Additional Insureds Are Owed a Defense for the Entirety of the Suit Against Them, Not Just Some of the Claims and Insurers Cannot Shirk Their Defense Obligations Simply Because Another Insurer Has Picked Up the Defense

By, Amanda K. Anderson, Esq.

Recently, in December 2019, the Middle District of Florida solidified an insurer’s defense obligations to an additional insured in two opinions arising from the same case – KB Home Jacksonville LLC v. Liberty Mut. Fire Ins. Co., No. 3:18-CV-371-J-34MCR, 2019 WL 4247269, at *1 (M.D. Fla. Sept. 5, 2019) and 2019 WL 4228602, at *1 (M.D. Fla. Sept. 5, 2019). KB Home Jacksonville, LLC (“KB Home”) filed suit against Liberty Mutual Fire Insurance Company (“Liberty) and Ironshore Specialty Insurance Company (“Ironshore”) seeking declarations that both insurers had a duty to defend KB Home as an additional insured in various Florida state-court actions involving projects wherein the insurers’ named insured, Florida State Plastering, performed work as a stucco subcontractor on KB Home’s behalf.

While Liberty agreed that its defense obligation was triggered by the allegations of the underlying complaints it likewise asserted that its duty to defend KB Home ended on June 2, 2017, when Liberty offered its policy limits to settle an unrelated class action in South Carolina state court against other insureds under the policies (South Carolina Litigation). KB Home Jacksonville LLC v. Liberty Mut. Fire Ins. Co., 2019 WL 4247269, at *2 (M.D. Fla. Sept. 5, 2019).

Importantly, for the first time in Florida in an additional insured context, the Court, in denying Libety’s Motion for Summary Judgment squashed Liberty’s argument that “[t]o the extent a duty to defend KB Home ever existed, the plain language of the Policies and case law limit that duty to defend to claims for liability caused by [FSP]. Liberty Mutual does not have and never had a duty to defend KB Home for its own liability, or for the liability of other subcontractors.” Id. The Court found Liberty’s argument to be unavailing. In its reasoning the Court stated:

Florida law is clear that “[i]f the complaint alleges facts partially within and partially outside the coverage of the policy, the insurer is obligated to defend the entire suit.” Category 5, 76 So. 3d at 23 (emphasis added); see also Lime Tree Village Community Club Ass’n, Inc. v. State Farm General Ins. Co., 980 F.2d 1402, 1405 (11th Cir. 1993) (“An insurer’s ‘duty to defend is distinct from and broader than the duty to indemnify…and if the [underlying] complaint alleges facts showing two or more grounds for liability, one being within the insurance coverage and the other not, the insurer is obligated to defend the entire suit.’ ” (quoting Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So. 2d 810, 813-14 (Fla. 1st Dist. Ct. App. 1985))).

The Court expressly determined “that is precisely the scenario presented here, and Liberty Mutual must defend the entire suit.” Id. at *9 (M.D. Fla. Sept. 5, 2019).

Ironshore likewise attempted to shirk its defense obligations arguing there were material facts in dispute and that it had no duty to defend KB Home because Liberty Mutual had already agreed to do so, and because the Policy’s Continuous or Progressive Injury or Damage Exclusion barred coverage. KB Home Jacksonville LLC v. Liberty Mut. Fire Ins. Co., 2019 WL 4228602, at *3.

Ironshore argued that it not have a duty to defend KB Home because “Liberty Mutual has already agreed to defend KB Home and there is no right to contribution in Florida.” Id. at *6. Ironshore maintained that based on caselaw regarding the right to contribution between insurers “and Liberty Mutual’s explicit acceptance of the full duty to defend KB Home, it would be inappropriate and not possible for Ironshore to take on the duty to defend Ironshore in this matter….” Id. The Court found Ironshore’s reliance on Florida law regarding the right to contribution between insurance companies to be unavailing. First, while noting the same was inapplicable to the issues presented by Ironshore, the Court examined the recently enacted Legislature that created a right of contribution among liability insurers for defense costs. See Fla. Stat. § 624.1055 (2019). Most importantly, the Court stated “though Florida law has not always allowed contribution ‘between insurers for expenses incurred in defense of a mutual insured,’ Argonaut Ins. Co. v. Maryland Cas. Co., 372 So. 2d 960, 963 (Fla. 3d Dist. Ct. App. 1979), that does not mean that Florida law permitted an insurer to shirk its contractual defense obligations simply because another insurer had already recognized its duty to defend.” Id. Indeed, the Court noted that the very case on which Ironshore relied, Argonaut, emphaszied the personal nature of an insurer’s duty to defend:

The agreement to defend contemplates the rendering of services. The insurer must investigate, and conduct defense, and may if it deems it expedient, negotiate and make a settlement of the suit. These matters each insurer is required to do regardless of what the other insurer is doing. While both may join together in the services and share expenses, there is no requirement that they do so. Conceivably, one might disagree with the other as to the strategy of the investigation and defense. It could act independently of the other. Thus the relationship is more that of co-insurer than cosurety. As to the assured, neither one is excused to any extent from its full duty to defend, no matter what the other does. The duty to defend is personal to the particular insurer. It is not entitled to divide that duty with or require contribution from the other.

Id. at *7. Thus, the presence of multiple insurers has never excused any single insurer from fully defending the insured. See id. (citing U.S. Fire Ins. Co. v. Transp. Cas. Ins. Co., 747 So. 2d 404, 405 (Fla. 4th Dist. Ct. App. 1999); Cont’l Cas. Co. v. United Pac. Ins. Co., 637 So. 2d 270, 273 (Fla. 5th Dist. Ct. App. 1994)). Accordingly, the Court concluded that Liberty Mutual’s recognition of its defense obligations did not relieve Ironshore of its own. Id.

While these rules have been the rules of Florida for the better part of thirty years, these decisions are the first to solidify that insurer’s obligation to defend an additional insured is not any different than their obligation to defend their named insured.

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