By Erik P. Raines
One of the most important aspects of construction defect litigation is the participation of the parties’ commercial general liability (CGL) insurance carriers. Indeed, many (if not a majority of) cases are settled using CGL dollars.
Therefore, savvy parties will typically frame their pleadings to trigger a CGL carrier’s duty to defend. Under Florida law, “[i]t is well settled that an insurer’s duty to defend its insured against a legal action arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage.” Jones v. Florida Ins. Guar. Ass’n, Inc., 908 So. 2d 435, 442-43 (Fla. 2005) (further providing that “the insurer must defend even if the allegations in the complaint are factually incorrect or meritless.”). Therefore, simply by alleging facts in a complaint’s “four corners” that implicate an insured party’s CGL policy, an insurer will typically be required to provide a defense until it is established that there is no indemnity obligation (e.g., via a declaratory judgment action). In a recent unpublished decision, the Eleventh Circuit Court of Appeals in Composite Structures, Inc. v. Continental Insurance Company, 2014 WL 1069253 (11th Cir. 2014), chipped away at this longstanding general rule. In doing so, it has provided insurance carriers with additional ammunition to avoid defense obligations.
In Composite Structures, an insured sought to obtain a declaratory judgment holding that its CGL insurer had a duty to defend the insured against personal injury claims in an underlying litigation. In the underlying case, two people sued the insured for damages flowing from alleged excessive carbon monoxide exposure. The insured did not dispute that its policy’s pollution exclusion applied; however, there was an exception to the pollution exclusion that could have applied under certain circumstances that were not evident from the underlying complaint (i.e., the insured’s timely notice to the carrier). Applying Florida law, the Eleventh Circuit recognized that “an insurance company’s duty to defend an insured is determined solely from the allegations in the complaint against the insured[.]” Id. at *3 (citing Lawyers Title Ins. Corp. v. JDC (America) Corp., 52 F. 3d 1575, 1580-81 (11th Cir. 1995)). Notwithstanding this general rule, the court noted an exception “where an insurer’s claim that there is no duty to defend is based on factual issues that would not normally be alleged in the complaint.” Id. (quoting Higgins v. State Farm Fire and Cas. Co., 894 So. 2d 5, 10 at n. 2 (Fla. 2005)). The Eleventh Circuit affirmed the Middle District’s order of summary judgment in favor of the insurer, noting that “because the date of written notice to the insurance company is not a fact that would normally be alleged in the complaint,” the court was permitted to consider that fact in assessing the insurer’s duty to defend.
Undoubtedly, carriers will be advocating for published opinions consistent with Composite Structures — both in federal and state courts. Attorneys should therefore be aware that the four corners of a complaint may not always define the field on which an insurer’s duty to defend is determined.
