The U.S. Eleventh Circuit Court of Appeals, applying Georgia law, held that an insurer was not estopped from asserting its coverage position because the insurer’s reservation of rights letters with respect to four underlying state court cases adequately reserved its rights before the insured undertook the insured’s defense. North American Specialty Ins. Co. v. Bull River Marina, LLC, et al., 2017 WL 4279211 (11th Cir. Sept. 27, 2017).

The insurer issued a CGL policy and a marina operators policy. It agreed to defend the insured in a suit and issued a reservation of rights letter which mentioned only the CGL policy. The insurer issued a second reservation of rights letter explaining the insurer’s position that neither policy applied but stating that it would continue to defend under a reservation of rights under both. After three other suits were filed, the insurer issued two more reservation of rights letters explaining its coverage position under both policies. The insurer filed this declaratory judgment action and moved for summary judgment arguing that neither policy required it to defend or indemnify the insured in the four underlying state cases. The underlying plaintiffs filed a cross-motion for summary judgment arguing, among other things, that the insurer was estopped from asserting its coverage defenses because it undertook the defense of the insured without adequately reserving it rights. The trial court partially granted the insurer’s motion, holding that the insurer did not have a duty to defend or indemnify any of the cases under the CGL policy, but held that the insurer was estopped from denying coverage under the marina operators policy. The insurer and underlying plaintiffs appealed.

The Eleventh Circuit affirmed the partial summary judgment for the insurer but reversed the partial summary judgment for the underlying plaintiffs. It explained that the first reservation of rights letter assumed the insured’s defense under only the CGL policy, and that estoppel did not apply to the marina operators policy because the insurer did not initially assume a defense under that policy. The Eleventh Circuit also rejected the contention that estoppel applied based on the insurer denying coverage under the marina operators policy on one ground while reserving the right to assert other defenses under that policy.