Many insurance claims disputes involve multiple levels of litigation, especially liability actions. These claims often involve an injury victim taking on an individual or company accused of causing the accident along with attendant litigation between the insurance company and the policyholder. The sequence in which these actions are litigated can have a substantial impact on the outcome. If the underlying tort action results in a defense verdict or a substantial judgement of liability, this outcome will certainly impact the approach of the defendant and insurer in the coverage dispute. Similarly, evidence obtained during litigation regarding the personal injury case might also impact the question of coverage.
A recent Florida 4th DCA decision considered a request by an insured to have a coverage action stayed until an underlying tort claim was decided. In Homeowners Property & Casualty Insurance Co., Inc. v. Margaret, Lake Point, the plaintiff in an underlying tort action, filed a tort action against Margaret for allegedly making false statements to other parties. The false claims allegedly induced those parties to void contracts with Lake Point.
The insurer initially provided a defense to Margaret under a reservation of rights before determining it had no legal duty to defend or indemnify the insured. The insurer contended that the policy did not cover the underlying torts because the claims were based on intentional acts. Therefore, Lake Point did not assert injuries or property damage caused by an “occurrence” that triggered coverage under the homeowner’s policy according to the insurer. Margaret responded in the coverage action based on waiver, estoppel, and other affirmative defenses.
The insurer filed a notice of deposition of Margaret in the coverage dispute. In response, Margaret moved to abate the coverage dispute until after resolution of the underlying tort action. She contended that litigation of the coverage claim would prejudice her defense in the tort lawsuit. According to the insured, Lake Point was a party in both cases, so discovery in the claims action could force her to reveal her defense strategy for the tort lawsuit.
While the trial court ruled in favor of the insured and abated the coverage dispute while staying the discovery process, the appellate court reversed. The judges applied a three-prong test adopted by the Florida Supreme Court for determining whether to stay a coverage dispute until resolution of an underlying tort lawsuit. The court identified the following three factors:
- Whether the two actions were mutually exclusive;
- Whether allowing the coverage dispute to be resolved first will promote settlement and reduce the risk of collusion between the insured and tort plaintiff to create coverage when none exists; and
- Whether the insured has independent resources to pay a judgment if there is no coverage.
The appellate court noted that the trial court failed to apply this three-prong test. With regard to the first prong of the test, the claims were mutually exclusive. The defenses of estoppel and waiver asserted in the coverage case had no bearing on the underlying tort action. Under the second factor, a finding regarding the insurer’s duty to indemnify the insured would promote settlement of the tort claim. A ruling in the coverage action would also discourage collusion by preventing the plaintiff from reframing its intentional tort claims into claims covered under the policy.
While the court did not specifically apply the third element, the court noted that the insured also had failed to establish prejudice to the insured’s defenses in the tort lawsuit. The insurer had agreed not to seek information or material protected by attorney-client privilege in the coverage case. The court indicated any other risk of prejudice could be averted by the insured raising objections in the coverage action to discovery requests that would involve disclosure of defense tactics in the tort lawsuit.
Because these types of technical or procedural issues can have a profound impact on the outcome of an insurance claims dispute, policyholders whose claims are denied should seek prompt legal advice. Our Miami-Dade County insurance claims law firm invites you to contact us if you are having difficulties with your insurance company. Florida insurance claims lawyer J.P. Gonzalez-Sirgo handles claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.