A Florida appellate court recently held that an insurer could not assert a defense to a claim for coverage when it failed to comply with the Florida Claims Administration Statute. GEICO Gen. Ins. Co. v. Mukamal, 2017 WL 3611593 (Fla. 3d DCA Aug. 23, 2017).
The underlying plaintiffs sued a putative insured for the wrongful death of their son resulting from an automobile accident. The insurer defended reserving rights because the putative insured was not listed as a driver under the insurance policy. While the insurer was defending the underlying lawsuit, the putative insured absconded. The insurer issued several other reservation of rights letters based upon the putative insured’s failure to cooperate. The insurer continued to defend the putative insured for years throughout the underlying lawsuit. After a final judgment was entered against the putative insured, the insurer sought to deny coverage based on the putative insured’s breach of cooperation. The underlying plaintiffs and the court-appointed receiver for the putative insured sued the insurer for bad faith and for a declaration of coverage. The trial court granted summary judgment on the coverage issues in favor of the underlying plaintiffs and court-appointed receiver, finding the insurer could not deny coverage as a matter of law due to its failure to comply with the Florida Claims Administration Statute. The insurer appealed.
The appellate court affirmed, finding that the insurer was precluded as a matter of law from denying coverage due to its failure to comply with the requirements of the Claims Administration Statute. The appellate court analyzed the three options available to the insurer under the statute after properly reserving its rights to deny coverage based upon a particular coverage defense: 1) refuse to defend the insured; 2) obtain a non-waiver agreement from the insured; or 3) retain independent, mutually agreeable counsel to represent the insured. Applying the plain and unambiguous language of the Florida Claims Administration Statute, the appellate court found that the insurer failed to comply with all three, thereby precluding the insurer’s ability to assert the breach of cooperation coverage defense.
The concurring opinion acknowledged that the options under the statute left the insurer open to potential bad faith given the putative insured’s abscondment and the inability to obtain his agreement to a non-waiver agreement, which appeared contrary to the intent of the statute to protect both the insured and insurer. The concurring opinion invited the Florida Legislature to review and to amend the statute to reflect the legislative intent.