University of Miami v. Great American Assurance Co., No. 3D09—2010, 2013 WL 616156 (Fla. 3d DCA Feb. 20, 2013), reh’g denied, May 3, 2013
An additional named insured under a commercial general liability (“CGL”) policy was entitled to indemnification for the attorney fees and costs it incurred after it retained its own counsel and rejected the insurer’s offer to provide a single defense counsel to represent both the additional insured and named insured as co-defendants in a negligence lawsuit. Because both the insured and the additional named insured were alleged to be directly negligent, and each defendant alleged that it should be relieved of its separate responsibility for damages due to the negligence of the other defendant, the court held a conflict in legal positions existed that required the insurer to provide separate and independent counsel to each co-defendant.
The University of Miami (“UM”) was an additional named insured on a CGL policy issued by Great American Assurance Company to MagiCamp, which ran a summer swim camp for kids using a pool on the campus of UM. On July 18, 2000, a four-year-old child was injured while using the pool. His parents sued both MagiCamp and UM claiming the injuries were due to lack of supervision of the campers at the UM pool and that both entities (MagiCamp and UM) were directly negligent. Additionally, the child’s parents asserted the position that UM was vicariously liable for the negligence and lack of supervision.
Great American retained the services of one law firm to represent both MagiCamp and UM. MagiCamp filed an answer and affirmative defenses alleging that there was an intervening or superseding act, not under the control of MagiCamp, which caused the injuries, and that the resulting damages were caused by the fault of persons or entities other than MagiCamp. Additionally, MagiCamp requested apportionment of damages based on the percentage of fault of the respective defendants and claimed that it was entitled to indemnification and contribution from UM for the damages. Notably, UM was the only other entity sued.
On the same day MagiCamp filed its answer and affirmative defenses, UM advised Great American that there was a conflict of interest in the single representation of both MagiCamp and UM and that UM demanded independent counsel of UM’s choice. In response, Great American asserted the position that there was no conflict of interest in providing single counsel in the representation of both MagiCamp (named insured) and UM (the additional insured). The insurer declined to provide separate independent counsel for UM.
UM retained its own counsel. The case subsequently settled. UM then brought an indemnification declaratory action requesting a declaration that Great American breached its contractual duty to UM by refusing to provide separate and independent counsel. The trial court granted Great American’s motion for final summary judgment and denied UM’s request for indemnification of attorney fees and costs. The Third District reversed and remanded, holding that there existed a conflict in the legal defenses of UM and MagiCamp and that this conflict required the insurer to appoint separate and independent counsel for UM.
In a case where the named insured and the additional named insured are co-defendants in a lawsuit, wherein both co-defendants are alleged to be directly negligent for the injuries sustained and each defendant alleges that it should be relieved of its separate responsibility for damages due the negligence of the other defendant, does there exist a conflict of interests between the insured and the additional named insured such that the insurer should provide separate and independent counsel for each.
Where a single defense counsel would have to argue conflicting legal positions in representing a named insured and an additional named insured as co-defendants in a lawsuit and, in doing so, would have to necessarily imply blame to one co-defendant to the detriment of the other, this “legal dilemma” creates a conflict of interests between the legal defenses of the co-defendants, thereby requiring the co-defendants’ liability insurer to provide separate and independent counsel to each (and entitling the additional named insured to qualify for indemnification for attorney fees and costs for independent counsel in a case where the insurer does not offer separate and independent counsel).
The court stated there existed a conflict in the co-defendants’ legal defenses, based on the allegations of the complaint that each defendant is directly liable, as well as the allegations in the answers and affirmative defenses set forth by each co-defendant. Specifically, MagiCamp answered and asserted the affirmative defense that, through no fault of its own, but through the fault of UM, the minor camper was injured, for which it was entitled to indemnification and contribution. Conversely, UM presented its position, as stated in a letter to Great American that, through no fault of its own, but through the fault of MagiCamp, the camper was injured. The court stated, “These allegations create diverse legal positions that are inherently adverse. These conflicting legal positions presented in defense to individual active negligence claims against MagiCamp and UM exist separate and apart from issues of coverage or excess policy limits.”
In a dissenting opinion, Judge Shepherd stated that the majority’s decision “opens a new frontier in insurance litigation of benefit only to the legal profession.” Judge Shepherd stated there was neither an actual conflict nor a “substantial risk” of a conflict and that the insurer’s contractual right to control the defense and indemnity features of the policy “should not be penalized merely because there exists the potential for insurer-selected counsel to become impermissibly conflicted in its representation.” Judge Shepherd indicated that the rules governing the Florida Bar and the attendant threat of malpractice liability provide sufficient assurance that counsel appointed by an insurer will not continue to represent an insured in the event a conflict of interest actually interferes with counsel’s ability to make independent professional judgments on behalf of the client.