In a recent decision, a Florida appellate court found that an insured was not entitled to statutory legal fees against its insurer where the insurer defended the insured under a reservation of rights before bringing a declaratory judgment action concerning coverage. Ufer v. State Auto Inc. Co., No. 4D06-1407 (Fla. 4th DCA, July 11, 2007).

Under Section 627.428, Florida Statutes, an insured that is a prevailing party in an action arising under an insurance contract is entitled to attorneys’ fees:

(1) Upon the rendition of a judgment or decree by any of the courts of this state against
an insurer and in favor of any named or omnibus insured or the named beneficiary
under a policy or contract executed by the insurer, the trial court or, in the event of an
appeal in which the insured or beneficiary prevails, the appellate court shall adjudge
or decree against the insurer and in favor of the insured or beneficiary a reasonable
sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the
suit in which the recovery is had.

In Ufer, the insured won summary judgment in the underlying wrongful death suit by arguing that the decedent was an employee of the insured (rather than a business invitee) and, therefore, his estate’s lawsuit was barred by the worker’s compensation statute. In the declaratory judgment action, the insurer similarly argued that it had no duty to indemnify because the decedent was the insured’s employee and, therefore, the underlying claim was not covered under the insured’s general liability and umbrella policies. The insured counterclaimed, seeking a declaration that it was entitled to both indemnity and a defense.

The court found: (1) the insurer prevailed on indemnity because "[t]he insured's winning argument against the plaintiff [in the underlying action] automatically rendered it the losing party" against the insurer; and (2) the insured's request for a declaration as to the insurer's duty to defend was unnecessary because the insurer had already agreed to defend under a reservation of rights and had conceded that count from the start; thus, it could not serve as a basis for attorney's fees.

The decision can be found here.