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Understanding the Duty to Defend

Fri Dec 22nd, 2017 on     Insurance Claims,    

As an insured defendant, the fact that the insurer will step in to provide a defense in claims (that fall within the applicable coverage) brought against the defendant is critical to effective litigation in many cases, particularly those where the defendant lacks personal financial assets necessary to pay for the expense of litigation.  Insurers owe a duty to their policyholders to step in and provide a defense in covered claims brought against their insured — this is known as the “duty to defend.”

For example, suppose that you are being sued for negligently operating your vehicle and thus causing an accident (and subsequent injuries).  Your liability insurance coverage is $500,000 and requires that the insurer step in to defend claims brought against you for injuries that you caused as a result of negligent driving conduct.

If an insurer fails to step in and satisfy their duty to defend, then the defendant-policyholder could be left with the responsibility of securing an attorney on your own and paying for the significant expense of litigation.  Even if the claims are illegitimate or otherwise unlikely to result in an award of damages to the plaintiff, the insurer is required to step in on their policyholder’s behalf in the defense.

Failure to Defend

Florida law requires that insurers provide a defense in claims brought against their policyholders so long as the claims are covered pursuant to the terms of the policy.  For example, if you have a liability insurance policy that handles motorcycle accidents, but not four-wheelers, then the insurer would likely not have a duty to defend you in claims brought against you on the basis of negligent operation of a car or truck.

If the insurer has a duty to defend you but refuses to step in and provide a defense, then you are entitled to sue the insurer and recover damages (not only for the policy limits, but also for damages in excess of the policy limits).  Further, you may be entitled to attorneys’ fees.

In some cases, you may want to consider filing a declaratory action against your insurer — in a declaratory action, the court will determine whether the insurer has a duty to defend you in your present litigation.

Good Faith Handling of Defense

All too often, insurers step in to provide a defense (as required), but do not act in good faith when acting on behalf of their policyholders.  Under Florida law, insurers owe their policyholders a duty of good faith which requires that the insurer act fairly and with honesty in handling the defense of claims brought against their policyholders, and further, that the insurer consider the interests of the policyholder when engaged in such litigation.

Good faith defense of the insured requires that the insurer handle the claim with the same degree of care as an ordinary person would use in managing their own business.  The insurer must investigate all the claims and all the facts at-issue, consider settlement offers (and alert the policyholder as to the existence of settlement opportunities), and must make settlement offers up to the policy limits where appropriate to the interest of the insured.

In Florida, if you are or have been the defendant in a lawsuit in which your insurer failed to provide a defense on your behalf, then you may be entitled to obtain a declaratory judgment forcing the insurer to handle your defense claims, or to sue the insurer for damages on the basis of bad faith or breach of the insurance contract.  Claims against the insurer (in situations where the insurer has violated their duty to defend the policyholder) can be rather difficult to litigate, as insurers are all too willing to interpret their contractual duties as narrowly as possible so as to minimize their obligations.

Ver Ploeg & Lumpkin, P.A. is a Florida insurance litigation firm that has successfully represented policyholders in claims against their insurers for violation of the duty of good faith and breach of contract, including those scenarios involving an insurer’s failure to provide a defense in a suit brought against the policyholder.  Here at Ver Ploeg & Lumpkin, P.A., we are committed to the provision of personalized, dynamic legal representation — from beginning-to-end of the litigation process, we work closely with clients to ensure that our strategic objectives are aligned.

Call 305-577-3996 today to schedule a free consultation with an experienced Miami insurance litigation lawyer.

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