relief is or could be claimed. No action or procedure is open to objection on the ground that a declaratory judgment is demanded. The court’s declaration may be either affirmative or negative in form and effect and such declaration has the force and effect of a final judgment. The court may render declaratory judgments on the existence, or nonexistence: (1)  Of any immunity, power, privilege, or right; or (2)  Of any fact upon which the existence or nonexistence of such immunity, power, privilege, or right does or may depend, whether such immunity, power, privilege, or right now exists or will arise in the future. Any person seeking a declaratory judgment may also demand additional, alternative, coercive, subsequent, or supplemental relief in the same action. 

Unfair Claims Settlement Statute – Fla. Stat. § 627.426

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