LIABILITY INSURER PRECLUDED FROM INTERVENING IN INSURED’S LAWSUIT

shutterstock_368505233There are cases where I honestly do no fully understand the insurer’s position because it cannot have its cake and eat it too.  The recent opinion in Houston Specialty Insurance Company v. Vaughn, 43 Fla. L. Weekly D1828a (Fla. 2d DCA 2018) is one of those cases because on one hand it tried hard to disclaim coverage and on the other hand tried to intervene in the underlying suit where it was not a named party.

 

This case dealt with a personal injury dispute where a laborer for a pressure washing company fell off of a roof and became a paraplegic.  The injured person sued the pressure washing company and its representatives.  The company and representatives tendered the case to its general liability insurer and the insurer–although it provided a defense under a reservation of rights—filed a separate action for declaratory relief based on an exclusion in the general liability policy that excluded coverage for the pressure washing company’s employees (because the general liability policy is not a workers compensation policy).   This is known as the employer’s liability exclusion that excludes coverage for bodily injury to an employee.  The insurer’s declaratory relief action sought a declaration that there was no coverage because the injured laborer was an employee of the pressure washing company.  The pressure washing company claimed he was an independent contractor, in which the policy did provide limited coverage pursuant to an endorsement.

 

The insurer also moved to intervene in the underlying action for the purpose of getting special interrogatories on the verdict form relative to the injured plaintiff’s employment status.  The pressure washing company objected because they did NOT want to inflate the damages by having the jury learn that insurance was involved, thereby prejudicing it, particularly if it was determined that there was no insurance coverage.  You cannot blame the insured in this instance, particularly because the injured plaintiff was probably all for having the insurer intervene so that the jury learned about the insured’s insurance. 

 

While the trial court granted the motion to intervene, after a number of events occurred (not discussed here), the trial court ultimately dismissed the intervention. The insurer appealed.

 

The appellate court affirmed the denial / dismissal of the insurer’s intervention in the underlying action.  The bottom line is that the insurer was not sued in the underlying action. It could not be sued by the injured plaintiff based on Florida’s non-joinder statute (Florida Statute 627.4136) that would prevent the injured plaintiff from suing the liability insurer directly until it gets a judgment against the insured.  Thus, the insurer had no direct and immediate interest in the dispute. Any judgment entered in the case would not be against the insurer—it would be entered against its insured.  Further, if the insured obtained a judgment and then sued the insurer, the insurer would not be deprived of appropriate legal defenses. 

 

As the appellate court explained, the insurer’s argument, if accepted, would be to eviscerate Florida’s non-joinder statute:

 

If the possibility of owing up to the policy limits based upon entry of an adverse judgment [against an insured] was itself a sufficient basis to allow intervention, insurers would be permitted the unhindered and unfettered opportunity to intervene in innumerable tort cases. That is exactly what Houston [insurer] wants; it seeks to interject itself directly into Mr. Vaughn’s [injured plaintiff’s] tort lawsuit. We cannot countenance such a result in light of the legislature’s intent [in Florida’s non-joinder statute] to prevent the introduction of such prejudicial information from being introduced to the jury.  After all, courts must continually be concerned that insurance coverage not be introduced to the jury because of its potential to adversely impact the issues of liability and damages. 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

COMPETING EXPERT WITNESSES IN AN INSURANCE COVERAGE DISPUTE

shutterstock_363608708Oftentimes, insurance coverage disputes involve competing expert witnesses.  The experts render different expert opinions regarding a topic that goes to coverage and/or damages.  An example of competing expert witnesses can be found in the recent property insurance coverage dispute, Garcia v. First Community Ins. Co., 43 Fla.L.Weekly D671a (Fla. 3d DCA 2018). 

 

In this case, an insured submitted a claim under her homeowner’s policy for water damage due to a roof leak.  She claimed her damage was approximately $23,000.  The insurer denied coverage and an insurance coverage dispute ensued.

 

The insured’s policy, akin to many homeowner’s policies, contained exclusions for loss caused by:

 

h. Rain, snow, sleet, sand or dust to the interior of a building unless a covered peril first damages the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening.

 ***

i. (1) Wear and tear, marring, deterioration;

 

The insurer sent an engineer to inspect the insured’s property and the engineer (expert) opined that the water intrusion was not covered under the policy based on the aforementioned exclusions.  Her opinion was that the water intrusion through the roof was the result of deterioration from age, tree branch abrasions, and construction defects based on how nails were installed into the shingles.  Based on this opinion, the insurer was denying coverage based on the (i) wear and tear, marring and deterioration exclusion and (ii) rain intruded through the roof based on a peril (construction defect) that was not covered under the policy.

 

The insured, as expected, had a competing expert that opined that a hail impact or high wind uplift (covered peril) in the days leading up to the rain event caused water to intrude through the roof and cause interior damage.   Under this opinion, the insured was presenting an expert opinion for coverage and why the insurer’s exclusions were inapplicable.

 

In this case, surprisingly, the trial court granted summary judgment in favor of the insurer.  However, this was reversed on appeal because the competing opinions as to coverage and the cause of the insured’s loss created a genuine issue of material fact.  Summary judgment cannot be granted if there are genuine issues of material fact.  See Garcia, supra, (“Given this conflict in the material evidence as to the cause of the loss, the trial court erred in entering final judgment in favor of First Community [insurer].”).

 

Another argument the insurer raised was that its engineer inspected the property within months after the date of loss whereas the insured’s expert is basing an opinion on an inspection that occurred three years after the fact.   This fact, albeit true, does not create a genuine issue of material fact.  Rather, it goes to the credibility of the experts at trial.  Which expert is more credible regarding the cause of the loss:  the insurer’s expert that inspected the property a few months after the loss or the insured’s expert that inspected the property years after the loss.  Well, the issue of credibility and how a jury / trier of fact weighs this in consideration of other evidence is not appropriate in determining a motion for summary judgment. See Garcia, supra.

 

Experts are an important part of construction disputes including insurance coverage disputes and it is not uncommon for there to be competing expert opinions as to the cause of a loss, a defect, and, of course, damages.   

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

ILLUSORY INSURANCE COVERAGE: REAL OR UNREAL?

shutterstock_585394823In insurance coverage declaratory relief actions, there are times an insured will argue that the insurance policy coverage is illusory.  Typically, an insured will raise this illusory argument if its insurer is denying coverage based on an exclusion or limitation in the policy.  If a court agrees and deems the coverage illusory, the court will construe the policy to afford coverage to the insured.  This is the obvious value of the argument: coverage!

 

A policy is illusory only if there is an internal contradiction that completely negates the coverage it expresses to provide.”  The Warwick Corp. v. Turetsky, 42 Fla.L.Weekly D1797a (Fla. 4th DCA 2017).    Thus, if a policy grants coverage in one section but then excludes the same coverage in another section, the coverage would be deemed illusory.  Id. quoting Tire Kingdom, Inc. v. First S. Ins. Co., 573 So.2d 885, 887 (Fla. 3d DCA 1990).  An illusory policy was found in the following examples: (a) a policy covered certain intentional torts but then excluded intended acts; (b) a policy covered advertising injury but elsewhere excluded advertising injury; and (c) a policy covered parasailing but excluded watercrafts.  Id. (citations omitted). In all examples, coverage in the policy was completely swallowed up by an exclusion rendering the coverage illusory.  Stated differently, coverage was completely contradicted by an exclusion in the policy rendering the policy absurd.

 

However, if an exclusion or limitation in the policy does not entirely swallow up the coverage, the policy is not illusory.  The Warwick Corp., supra.  For example, if a policy covers advertising injury but excludes advertising injury caused by a violation of law, the coverage is not illusory.   The exclusion does not completely swallow up the coverage as it only excludes advertising injury cased by a violation of law.  Id. (citation omitted). 

 

In The Warwick Corp., the insured argued that the excess commercial property insurance policy that covered four hotels was illusory because its coverage was limited to the value of the hotel, which equaled the amount payable under the primary property insurance policy.  Although the court acknowledged that it would be very rare that the excess policy would ever be triggered for one of the hotels, it held that the policy was not illusory because the limitation did not completely swallow up the coverage (as there was an unlikely circumstance that could trigger coverage for the hotel).  Additionally, the court noted that the insured was a sophisticated entity that paid a minimum premium for minimum coverage under the excess policy for the hotel, meaning it elected to buy the policy and coverage it bought which is a choice it cannot change after-the-fact.

 

As you know from reading my prior posts, insurance coverage is important so make sure you know what risks are covered and what risks are not for your business interests.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

 

AMBIGUITY IN INSURANCE POLICY WILL BE INTERPRETED IN FAVOR OF INSURANCE COVERAGE

shutterstock_389538880An ambiguity in an insurance policy–after reading and interpreting the policy as a whole–will be construed against an insurerThis means an ambiguity will be construed in favor of insurance coverage (for the benefit of the insured) as opposed to against insurance coverage.  This does not mean that every insurance policy contains an ambiguity.  This also does not mean a court will interpret plain and ordinary words contrary to their conventional meaning or definition.  But, as we all know, insurance policies are not the easiest of documents to decipher and ambiguities do exist relating to a particular issue or circumstance to the benefit of an insured.  An insured that is dealing with specific insurance coverage issues should make sure they are working with counsel that looks to maximize insurance coverage, even if that means exploring ambiguities that will benefit an insured based on a particular issue or circumstance.

 

An example of an ambiguity in an insurance policy relating to a particular issue that benefitted an insured can be found in the Florida Supreme Court decision of Government Employees Insurance Co. v. Macedo, 42 Fla. L. Weekly S731a (Fla. 2017).  This case involved an automobile accident and the interpretation of an automobile liability policy. 

 

In this case, after an accident, a plaintiff sued the defendant that caused the accident. The defendant’s insurer GEICO provided a defense in accordance with the defendant’s automobile liability policy.  During the litigation, the plaintiff served a proposal for settlement for $50,000, which is a procedural vehicle to create the argument for attorney’s fees if the defendant does not accept the proposal.  The defendant—again, being defended by its insurer GEICO—did not accept the proposal.  The case proceeded to trial and the plaintiff obtained a jury verdict of approximately $243,000.  This meant the plaintiff had a basis to recover attorney’s fees since the defendant did not accept the proposal for settlement.   The plaintiff moved to bind GEICO to a judgment, and the underlying issue was whether the defendant’s insurer GEICO was liable under the policy for attorney’s fees.  If GEICO was not liable, then that meant the defendant was individually liable for the plaintiff’s incurred attorney’s fees. 

 

This is a significant issue because by the defendant’s counsel not accepting the proposal for settlement, the defendant, individually, was exposed to substantial attorney’s fees incurred by the plaintiff.   The defendant’s counsel was hired by GEICO and GEICO controlled any settlement of the case and the defendant was required to cooperate with GEICO.

 

The applicable language of the insurance policy as relied upon by the Florida Supreme Court was as follows:

 

ADDITIONAL PAYMENTS WE WILL MAKE UNDER THE LIABILITY COVERAGES

1. All investigative and legal costs incurred by us.

. . . .

4. We will upon request by an insured, provide reimbursement for the following items:

. . . .

(c) All reasonable costs incurred by an insured at our request.

. . . .

Additionally, the index of the policy lists “Legal Expenses And Court Costs” as items that are covered under the Additional Payments section.

 

The Florida Supreme Court, interpreting the policy as a whole, found this language to be ambiguous relating to the insurer’s obligation to cover attorney’s fees incurred by the plaintiff due to GEICO’s defense counsel not accepting the proposal for settlement.  This ambiguity was a big “W” for both the defendant-insured and the plaintiff because it meant that GEICO was liable for the plaintiff’s attorney’s fees.

 

First, the Court explained that the terms “Legal Expenses” and “Court Courts” signify that legal expenses in addition to court costs would be covered under the policy; otherwise, there would have been no reason to separately include the language “Legal Expenses” in the index of the policy.

 

Second, the Court explained that there are numerous reasonable interpretations that attorney’s fees are encompassed by the terms “costs” and expenses” as used in the policy. 

 

And, third, the Court explained that the legal expenses (attorney’s fees) incurred by the insured were the product of GEICO electing not to accept the proposal for settlement, and thus, were incurred by the defendant-insured at GEICO’s direct request.  GEICO had complete discretion under the policy to settle the case with the insured being required to cooperate with its insurer.   “It follows that any cost or fee incurred as a result of GEICO exercising its authority and control is something that it intended to pay.”  See Macedo, supra

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.