John David Dickenson and Chad Pasternack | Cozen O’Connor | June 20, 2019
The Florida Legislature recently created a right of contribution among liability insurers for defense costs. Prior to the enactment of this legislation, it was long the law in Florida that there was no right to contribution among co-primary insurers. Without a right of contribution, some insurers were incentivized to delay accepting the defense of their policyholders in the hope that another insurer will foot the bill. By creating this right of contribution for liability insurers, the Florida Legislature took a positive step forward in protecting policyholders and leveled the playing field for insurers that play by the rules.
This right of contribution in Florida is of particular significance because of Florida’s construction industry and the accompanying wealth of construction defect litigation. In construction defect litigation and lawsuits involving progressive injuries, there are often difficult questions of which insurance policies are triggered and when.1 In Carithers v. Mid-Continent Cas. Co., the Eleventh Circuit applied an injury-in-fact trigger to a construction defect claim. Applying the injury-in-fact trigger, “the only inquiry is when the property was damaged,” regardless of “when the damage is discovered or discoverable.”2
The seminal case on contribution in Florida, Argonaut Ins. Co. v. Maryland Cas. Co.,3 explained:
If an insurance company refuses to defend or provide contractual coverage to its insured, then it may expose its policy limits to a third party and faces a breach of contract suit with other statutory remedies (e. g., Section 627.421(1), Florida Statutes) [b]y the insured. An insured is adequately protected when its insurer breaches its contract. Further, third parties are protected for required liability coverage by public policy pursuant to established law. All necessary remedies and protection to the proper parties are available to enforce all necessary rights. …
The Legislature has not seen fit to allow contribution for costs or attorney’s fees between insurance companies. If contribution for costs were allowed between insurance companies, there would be multiple claims and law suits. The insurance companies would have no incentive to settle and protect the interest of the insured, since another law suit would be forthcoming to resolve the coverage dispute between the insurance companies. This is contrary to public policy, particularly since the insured has been afforded legal protection and has not had to personally pay any attorney’s fees.
The Florida Legislature listened to Argonaut’s suggestion, and passed H.B. 301. The law creates Florida Statutes Section 624.1055, which provides, in part:
624.1055 Right of contribution among liability insurers for defense costs. — A liability insurer who owes a duty to defend an insured and who defends the insured against a claim, suit, or other action has a right of contribution for defense costs against any other liability insurer who owes a duty to defend the insured against the same claim, suit, or other action, provided that contribution may not be sought from any liability insurer for defense costs that are incurred before the liability insurer’s receipt of notice of the claim, suit, or other action.
Section 624.1055 provides that, if multiple liability insurers have a duty to defend an insured, the insurer(s) that defends the insured is entitled to contribution of defense costs from the insurer(s) that fail to defend the insured. Contribution may only be sought for defense costs incurred after the insurer is given notice of the claim or suit — the focus of the law is insurers that neglect their contractual obligations, and not insurers that may provide coverage but are unaware of the claim or lawsuit.
Not only is Section 624.1055 a substantial change in longstanding law, the statute is wide-reaching:
(4) APPLICABILITY. — This section applies to liability insurance policies issued for delivery in this state, or liability insurance policies under which an insurer has a duty to defend an insured against claims asserted or suits or actions filed in this state. Such liability insurance policies include surplus lines insurance policies authorized under the Surplus Lines Law, ss. 626.913-626.937.
The right to contribution exists regardless of whether an insurance policy was delivered in Florida or the policy otherwise has a connection to the state. Section 624.1055 applies where liability insurers, including surplus lines insurers, have a duty to defend an insured in Florida. Therefore, foreign insurers that fail to defend their insureds in Florida can be subject to a contribution action. By creating Section 624.1055, Florida took bold action to protect not only its own residents, but any person or organization who may be forced to defend a lawsuit in the state.
To enforce contribution rights, Section 624.1055 creates a right of an insurer to “file an action for contribution in a court of competent jurisdiction.”4 Section 624.1055 applies to any claim, suit, or other action initiated on or after January 1, 2020. Section 624.1055 does not, however, apply to motor vehicle liability insurance or medical professional liability insurance.5
Section 624.1055 is another in a series of insurance reforms recently passed by the Florida Legislature and signed by Governor DeSantis.6 In situations where more than one liability insurer has a duty to defend an insured in Florida, Florida law now discourages insurers from playing the “waiting game” and neglecting their contractual obligations in the hope that another insurer will defend and relieve them of the expense. For insurers that defend their policyholders in these circumstances, there is now a reasonable mechanism to recover those costs that should have been borne by another insurer.
1 See, e.g., Carithers v. Mid-Continent Cas. Co., 782 F.3d 1240 (11th Cir. 2015).
2 Id. at 1247.
3 Argonaut Ins. Co. v. Md. Cas. Co., 373 So. 2d 960, 964 (Fla. 3d DCA 1979).
4 Fla. Stat. § 624.1055(2).
5 Fla. Stat. § 624.1055(5).
6 See, e.g., John David Dickenson & Chad A. Pasternack, Florida’s “Assignment of Benefits” Bill: A Guide Through the New Statutory Framework.