An Insurer issuing liability policies in Florida must comply with Florida’s Claims Administration Statute, Florida Statutes §627.426, or risk waiving otherwise viable “coverage defenses.” The first section of the statute permits an insurer to take certain actions without waiving its rights under the policy. The second section of the statute sets forth procedures that an insurer must follow before it can deny coverage based upon a “coverage defense.”
The definition of “coverage defense” has been the subject of considerable litigation in Florida. However, under current Florida law, “coverage defense” refers to an insurer’s reliance upon an insured’s alleged breach of a policy condition. Typically, “coverage defense” indicates that the insured either provided late notice of the lawsuit, claim or incident; failed to cooperate with the insured or to submit to an examination under oath; and/or entered into a settlement without the insurer’s consent.
Generally, to successfully assert a “coverage defense,” an insurer must issue a reservation of rights letter to the insured within 30 days of when the insurer knew or should have known of the coverage defense. Then, within 60 days after it issues the reservation of rights letter or receives a summons and complaint naming the insured as a defendant (whichever is later), the insurer must either deny the claim; obtain a non-waiver agreement from the insured after fully disclosing (a) the facts and policy provisions upon which the coverage defense is based, and (b) the insurer’s obligations during and after litigation; or retain independent counsel acceptable to the insured.
