Beware the “Independent” Agent O [email protected] Esq., Guzzi, Gary By policy. individual who sold the insurance the knowledge ofor actions the will be bound by or liable for is whether an insurance carrier and especially in cases, rescission uncertainty regarding thisissue. regarding uncertainty Florida, however, has created adeal good of creating liability for the carrier. Case law in the salesperson’s or knowledge fromactions as an to independent prevent agent/broker generally rely upon a salesperson’s status The The insured may claim that the salesperson informed of the thesalesperson condition. medical condition on the application, she not disclose the existence of a particular insured may claim that although she did alleged misrepresentation. For instance, an aware of the concerningtrue facts an arises as to whetherwas the salesperson     issue this route Please Florida Insurance Agency Law: In In many rescission ancases, issue in insurance coverage matters, ne issue that commonly arises ______Traditionally, a carrier could to: 1

who who sell for multiple A carriers. captive for only one insurer, asto opposed those insurance who sell salespersons insurance carrier,the both. or insured, of the agent legal is the salesperson the critical issue then becomes whether the application contained a misrepresentation, of the trueeven facts, though the written insured claim that thewas salesperson aware 3d (Fla. DCA 1991). Accordingly, should the Co. Cas. Ins. Great Oaks 1447, 1452 Fla. 1997); Gonzalez (M.D. v. 1951); v. Co. Ins. Life of Ga. tocarrier. the imputed See authority, the legal agent’s isknowledge of that scope the within insurer is acting and is considered to be a legal agent of the Moreover, salesperson the where 1998). Co. v. Ins. Almerico RLI not disclosed during the application process. based on apolicy claim that were those facts the rescinding from is estopped it policy, the aware of the attrue facts the time it issues application. in existence, but not disclosed in the new to the insured a life insurance still policy that had the previouslysalesperson sold insurance application. The insured may claim a teenage driver not listed in the automobile knew that the insured’s household included Florida law draws a distinction between law, Florida insurer an is Under where Wimberg v.Wimberg Chandler , 52 So. 2d 813 (Fla. 1 , 716 So. 2d 774 (Fla. , 574 So. 2d 1182 , e.g. , 986 F., 986 Supp. , id. ; Johnson broker will be considered the legal agent the absence of special circumstances, the So. 2d 1061, 1062 3d (Fla. DCA 1981). In v. Elie Agency Ins. 1993); AMI DCA Travelers Co. Ins. the insured. the is usually to deemed be the legal agent of from several different insurers, however, insurance insurance to issell free broker who not proceed any further. An independent need analysis agency the and knowledge will generally be liable for such or actions are those of a captive agent, the carrier ofknowledge in the question salesperson 2d at 776. Therefore, where the or actions of that insurer. See will generally to be deemed be a legal agent who sellssalesperson, for only one carrier, Florida Appellate Update Faith. Bad In Act NOT Did Insurer That Finds Court Florida Attorneys the Use of Insurance Defense Staff Approves Court Texas Supreme . Safety Workplace Law”: Right to Bear Arms Trumps The “Bring-Your-Guns-To-Work Statutes and InsuranceCasualty Property to the Changes More with Ends Session Legislative Florida 2008 INSIDE Insurance Id...... T&R Store,; T&R Fixtures, Inc. v. , 621 So. 2d 1388 3d (Fla. , e.g...... , Almerico ...... Continued on page 2 page on Continued ...... , 716 So. , 394 , 394

7 5 8 3 6 JUNE 2008 Akerman Senterfitt Insurance Bulletin June 2008

Florida Insurance Agency Law party justifiably relied on that representation; Alden Life Ins. Co., 744 So. 2d 1123 (Fla. 4th Continued from page 1 and (3) the injured party changed position in DCA 1999), while other courts have been reliance upon the representation and suffered more willing to analyze other factors under the of the insured as to matters connected detriment. National Indem. Co. of the “totality of the circumstances” test to conclude with the application and the procurement South v. Consolidated Ins. Servs., 778 So. that there was no agency relationship, see of the insurance, despite the fact that the 2d 404, 407 (Fla. 4th DCA 2001). Apparent Cadet, 862 So. 2d at 74 (despite carrier broker receives a commission from the agency issues usually arise in the context of a furnishing salesperson with carrier’s materials insurer. Steele v. Jackson Nat’l Life Ins. salesperson who allegedly provides advice or and carrier’s acceptance of business from Co., 691 So. 2d 525 (Fla. 5th DCA 1997); guidance to the applicant/insured with respect salesperson, no statutory agency relationship Couch on Insurance (3d ed. 1995) § 45:4; to application-related issues. See Steele, 691 existed because language in application placed 16 Appleman, Insurance Law and Practice So. 2d at 528. applicant on notice to inquire as to limitations § 8730 (1981) (general rule is that notice Finally, statutory agency, pursuant to Fla. placed on salesperson’s authority). to or knowledge of broker as to facts or Stat. § 626.342, will be found where, under One court found that a salesman’s alleged matters pertaining to risk or coverage, while the totality of the circumstances, the insurer explanation to an applicant that the applicant imputable to insured, is not imputable to cloaks the salesperson with sufficient indicia need not disclose certain medical history 2 insurer). of agency to induce a reasonable person could not be imputed to the carrier because Nevertheless, even where the to conclude that there is an actual agency no apparent agency relationship existed due salesperson is an independent broker, relationship (such as where the insurer provides to language in the application that placed the agency analysis does not end there. the salesperson with literature, brochures, the applicant on notice to inquire as the Instead, a determination must be made blank forms, applications, binder forms, limitations on the salesman’s authority. See whether, despite the salesperson’s status stationery, business cards, letterheads, signs, Steele v. Jackson Nat’l Life Ins. Co., 691 So. as an independent broker, a legal agency corporate seals, receipts or other similar 2d 525 (Fla. 5th DCA 1997). However, in two relationship has been created either through documents and the carrier accepts business subsequent cases, a state court and a federal actual agency, apparent agency or statutory from the salesperson), unless the insured knew court reached different conclusions regarding agency. If any of these three bases of or was put on notice of inquiry regarding whether a paramedic examiner can be deemed agency are present, the salesperson will be limitations that may have been placed on to be the legal agent of the carrier based deemed to be the legal agent of the carrier and the broker’s actual authority. Almerico, upon the paramedic’s actions or information the salesperson’s actions or knowledge will 716 So. 2d at 783; Cadet, 862 So. 2d at provided to the paramedic during the exam. generally be imputed to the carrier. 741. Statutory agency issues typically arise Compare Casamassina v. The United States The elements necessary to establish where the salesperson’s agency agreement Life Ins. Co. in the City of New York, 958 So. an actual agency relationship are: (1) does not create an agency relationship and 2d 1093 (Fla. 4th DCA 2007) (holding, without acknowledgement by the principal that the the salesperson does not necessarily make explanation, that the paramedic examiner was agent will work for him; (2) acceptance by a specific representation to the applicant/ the legal agent of the carrier simply because the agent of the undertaking; and (3) control insured, but the documents, signs and other the examiner had assisted the applicant over the agent’s actions by the principal. See writings cause the applicant/insured to believe with completing a portion of the insurance Villazon v. Prudential Health Care Plan, Inc., that a legal agency relationship between the application) with Joseph v. Zurich Life Ins. Co. 843 So. 2d 842 (Fla. 2003); Banco Ficohsa v. salesperson and the carrier exists. Id. of Am., 159 Fed. Appx. 114 (11th Cir. 2005) Aseguradora Hondurena, 937 So. 2d 161 (Fla. In applying these standards to factual (alleged statement to paramedic examiner 3d DCA 2006). Typically, actual agency issues scenarios, courts across Florida have taken about medical history that was not disclosed are resolved through an analysis of the written different approaches. Some courts have in written application could not be imputed to agreement between the salesperson and the seemingly applied a “bright-line” test with carrier to avoid rescission of the policy). Simply carrier that outlines the authority granted to respect to statutory agency, see Straw v. put, current Florida law regarding insurance the salesperson to act on behalf of the carrier. Associated Doctors Health & Life, 728 So. agency has created uncertainty with respect See Amstar Ins. Co. v. Cadet, 862 So. 2d 736, 2d 354 (Fla. 5th DCA 1999) (mere fact that to whether a salesperson or other individual 741-42 (Fla. 5th DCA 2003). the insurer had provided the salesperson involved in the application process will be The elements necessary to establish with blank applications and training manuals deemed to be the legal agent of the insurance an apparent agency relationship are: (1) a was sufficient to confer agency status on the carrier. representation by the principal; (2) the injured salesperson.); Guarente Desantolo v. John Continued on page 3

2 ADVERTISEMENT Akerman Senterfitt Insurance Bulletin June 2008

Florida Insurance Agency Law Continued from page 2 2008 Florida Legislative Session Ends

The practical effect of this legal uncertainty with More Changes to the Property and is that carriers that utilize independent brokers Casualty Insurance Statutes in their distribution channels will be unable to operate their business models based upon an By Ed Kutter, Esq., [email protected] to $20,000. Administrative fines for assumption that they will be insulated from and Maria Henderson, maria.henderson@ knowing and willful violations of a lawful akerman.com liability due to a broker’s knowledge of true order or rule were doubled to $40,000 facts acquired during the application process. efore the 2008 Florida for each violation, with an aggregate cap In addition, carriers involved in litigation may Legislative Session officially of $200,000 for all such violations arising began, it appeared that out of the same action. (§624.4211 F. S.) not be able to conclusively assert that the B there may be wide-sweeping actions or knowledge of an independent • Insurers are often concerned that changes for the property and Florida’s broad public record’s laws will broker cannot be imputed to the carrier. casualty insurance writers in this result in public disclosure of confidential An insured or beneficiary who can discover state. Hearings by the Senate and complex documnets that insurers are required sufficient facts during the litigation discovery changes recommended by the Banking and to submit to the Office of Insurance process regarding agency-related factors may Insurance Committee suggested that this Regulation. New provisions designed to be able to prolong litigation and defeat pre- Session could lead to some of the most provide some degree of protection were trial motions that would otherwise stop the challenging changes for carriers. While created that outline the requirements insured/beneficiary from proceeding to a jury many changes were adopted, many of by insurers who claim that documents trial. A salesperson’s status as an independent the recommendations were not. We have required to be submitted to the Office of broker, rather than a captive agent, certainly outlined some of those changes below. We Insurance Regulation are trade secrets. will provide significant support in asserting do not anticipate a veto by the Governor of An affidavit certified under oath must any of these changes but that is always a such a defense, and in appropriate cases be submitted with the material and must possibility. Unless otherwise noted, these may be sufficient to avoid liability for the include specific statements. If through a provisions will take effect on July 1, 2008. salesperson’s actions. Carriers must be aware, public records request, a document that Feel free to contact your Akerman is noted as a trade secret is requested, however, that under Florida law, the mere fact Senterfitt attorney or consultant if you have the Office will notify the insurer of the that a salesperson is independent will not, in any questions related to these changes or request and the insurer has 30 days to and of itself, automatically result in the carrier need assistance with ensuring that you are in file an action in circuit court seeking a divesting itself of the acts or knowledge of the compliance. Ed Kutter, Shareholder, edward. determination whether the document salesperson. [email protected] and Maria Henderson, in question contains trade secrets. The Shareholder Gary Consultant, [email protected] Office may disclose trade secrets to other Guzzi is located in are also available to assist. governmental agencies. (§624.4213 F. S.) the Miami office of General Insurance Provisions • If an insurer requests an administrative Akerman Senterfitt hearing related to a rate filing, the and is a member • If the Office of Insurance Regulation has process is to be expedited and assigned of its Litigation and findings from a market conduct exam to an administrative law judge who Insurance Practice that an insurer appears to use unfair shall commence the hearing within 30 Groups. claims settlement practices, the Office days after receipt of the formal request may issue an order that requires the in- 1 and enter a recommended order within Although the term “insurance agent” and “insurance broker” surer to file it claims-handling practices are commonly used to refer to the person who sold the policy, 30 days after the hearing or 30 days the terms “agent” and “broker” have specialized legal meanings and procedures. These filed practices and with respect to insurance cases. Accordingly, for purposes of after receipt of the hearing transcript procedures are public records, similar to the following discussion, the term “salesperson” will be used to whichever is later. There is intent refer to the individual who sold the applicable policy, and the rate and rule filings and cannot be con- terms “legal agent” and “legal broker” will be used when a legal language that if the insurer requests connotation is required to be applied to those terms. In addition, sidered trade secrets. (§624.3161 F. S.) this article is not intended to analyze a carrier’s vicarious liability an expedited appellate review that the for the tortious actions of a salesperson, but instead is focused • Administrative fines were doubled to First District Court of Appeal will grant solely on the imputation of the salesperson’s knowledge or $5,000 for any nonwillful violation and actions for purposes of a misrepresentation or similar defense. that request. Arbitration has been 2In addition, an insurance salesperson can simultaneously serve a the cap for all nonwillful violations arising permanently repealed. (§627.062 F. S.) dual role as legal agent for both the insurer and the insured. See, from the same action was doubled e.g., Almerico, 716 So. 2d at 776 77. Continued on page 4

3 Akerman Senterfitt Insurance Bulletin June 2008

2008 Florida Legislative Session Ends – whether a factor for underwriting termination at least 180 days prior to with More Changes Continued from page 3 profit and contingencies is reasonable the effective date of the cancellation, • An insurer can include a multiple policy or excessive; nonrenewal or termination for residential discount when a Citizens policy is also – whether the cost of reinsurance is property that has been insured by the purchased or taken out and serviced by reasonable or excessive. carrier for a least a five-year period the same agent. (§627.0655 F.S.) (§627.0612 F. S.) immediately prior to the written notice. (§627.4133 F. S.) • A new section of code is created to • Property insurance rate filings seeking define transparency in rate regulation. an increase over the previously approved • A seller of a property in the wind-borne (§627.0621 F.S.) filing must be done on a “file and use” debris region is required to inform the basis until December 31, 2009. A rate purchaser of the windstorm mitigation Automobile Insurance may not be disapproved as excessive rating of the structure in the contract • The fee schedule to be used for personal solely on the basis that the insurer for sale or as an attachment to the injury protection coverage is clarified to obtained catastrophic insurance to cover contract for sale. There is a provision for be the participating physicians schedule the insurer’s estimated 250-year probable rule-making by the Financial Services Medicare Part B for 2007. (§627.736 F.S.) maximum loss or any lower level of Commission. (§689.262 F.S.) • Numerous changes were made to the loss. Projected hurricane losses must be • Residential property insurers may have code relating to the Department of estimated using a model approved by the access and use the public hurricane loss Highway Safety and Motor Vehicles for Florida Commission on Hurricane Loss projection model for the purpose of changes in vehicle driving violations, Projection Methodology. (§627.062 F. S.) calculating rate indications. By January fines, and other related items, including 1, 2009, the Office shall establish a fee lowering the blood-alcohol level for • Final agency action as it relates to schedule for access and use of the model. which enhanced penalties are imposed. insurance rate-making is vested in the (See Senate Bill 1992 for a comprehensive Office of Insurance Regulation and (§627.06281 F. S.) review.) the Financial Services Commission and • The Chief Financial Officer shall provide a processes, standards, and guidelines of report on the economic impact to Florida Property Insurance the Florida Commission on Hurricane of a 1 in 100 year hurricane by March 1 • A new provision was created that requires Loss Projection Methodology do not of each year. any insurer planning to non-renew constitute final agency action nor are • The authorization for the Florida more than 10,000 residential property subject to Chapter 120 Administrative Hurricane Catastrophe Fund coverage for insurance policies in Florida within a 12 Procedure Act. The Commission shall limited apportionment companies and month period to give notice in writing adopt findings as to the accuracy companies participating in the Insurance to the Office of Insurance Regulation 90 or reliability of methods, principles, Capital Build-up Incentive Program is days prior to the issuance of the non- standards or models related to probable extended to May 31, 2009. (§215.555 renewal notices. (§624.4305 F.S.) maximum loss. Insurers are required to F.S.) employ, without modification, models • The unfair claims settlement practice • If an insurer issues a policy that does not found by the Commission to be accurate statute was expanded to include the include wind coverage, the insurer must or reliable. (§627.0628 F. S.) failure to pay undisputed amounts of provide notice to the mortgageholder or partial or full benefits owed under a first- • The Office of Insurance Regulation lienholder to that effect. (§627.712 F.S.) party property insurance policy within shall develop and make available 90 days after the notice of a residential a proposed method for insurers to Citizens Property Insurance property claim. (§626.9541 F.S.) establish discounts, credits, or other • Allows for “non-homestead” property • In rate proceedings, the following are rate differentials related to hurricane meeting all other requirements to be findings of fact in determining whether mitigation measures correlating to the insured through Citizens. Increases the an insurer’s rates, rating schedules, rating numerical rating pursuant to the uniform cap on residential property eligibility manuals, premium credits, discount home grading scale adopted by the in the program from $1M to $2M. schedules, surcharge schedules, or other Financial Services Commission. Rules to Eliminates the restriction that properties changes for property insurance comply use the new methodology must be in insured by Citizens be located beyond with the law: place by November 11, 2011. (§627.0629 2,500 feet landward of the coastal F. S.) – whether a factor or factors used in construction control line unless the a rate filing or applied by the Office • Insurers are required to give written property meets the requirements of the is consistent with standard actuarial notice of cancellation, nonrenewal or Continued on page 5 techniques; 4 Akerman Senterfitt Insurance Bulletin June 2008

2008 Florida Legislative Session Ends with More Changes Continued from page 4 The “Bring-Your-Guns-To-Work code-plus building standards developed by the Florida Building Commission. Law”: Right to Bear Arms Trumps Effective January 1, 2010, property that is insured through Citizens located in Workplace Safety as of July 1, 2008 the wind-borne debris region and with By Michelle Napier Boyd, Esq. prohibit employees, customers or other guests an insured value of $500,000 or more [email protected] from bringing firearms inside the building and must receive from the seller a written Governor Charlie Crist signed a new bill into from actually brandishing or carrying a gun disclosure of the windstorm mitigation law which many are calling the “Bring-Your- anywhere on the premises unless the gun is rating based on the uniform home Guns-To-Work Law”. The actual title of the being used for lawful defensive purposes. grading scale. Reduces the maximum bill is the “Preservation and Protections of Employers can also prohibit employees from assessment percentage from 10% to 6% the Right to Keep and Bear Arms in Motor having guns inside their vehicles to the extent the guns are not lawfully possessed or are for Citizens policyholders. Allows for a Vehicles Act of 2008.” The new law makes it unlawful for employers and businesses to not locked inside (or to) the vehicle. However, 15% of premium surcharge to be levied prohibit employees, customers or other lawful it is nearly impossible for an employer to at renewal against Citizens policyholders guests from bringing their lawfully possessed know whether or not an individual is lawfully to offset deficits. Requires Citizens to guns to work so long as the guns are locked in carrying a gun as employers cannot ask the make an actuarially sound rate filing (or to) their private vehicles. employee this question according to the Act, and since concealed weapons records are beginning on July 15, 2009 and each The Act focuses on protecting the constitutional right to possess and keep legally secret under state law providing employers no year thereafter. The effective date of the owned firearms within private vehicles for way of verifying the permits. first filing must be no later than January self defense and other lawful purposes, and Moreover, employers cannot get around 1, 2010. This effectively extends the rate provides that citizens of Florida do not lose the law by conditioning employment on freeze until that time. Insurers are no this right by virtue of becoming a customer, whether or not an individual holds a license to longer required to purchase any unsold employee, or guest of any employer or carry a gun, or by conditioning employment on the employee’s agreement not to keep a Citizens bonds. Citizens can release business establishment within the state. The new law has spurned concern among gun locked inside (or to) his or her vehicle. confidential contents of an insured’s file. employers due to the rising threat of violence Don’t go searching. An insured who has filed suit against in the workplace from distressed employees Citizens has the right to discover the and customers. Businesses want employees, The new law states that a search of a vehicle contents of his or her claim file where customers and guests to feel safe on their in an employer’s parking lot to ascertain the presence of a firearm within the vehicle can that same discovery would be available premises; however, the new law forbids em- ployers from prohibiting individuals from pos- only be conducted by on-duty law enforce- from a private insurer. (§627.351 F. S.) sessing firearms in locked vehicles parked on ment personnel based upon due process and • The Citizens Property Insurance their property as a means of providing a safe must comply with constitutional protections. Corporation Mission Review Task Force workplace. Exemptions. is created to analyze and compile data Employers Beware. The Act exempts certain businesses from its and to develop a report by January 31, The Act not only allows employees, customers restrictions including schools, correctional 2009 outlining statutory and operational and guests of a business to bring firearms institutions and other business dealing changes needed to restore it to its onto an employer’s property, but also with national defense or nuclear powered electricity generation. original role as a residual market. prohibits employers from inquiring about the presence of a firearm inside a vehicle, from Revise your policy. searching a vehicle to ascertain the presence Employers who have a workplace safety policy of a firearm, from “taking action” against an in place prohibiting employees from bringing employee based upon a statement concerning firearms anywhere on the employer’s premises the individual’s possession of a firearm within will need to revise that policy in order to a vehicle, and from preventing entrance comply with the law. While there may be a to the employer’s parking lot because the court challenge to employee’s, customer’s, or guest’s vehicle this law, it is currently contains a legal, out-of-sight firearm. scheduled to take Pursuant to the Act, employers cannot effect July 1, 2008. terminate or discriminate against employees for exercising their right to keep and bear arms, or exercising their right to self defense, Shareholder Ed Kutter and Consultant Maria Michelle Napier Boyd, an Henderson are located in Akerman Senterfitt’s as long as the firearm is never exhibited on Associate in the Tampa Tallahassee office and are members of the company property for any reason other than office, practices Labor & Insurance and Policy Groups. lawful defensive purposes. Employers can still Employment Law. 5 Akerman Senterfitt Insurance Bulletin June 2008

because, for all practical purposes, only one client is involved.

The Court held that the interests conflict Texas Supreme Court when there are coverage questions or when the consequences of the manner in which the defense is rendered affect them Approves the Use of differently. The Court refused to impose a blanket rule that a staff attorney can never represent an insured under a routine Insurance Defense reservation of rights. But it cautioned that, if a conflict is likely to arise because of such a reservation, then the safer course would Staff Attorneys be to not use a staff attorney to defend the claim. The Court also noted that, whether the By Katherine E. Giddings, Esq., insurer’s interest and the insured’s interest defense counsel represents both the insurer [email protected] are congruent, but not otherwise. Their and the insured as co-clients, is a matter of he Texas Supreme Court, interests are congruent when they are contract. in a 7-2 decision, has aligned in defeating the claim and there is Finally, the Court held that the staff resoundingly approved the no conflict of interest between the insurer attorney must fully disclose to a represented T and the insured. We also hold that a staff use of insurance defense staff insured the identity of the lawyer’s employer. attorneys (“staff attorneys”) attorney must fully disclose to an insured his The Court declined to reach whether it was or her affiliation with the insurer.” to defend covered claims, appropriate to use a law firm type name, The Court concluded that, so long as stating that issue was not properly before after considering a hard- there is no conflict of interest, the use of the court. fought challenge to the use of staff attorneys is not the unauthorized The two dissenting judges would find such attorneys by the Texas practice of law. It even recognized that First the use of insurance defense staff attorneys Unauthorized Practice of Law Amendment rights might be implicated in to be the unauthorized practice of law. Committee. Before this issue reached curtailing the use of staff attorneys, but did The Texas Supreme Court Unauthorized the Texas Supreme Court, two intermediate not reach any decision on that issue. Practice of Law Committee has filed a Texas appellate courts and several prior The Court provided a three-part test to motion for rehearing which is still pending Texas ethics opinions had previously be used in determining whether an insurer before the Court. concluded that the use of staff attorneys may use staff attorneys to defend claims: Status Of The Law On Staff is appropriate in the absence of any actual 1. Whether the company’s interest being conflict of interest between the insured and Attorneys In Other States served by the rendition of legal services the carrier. In reaffirming the validity of insurance is existing or only prospective; defense staff attorneys, Texas joins the The Decision 2. Whether the company has a direct, American Bar Association and twenty-four The Texas Supreme Court recently substantial financial interest in the other states that, either through case law considered the use of staff attorneys in matter for which it provides legal or bar ethics opinions, have approved the Unauthorized Practice of Law Committee services; use of insurance staff attorneys to defend v. American Home Assurance Company, covered claims where the interests of the ---S.W.3d---, 2008 WL 821034 (Tex. Mar. 3. Whether the company’s interest is insurer and its insured are aligned. Only 28, 2008). The case was orally argued aligned with that of the person to whom two states have disapproved that practice before the Court in September 2005. the company is providing legal services. (Kentucky and North Carolina). The majority opinion states: “We hold When the company and its employee Today it is estimated that more than that an insurer may use staff attorneys to or affiliate have common interests, a one-half of all lawsuits involving covered defend a claim against an insured if the staff attorney can represent them both Continued on page 7

6 Akerman Senterfitt Insurance Bulletin June 2008

Texas Supreme Court Continued from page 6 Florida Court Finds claims are defended by staff attorneys. Staff attorneys have defended insurance claims for That Insurer Did NOT Act almost a hundred years. Such representation has proven to be efficient, competent, and In Bad Faith economical. Like Texas, states approving By Gary Guzzi, Esq., [email protected] did not fulfill its legal obligations with insurers’ use of staff attorneys to defend n a significant victory for respect to the settlement negotiations. claims recognize that, where the insurer a Firm client, the Southern The estate argued that the carrier could has a direct interest in the outcome of the IDistrict of Florida recently not simply act as a “messenger” between litigation under the insurance policy, and no entered summary judgment in the estate and the insureds with respect to material conflict of interest exists between a favor of an insurance carrier the settlement terms and conditions, but the insurer and the policyholder, both on a bad faith claim. In Maldonado instead had an affirmative duty essentially to insurers and their policyholders benefit from v. The First Liberty Ins. Corp., 2008 WL attempt to convince the insureds to change this practice. 1932066 (S.D. Fla. April 22, 2008), First their settlement position. According to the For more information on issues related Liberty had issued an automobile insurance estate, such a duty would include hiring a to insurance defense staff attorneys, please policy to the insureds, which provided lawyer at the carrier’s expense (even before contact Katherine E. Giddings at katherine. liability limits of $25,000 per person. One of suit was filed) to advise the insured as to the [email protected] or 850-425-1626. the insureds caused an automobile accident benefits of settling, advising the insured as Ms. Giddings, who is Board Certified in that resulted in the death of the other to the detailed ramifications of an excess Appellate Practice, is a frequent speaker on driver. Shortly after the accident, the estate’s judgment being entered (such as a lower staff counsel and other insurance issues, attorney contacted the carrier and advised credit score, difficulty obtaining a loan or chaired the Florida Bar’s CLE Committee that the estate might be willing to settle a job, etc.), acting as a mediator between on the 2003 Florida Rules of Professional for the policy limits if the insureds provided the insureds and the estate to reach a Conduct governing insurance defense staff asset affidavits. The carrier agreed to tender compromise position instead of simply attorneys, and served on the Florida Bar’s the policy limits and advised the insureds of relaying each party’s position to the other drafting subcommittee for the Statement the terms of the potential settlement. The party, etc. The court rejected this argument, of Insured Clients Rights. She monitors insured initially provided asset affidavits, but holding that Florida law did not require a litigation management issues nationally and the estate rejected them as insufficiently carrier to undertake any of these activities. has facilitated efforts in support of litigation detailed and demanded that the insureds Instead, the court found that Florida law management practices and insurance complete more detailed affidavits. The requires a carrier to fulfill those duties set defense staff counsel offices in at least carrier forwarded the detailed affidavits to forth in the seminal case of Boston Old thirteen states through the filing of amicus the insureds, advised the insureds as to the Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 curiae briefs on behalf of the insurance estate’s demand and advised the insureds as (Fla. 1980), which requires a carrier to advise industry, state business associations, and to the benefits of completing the affidavits. the insured of settlement opportunities, related entities. She also provides national The insureds, however, refused to complete advise of the probable outcome of the consulting services to her insurer clients on the affidavits based upon privacy concerns. litigation, warn of the possibility of an excess litigation management matters and many When the carrier advised the estate as to judgment, advise as to the steps an insured other insurance issues, with special emphasis the insureds’ position, the estate again may take to avoid an excess judgment, in the area of staff demanded that the insureds fully complete and to generally act in the insured’s best counsel operations the detailed affidavits or else the estate interests rather than in its own interests. and issues involving would not consider settlement within policy Because the carrier had fulfilled these duties, the tripartite limits. When the insureds refused to do so, and the insureds had nevertheless failed to relationship among the estate withdrew the potential settlement submit the affidavits that were required as a insurers, insureds, offer, and ultimately obtained a $3 million condition to potential settlement, the carrier and defense consent judgment against the insureds. did not act in bad faith as a matter of law. attorneys. The estate then filed a bad faith lawsuit The estate has filed a notice of appeal with against the carrier, arguing that the carrier the Eleventh Circuit Court of Appeals. 7 Akerman Senterfitt Insurance Bulletin June 2008

FLORIDA: APELLATE UPDATE

By Felicia Nowels, Esq. actions initiated or caused to be brought covered by the same policy are barred, the [email protected] about by any insured covered by the policy court reasoned that because Itnor was the The Itnor Corporation, et. al, v. against any other insured covered by this named insured, and because Murphy was Market International Insurance policy (“cross liability exclusion”). acting as the real estate manager of Itnor’s Company, Ltd., (Fla. 3d DCA, May The trial court found, and the Third property, which made Murphy an insured, 21, 2008) District Court of Appeal affirmed, that the cross liability exclusion barred coverage The Third District Court of Appeal affirmed Murphy was an independent contractor for Murphy’s lawsuit against Itnor. Because the trial court’s final summary judgment injured in the course and scope of her coverage was excluded under the policy, the holding that an injured independent employment. The court reasoned that the court affirmed the final summary judgment contractor was barred from coverage under independent contractor exclusion was in favor of Markel, the policy’s independent contractor and plain and unambiguous, and there were no the insurer. cross liability exclusions. Insured, Itnor, had genuine issues of material fact concerning a commercial liability policy with Markel. Murphy’s status as an independent The policy excluded bodily injury arising out Felicia Nowels, an contractor who was injured in the course associate in the of operations performed by independent of her employment. Under the cross liability Tallahassee office, contractors (“independent contractor is a member of the exclusions, under which claims brought Insurance and Global exclusion”), and bodily injury arising out of by one insured against another insured Practice Groups.

This publication of the Insurance Group of Akerman Senterfitt, with offices in Florida, California, New York, Virginia, Wisconsin and the District of Columbia, is intended to inform firm clients and friends about legal developments in the areas of insurance law, including recent decisions of various courts and administrative bodies. Nothing in this publication should be construed as legal advice or a legal opinion, and readers should not act upon the information contained in this publication without seeking the advice of legal counsel.

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