In Florida, the Claims Administration Act (Fla. Stat. § 627.426) may be the bane of an insurer’s existence. It provides:
A liability insurer shall not be permitted to deny coverage based on a particular coverage defense unless:
(a) Within 30 days after the liability insurer knew or should have known of the coverage defense, written notice of reservation of rights to assert a coverage defense is given to the named
insured by registered mail or certified mail sent to the last known address of the insured or by hand delivery; and
(b) Within 60 days of compliance with paragraph (a) or receipt of a summons and complaint naming the insured as a defendant, whichever is later, but in no case later than 30 days before
trial, the insurer:
1. Gives written notice to the named insured by registered or certified mail of its refusal to defend the insured;
2. Obtains from the insured a nonwaiver agreement following full disclosure of the specific facts and policy provisions upon which the coverage defense is asserted and the duties, obligations, and liabilities of the insurer during and following the pendency of the subject litigation; or
3. Retains independent counsel which is mutually agreeable to the parties. Reasonable fees for the counsel may be agreed upon between the parties or, if no agreement is reached, shall be set by the court.
In this context, a “coverage defense” means a condition in the policy such as late notice, cooperation, etc. See, Sharp General Contractors, Inc. v. Mt. Hawley Ins. Co., 604 F.Supp.2d 1360 (USDC SD FL 2009); Mid-Continent Cas. Co. v. King, 552 F.Supp.2d 1309 (USDC ND FL 2008); Lazzara Oil Co. v. Columbia Cas. Co., 683 F.Supp. 777 (USDC M.D. FL 1988).
Many insureds and additional insureds use the Claims Administration Act as a “gottcha” in the event a reservation of rights or denial letter goes out even one day later than the statutory time frame. Because strict compliance is required, they allege that even a one day delay waives all coverage defenses.
In a case of first impression, Judge Blazs held that:
[T]he specific language of Section 627.426(2), Florida Statutes, requires the provision of a written notice of reservation of rights to a “named insured” to preserve a coverage defense. . . . . There is no requirement to give such notice to an additional insured. There is no material issue of disputed fact and FCCI did not wave (sic) its notice defense by failing to provide written Notice of Reservation of Rights.”
Pulte Home Corporation v. Alpha Insulation & Water Proofing Company, et.al. Circuit Court of the Fourth Judicial District, Case # 16-2014-CA-004911-:XXXX (1/18//18).
Essentially, Claims Administration Act means what it says when it limits the insurer’s duties to a “named insured” and insurers have no obligation to send reservation of rights or denial letters to additional insureds. Obviously, even though not required, the response to any additional insured tender may be a “best practices” issue, but the failure to respond won’t be a waiver or estoppel issue under Florida’s Claims Administration Act.
For more information, contact Robert Darroch, (941) 806-2980 or rdarroch@gm-llp.com.
