What You Need To Know About Recent Changes To Florida Property Insurance Law Affecting Admitted And Surplus Lines Insurers

William B. Collum | Butler Weihmuller Katz Craig

Having been called back to the capitol by Florida’s governor for a special session to address issues within the property insurance market, the Florida Legislature passed two property insurance bills, SB 2-D and SB 4-D, both of which were signed by the Governor on May 26, 2022. SB 2-D and SB 4-D have provisions that affect both admitted carriers and surplus lines carriers. The key provisions of these bills addressed in this article became effective upon the Governor’s approval of the bills on May 26, 2022.

In addition to these recent legislative changes, the Florida Supreme Court on May 26, 2022 amended Florida Rule of Civil Procedure 1.442 regarding serving proposals for settlement. The rule amendment, effective July 1, 2022, provides that a proposal for settlement must exclude nonmonetary terms, with the exception of dismissal with prejudice and any other nonmonetary terms permitted by statute.

Provisions Relating to Roofs

Roof Deductibles

SB 2-D creates Florida Statute § 627.701(2)(c), permitting a carrier, with the approval of the Florida Office of Insurance Regulation, to offer special deductibles applying only to roof losses. SB 2-D creates Florida Statute § 627.701(4)(e)1 and 2 requiring mandatory language and disclosures on the declarations page for policies that contain deductibles applying only to roof losses.

SB 2-D creates Florida Statute § 627.701(10) addressing the mechanics of a roof deductible applying to losses other than losses from a hurricane. A separate roof deductible is permitted if the insured is given a premium credit or discount for the policy. If the separate roof deductible is offered by the carrier at the time of the initial issuance or renewal of the policy, the insured must sign a form approved by the Florida Office of Insurance Regulation in order to opt-out of the separate roof deductible.

If the separate roof deductible applies, no other deductible can apply. The separate roof deductible may not exceed the lesser of 2% of Coverage A limit or 50% of the cost to replace the roof. The roof deductible can only apply to a Replacement Cost claim and it cannot not apply to

  1. A total loss by a covered peril;
  2. A hurricane loss;
  3. A loss from tree fall or other hazard that damages the roof and punctures the roof deck; or
  4. A roof loss requiring repair that is less than 50% of the roof.

SB 2-D amends Florida Statute § 627.7011(3)(a), providing that, if a separate roof deductible applies, the insurer may limit the claim payment to Actual Cash Value of the roof until the carrier receives reasonable proof of payment of the deductible. Reasonable proof of payment includes a cancelled check, money order receipt, credit card statement, or copy of an installment plan contract or other financing arrangement requiring full payment of the separate roof deductible.


SB 2-D creates Florida Statute § 627.7011(5) applying only to policies issued or renewed on or after July 1, 2022. Florida Statute § 627.7011(5) prohibits carriers from refusing to insure a home with a roof that is less than 15 years old solely because of the age of the roof. If the roof is at least 15 years old, and the carrier requires the replacement of the roof to issue or renew the policy, the homeowner can have a roof inspection paid for by the homeowner. The insurer is prohibited from refusing to issue a policy solely because of the age of the roof if the inspector determines that the roof has 5 or more years of useful life left.

25% Rule under Florida Building Code for Roof Repairs

SB 4-D creates Florida Statute § 553.844(5) to provide that, if the existing roofing system or roof section was built, repaired, or replaced in compliance with the 2007 Florida Building Code or any subsequent editions of the Florida Building Code, then only the repaired, replaced, or recovered portion is required to be constructed in compliance with the current Florida Building Code.

Provisions Relating to Advertising, Assignments of Benefits, and Attorneys’ Fees

Contractor and Public Adjuster Advertisements

SB 2-D amends Florida Statute § 489.147, a statute created in 2021 to address contractor and public adjuster solicitations by prohibiting certain advertisements. Previously, a federal District Court in Gale Force Roofing & Restoration, LLC v. Brown, 548 F. Supp. 3d 1143 (N.D. Fla. 2021), enjoined, through a preliminary injunction, enforcement of certain sections of the statute as an unconstitutional restriction on commercial speech. Although the court has only issued a preliminary injunction, and not a permanent injunction, as the litigation is continuing, the Legislature’s changes to Florida Statute § 489.147 seek to address the court’s issues with the statute’s original definition of a “prohibited advertisement”.

The amendment to Florida Statute § 489.147 requires that a contractor or public adjuster advertisement contain, in at least 12 point font size and no smaller than at least half the font size as the largest font size used in the communication, the following language:

  1. The consumer is responsible for payment of any insurance deductible;
  2. It is insurance fraud punishable as a felony of the third degree for a contractor to knowingly or willfully, and with intent to injure, defraud, or deceive, pay, waive, or rebate all or part of an insurance deductible applicable to payment to the contractor for repairs to a property covered by a property insurance policy; and
  3. It is insurance fraud punishable as a felony of the third degree to intentionally file an insurance claim containing any false, incomplete, or misleading information.

Defining Assignment Agreements

SB 2-D amends Florida Statute § 627.7152(1)(b) to expand the definition of assignment agreements to include any person providing services that include inspecting, protecting, repairing, restoring, or replacing the property or mitigating. A public adjuster fee agreement does not fall within the definition of assignment agreements.

Notices of Intent to Litigate from Assignees of Benefits

SB 2-D modifies Florida Statute § 627.7152(9)(a) to provide that an assignee’s notice of intent to litigate must be served, if by certified mail, to the name and mailing address on the policy forms and, if by electronic delivery, to the email address designated on the policy forms.

Attorneys’ Fees for Suits under Assignment of Benefits Lawsuits

SB 2-D amends Florida Statute § 626.9373 (applying to surplus lines carriers) and § 627.428 (applying to admitted carriers) to provide that, in a lawsuit under a residential or commercial insurance policy, the right to attorneys’ fees may not be transferred to, assigned to, or acquired by any manner by anyone other than a named or omnibus insured or a named beneficiary.

SB 2-D amends Florida Statute § 627.7152(10), removing an assignee’s ability to recover fees under Florida Statute § 627.7152 and limiting the ability of an assignee to obtain fees and costs to Florida Statute § 57.105.

Attorneys’ Fees for Suits from Insureds

SB 2-D amends Florida Statute § 627.70152(8)(b) to allow for awarding attorney’s fees to a carrier if a lawsuit is dismissed for not filing a Notice of Intent to Initiate Litigation as required by statute.

SB 2-D creates Florida Statute § 627.70152(8)(c), providing a strong presumption that the lodestar fee is sufficient and reasonable. This presumption can only be rebutted (for the application of a multiplier) in “rare and exceptional circumstances” with evidence that competent counsel could not be retained in a reasonable manner.

Provisions Relating to Claims Handling and Bad Faith

Claims Handling

SB 2-D amends Florida Statute § 627.70131(3)(b), requiring a physical inspection within 45 days after receipt of a proof of loss, except in claims subject to a hurricane deductible.

SB 2-D creates Florida Statute § 627.70131(3)(d), requiring a carrier to advise, within 7 days after the assignment of an adjuster, a policyholder of the right to request a copy of a detailed estimate generated by the carrier’s adjuster. Upon receiving such a request from a policyholder, the carrier must send the detailed estimate within the later of 7 days after the carrier receives the request or 7 days after the estimate of the amount of loss is completed. A carrier is not required to create a detailed estimate if the estimate is not reasonably necessary as part of the investigation.

SB 2-D amends Florida Statute § 627.70131(7)(a) to require a carrier to provide a written explanation of the basis in the policy in relation to the facts or applicable law, for the payment, denial or partial denial of the claim. It also requires the carrier to provide a written explanation if the payment is less than the detailed estimate.

Bad Faith

SB 2-D creates Florida Statute § 624.1551, requiring that a claimant must establish that a carrier breached the insurance contract in order to prevail in a claim brought for extra-contractual damages under Florida Statute § 624.155(1)(b).

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Tools & Talent: Insurers Need Both in Claims

Richared Vonesh | Property Casualty 360

Striking a balance between tech tools and human skills will require more strategic thinking around claims operations.

When property & casualty insurers peer into the future of claims operations, most envision digital technologies playing a dominant role. Although digital transformation is occurring and necessary in claims departments, there will always be a need for the human touch, especially on more complex losses. Indeed, to be successful in managing claims and enhancing the customer experience, insurers will need to balance both technology and talent.

Finding the balance between tech tools such as artificial intelligence and human skills will require insurers to think more strategically about their claims operations and how they deploy resources. Terms such as “claims automation” and “no-touch claims” tend to scare claims teams and trigger fears their jobs will be eliminated. Insurers should not let their staffs’ imaginations run wild during digital transformation projects. Digital technology, artificial intelligence (AI), machine learning and advanced analytics are useful ways to increase efficiency and augment — not replace — human involvement in the claims process.

Mixing traditional and digital in claims

Currently, there are four typical modes of claims handling. P&C insurers may use some or even all of these, depending on the type of claim.

  • Automated: An automated claims model works in conjunction with parametric or episodic insurance policies, which are triggered by a defined set of conditions and may not even require claim reporting.
  • Pass-through: A pass-through model is a low-touch method of claims handling that generally uses a digital-first notice of loss (FNOL) for simple property damage and applies AI to screen claims for fraud.
  • Self-service: A self-service claims model uses a digital ecosystem for FNOL and connects claimants with adjusters.
  • Traditional: A traditional claims model uses a call center for claim intake and refers claims within the carrier organization, which assigns a claims adjuster.

In general, the simpler and more straightforward a claim, the better suited it is for digital models. There is no way to remove human involvement from complex claims. Technology can help in capturing data and assessing complex claims, but ultimately experienced claims professionals are needed to achieve the best outcomes.

Impact of AI

So where can technology make a difference in claims? Artificial intelligence can play a valuable role in critical claims functions. Two of these functions are first notice of loss and straight-through processing. For example, carriers can use AI in FNOL operations, including claim setup and automating the adjuster assignment process. Similarly, in automobile claims, AI can integrate FNOL analytics with vehicle event recorder data and evaluate claims for fraud prevention, litigation potential and screen for bodily injuries, which add complexity to property damage claims.

Another way AI can have an impact on claims is straight-through processing (STP) on low-complexity property damage claims. For example, AI can integrate STP photo estimating with claims estimating software. In addition, carriers can use AI to automate document indexing and attribution, to reduce manual costs — especially for low-severity, high-frequency auto and property claims.

A paradigm shift

In claims, a paradigm shift is occurring that requires the integration of technology and teams of people. These components work together to reduce costs, allowing for more focus on the customer’s claim experience. Elements of this new paradigm in claims are:

  • Eliminating waste or unnecessary tasks. Cost and time are expended, often unnecessarily, on desk versus field adjusting and unneeded auto or property inspections. STP can make a difference in eliminating unnecessary steps.
  • More focus on the customer claim experience. Using technology to free claims teams to enhance the experience for each customer is a critical step in attracting and retaining customers. Useful tools include customer experience training for adjusters and claims surveys.
  • Multi-channel loss reporting. P&C carriers can improve their customer communications by offering multiple ways to interact with the claims team. These can include a call center, text, email and online chat.
  • Better management oversight. Claims oversight designed to manage all claims inevitably leads to wasted resources. A better oversight strategy that can scale to meet higher claim volume is to use technology and exception reviews. Instead of manually overseeing each and every claim, technology can scan and flag claims that require a closer look, enabling carriers to train and coach their leaders to be even more effective claims managers.

While technology and people will clearly play vital roles in claims in the future, it’s less clear how the insurance industry will recruit more talent to claims jobs. A significant number of baby boomers will retire in the coming years. The industry has an opportunity to make careers in claims more attractive for talent that is already comfortable with digital technologies while they continue to think strategically about how they deploy their resources and seek partners to maximize their teams’ ability to improve customers’ experience.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

The Requirement to Post Collateral Under General Agreement of Indemnity is Real

David Adelstein | Florida Construction Legal Updates

In prior postings, I have discussed the all-powerful General Agreement of Indemnity (click here and here).  This is the document a bond-principal executes to obtain bonds (e.g., performance and payment bonds).  Not only does the bond-principal execute this General Agreement of Indemnity, but typically, so do other indemnitors such as the company’s principals and their spouses, other related companies, etc.  The objective is that the surety has financial comfort that if a claim is made against the bond, there are avenues where it will get reimbursed and indemnified for any cost it incurs, or payment it makes, relative to that claim against the bond. When a surety issues bonds, the objective is that all losses it incurs gets reimbursed because the bonds are NOT insurance policies.

One of the powerful tools the surety can exercise in the General Agreement of Indemnity is to demand the bond-principal and other indemnitors to post collateral in an amount the surety deems sufficient to cover any losses it may incur.  This is a right in any General Agreement of Indemnity I have seen and is a right the surety can rightfully exercise.

A recent example is shown from the opinion in Philadelphia Indemnity Ins. Co. v. Quinco Electrical, Inc., 2022 WL 1230110 (M.D.Fla. 2022), which pertains to the surety’s motion for preliminary injunction.

An electrical subcontractor obtained bonds for a project in Orlando.  In obtaining these bonds, the electrical subcontractor executed a General Agreement of Indemnity that allowed the surety to require the bond-principal and indemnitors to post collateral to cover losses and potential losses the surety may incur.  The provision read as follows (and is similarly worded in many General Agreements of Indemnity):

Indemnitors agree to deposit immediately upon demand by Surety an amount equal to the greater of: (a) the amount of anyreserve established by Surety in its sole discretion to cover any actual or potential liability for any Loss or potential Loss for whichIndemnitors would be obliged to indemnify Surety hereunder; or (b) the amount of any Loss or potential Loss (including legal,professional, consulting, and expert fees and expenses) in relation to any claim or claims or other liabilities asserted against Surety as a result of issuing any Bond, as determined by the Surety in its sole discretion.

The general contractor declared the electrical subcontractor in default and made a claim against the subcontractor’s bond. The surety hired a consultant to monitor the subcontractor’s progress.  A few months later, the surety demanded for the bond-principal and indemnitors to submit $1.8 Million in collateral or relieve it from its obligations (which really means for the subcontractor to resolve the dispute with the general contractor that gives the surety a release.  Typically, this is not a valid option when the default and/or termination is contested).   Almost a year later, the general contractor notified the surety that the electrical subcontractor remains in default and owes its supplier significant money. The surety then notified its bond-principal and indemnitors that they were in default of the bond.  At this point, the surety demanded $600,000 in collateral.

The surety filed a lawsuit against the bond-principal and indemnitors and moved for a preliminary injunction to require them to post collateral in the amount of $600,000 and refrain from transferring or encumbering any assets until collateral was posted.

After a hearing on the surety’s motion for injunction, the court ordered the bond-principals and indemnitors to post collateral in the amount of $521,250.84.  The amount represented legal fees and consulting fees that had been incurred, and pending supplier claims including a portion of a claim paid to a supplier. (The order included other components regarding the transferring of assets until the collateral was posted.)

Here is the key because parties oftentimes want to dispute the surety’s right, despite that right existing in the General Agreement of Indemnity and this General Agreement of Indemnity CONTROLS.  Quinco Electrical, supra, at *3. “This obligation [to require collateral] applies ‘regardless of whether [The Principals or Indemnitors] dispute their liability for any Loss or potential Loss or assert any defenses to the validity or enforcement’ of the [General agreement of Indemnity].”  Id. at *2.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Surfside Condo Families and Survivors Reach $1B Settlement with Insurers, Others

Insurance Journal

Families of the 98 victims of the 2021 condominium collapse near Miami Beach, along with injured survivors, could split hundreds of millions of dollars in payouts under a preliminary settlement agreement announced Wednesday.

The settlement will top $997 million, the plaintiffs’ lawyer said in Miami-Dade Circuit Court, according to reports in the Miami Herald and Sun Sentinel newspapers. How the money will be distributed among the families and injured victims, along with attorneys’ fees, has yet to be decided.

The judge in the case, who last year had charged the lawyers with reaching a speedy resolution, marveled at the results so far.

“The result achieved and the speed is beyond extraordinary,” Hanzman said, the Herald reported. “When this case first came in this court I told everyone this wouldn’t be business as usual. This was a tragedy of unspeakable proportions. If we didn’t have the right people handling this case, it would be a 10-year slog with tens of millions in attorneys’ fees.”

The judge must approve the settlement before it is finalized and he said he hopes to get it done before the one-year anniversary of the collapse on June 24.

Hanzman (AP photo)

The money will come from more than 10 sources, including insurers of the security company for the Champlain Towers South building in Surfside, on the northern edge of Miami Beach. The security firm was responsible for safety systems at the condo building and will pay the largest share, more than $450 million, according to news reports.

Other defendants include parties associated with the condominium association, engineers, architects, the town of Surfside, where the building was situated, and the developers and contractors at 87 Park, the condo next door to the collapsed tower.

Plaintiffs had argued that the construction of the adjacent condo in 2016 had contributed to the collapse by destabilizing the Champlain foundation and forcing runoff into the building’s underpinnings, according to news reports and lawsuit filings. The 87 Park owners and associated firms have not admitted fault in the case, and settled for an undisclosed amount. An engineering firm for 87 Park will pay about $8.5 million as part of the settlement.

Two other defendants have settled in recent weeks, including the powerhouse Florida condo law firm of Becker, which advised the Champlain Towers board. The firm’s professional liability insurer will pay an estimated $31 million in its part of a settlement.

The engineering firm hired to inspect the towers shortly before the collapse also has agreed to a $16 million settlement, paid by the engineering firm’s insurance company.

Repairs to the tower, which had been postponed by the Champlain condo association, were estimated to cost $15 million, and had just begun when part of the high-rise building crumbled, according to news reports. Investigations are continuing, but have raised questions about Champlain Towers’ construction techniques, modifications, water infiltration, unrepaired cracks in concrete and other deterioration since it was built more than 40 years ago.

The Champlain South condo association’s insurer also has paid out $50 million, according to reports.

Part of the proceeds from the sale of the property, where the remaining part of the condo has been demolished and removed, will eventually be added to the total settlement. That will increase the total for the settlement to more than $1 billion, the Herald reported.

Separately, Judge Hanzman in March approved a $83 million settlement for lawsuits brought by individual owners of units in the Champlain Towers condo building who lost property and belongings. The settlement money would come from the condo association’s property and liability insurers and from the sale of the property.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Insurers Can Sue One Another for Defense Costs on Equitable Indemnity and Equitable Contribution Basis

Garret Murai | California Construction Law Blog

Screen Shot 2022-03-14 at 6.09.37 PM Cropped-3

Since I don’t do insurance defense work, fights between insurers isn’t something I have to deal with. It’s good sport nonetheless. In the next case, Travelers v. Navigators Specialty Insurance Company, Case No. D078852 (October 15, 2021), three of the biggies – Travelers, Navigators and Mt. Hawley – got into it over indemnity.

The Travelers Case

General contractor TF McGukin, Inc. was involved in a construction defect lawsuit with respect to a condominium project. TFM entered into subcontracts with several subcontractors including F&F Steel and Stairway, Inc and Calvac Paving which required the subcontractor to defend and indemnify TFM against any claims arising out of the subcontractor’s work. The subcontracts also required the subcontractors to name TFM as an additional insured.

Navigators issued a commercial general liability policy to F&F and Travelers issued a commercial general liability to Calvac. Travelers agreed to defend TFM in the construction defect action,

While the decision doesn’t explain what happened in the construction defect action, what did take place, obviously, is that defense costs were incurred, to the tune of nearly $500,000.

In January 2015, Travelers filed suit various parties including Navigators and Mt. Hawley. Mt. Hawley had issued a commercial general liability policy to TFM.

What followed was three amended complaints and two demurrers. In the first two complaints, Travelers alleged causes of action against Navigators and Mt. Hawley for declaratory relief, equitable contribution and equitable indemnity each premised on Traveler’s claim that Navigators and Mt. Hawley had a duty to defend TFM but refused to do so.

In March 2018, Travelers filed a third amended complaint on alleging that it was “deceived” into defending TFM because TFM and Calvac had signed a subcontract that was “fraudulently backdated to make it appear that it was entered into at the time of the construction contract.” Travelers further alleged that while TFM and Calvac had signed an earlier subcontract, that subcontract did not require that TFM be named as an additional insured, and that its defense of TFM was therefore “not triggered.” In short, Travelers wanted full reimbursement of its defense costs, not just partial reimbursement.

In response, Navigators and Mt. Hawley demurred to the Navigator’s third amended complaint. WIth respect to the Traveler’s declaratory relief claim, Navigators and Mt. Hawley argued that declaratory relief as to their duty to defend was moot because the construction defect action had ended. With respect to Traveler’s equitable indemnity claim, Navigators and Mt. Hawley argued that equitable indemnity is only available for reimbursement of payments made in a settlement or to satisfy a judgment not for defense costs.

Finally, as to Traveler’s equitable contribution claim, Navigators and Mt. Hawley took divergent approaches. Navigators argued that because, according to Traveler’s third amended complaint, it did not insure the same insured (TFM) or the same risk (TFM’s risk), no equitable contribution arose because equitable contribution requires that: (1) insurers share the same level of obligation; (2) on the same risk; (3) for the same insured.

Mt. Hawley, on the other hand, took a contract approach, and agued that if the trial court took judicial notice of its policy, Mr. Hawley merely agreed to provide excess coverage while Travelers provided primary coverage. As such, according to Mt. Hawley, Travelers and Mt. Hawley were not insurers with the “same level of obligation” and their respective policies did not cover the “same risk.”

The trial court granted the demurrers without leave to amend agreeing with Navigators and Mt. Hawley on their arguments with respect to Traveler’s declaratory relief and equitable indemnity claims. The trial court refused to take judicial notice of Mt. Hawley’s policy, but based on Navigator’s demurrer, also sustained the demurer to Traveler’s equitable contribution claim without leave to amend.

Travelers appealed except to the trial court’s ruling on the declaratory relief cause of action.

The Court of Appeal Decision

On appeal, the Fourth District Court of Appeal explained that on appeal from an order sustaining a demurrer, the court reviews the arguments on appeal de nova and exercises its independent judgment about whether a complaint states a cause of action as a matter of law.

Addressing first Mt. Hawley’s argument that the trial court should have taken judicial notice of Mt. Hawley’s insurance policy, the Court of Appeal explained that under Evidence Code section 452(h), which permits a court to take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy,” that under existing case law the existence of a contract between private parties (such as an insurance policy) cannot be established by judicial notice.

As to Traveler’s equitable contribution claim, the Court of Appeal explained that “in the insurance context”:

[T]he right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others. Where multiple insurance carriers insure the same insured and cover the same risk, each insurer has independent standing to assert a cause of action against its coinsurers for equitable contribution when it has undertaken the defense or indemnification of the common insured. Equitable contribution permits reimbursement to the insurer that paid on the loss for the excess it paid over its proportionate share of the obligation, on the theory that the debt it paid was equally and concurrently owed by the other insurers and should be shared by them pro rata in proportion to their respective coverage of the risk. The purpose of this rule of equity is to accomplish substantial justice by equalizing the common burden shared by coinsurers, and to prevent one insurer from profiting at the expense of others.

Here, explained the Court of Appeal, the trial court accepted as true Traveler’s allegations that it was “deceived” and never owed an obligation to defend TFM and, as such, Travelers could not show that it insured the “same insured” or the “same risk.” However, held the Court of Appeal, while a court must “treat a demurrer as admitting all material facts properly pleaded,” it “does not, however, assume the truth of contentions, deductions or conclusions of law,” and here Traveler’s allegation that it owed no duty to defend TFM was a legal allegation not a factual one.

As to Traveler’s equitable indemnity claim, the Court of Appeals noted that, according to Mt. Hawley, equitable indemnity is only applicable to joint tortfeasors, and that here, no plaintiff asserted tort claims against both or either Travelers and Mt. Hawley. However, explained, the Court of Appeals, “[c]ase law and commentators recognize that an equitable indemnity claim may be asserted in a dispute between insurance carriers, even though they are not joint tortfeasors”:

In the context of litigation between insurers, “[a]lthough courts often use the terms `equitable contribution,’ `equitable indemnity’ and `equitable subrogation’ interchangeably, they are really separate remedies that apply in discrete situations. . . . Equitable contribution is a loss-sharing procedure. It lies where several insurers insure the same risk at the same level (e.g., all primary insurers) and one pays the entire loss. That insurer may seek equitable contribution from the others to obtain reimbursement for a portion of what it has paid. . . . Equitable indemnity is a loss-shifting procedure. `Equitable indemnity applies in cases in which one party pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter party.’”

As to Navigator’s argument that Travelers failed to state a claim for equitable indemnity because equitable indemnity requires a loss through payment of an adverse judgment or settlement, not for defense costs, the Court of Appeal held that “[e]quitable indemnification is available to an insurer who “‘has paid an obligation which was entirely the responsibility of a co-insurer” and does not turn on whether that “obligation” was the payment of a settlement, satisfaction of a judgment, or an insurer incurring defense costs:

The duty to pay defense costs is reasonably classified as the “obligation” of an insurance carrier under a general liability policy, just like the duty to indemnify the insured for the cost of a settlement or a judgment. If a claim for equitable indemnity can be based on a carrier’s obligation to pay a settlement on behalf of an insured, we perceive no reason why paying defense costs would not also be sufficient to give rise to a claim for equitable indemnity, as long as the carrier believes that another carrier should have been the party to make those payments.


So there you have it. A battle between the giants. As between insurers, an insurer can sue another insurer for reimbursement of defense costs on an equitable indemnity and equitable contribution basis.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.