An insurer has no duty to defend a Complaint that fails to state a cause of action as a matter of law when the insurer would also have no duty to defend a properly pleaded cause of action.
Florida courts typically characterize a liability carrier’s duty to defend as very broad. Courts routinely find that a carrier has a duty to defend as long as the policy might potentially cover the allegations of a Complaint, even when those allegations have no legal or factual merit. Not surprisingly, Plaintiffs with dubious claims sometimes draft Complaints in a manner designed to trigger a carrier’s duty to defend. Such Complaints often seek to spin gold from straw; even though the claim against the inured must inevitably fail, the carrier must provide a defense. A claim for which there is no coverage thus acquires value based upon the cost of defense.
This outcome is not inevitable, though. Courts have found that an insurer has no duty to defend when the Plaintiff fails to allege the required elements for a claim under Florida law. In two recent cases, Florida courts found that the carrier had no duty to defend a Complaint that failed to state a cause of action as a matter of law when the carrier would have no duty to defend a properly pleaded cause of action. In each case, the carrier had no duty to defend despite allegations that might otherwise have triggered a defense obligation.
In Chartis Property & Casualty Company v. Jassy[i], a federal district court considered whether a carrier had a duty to defend its insureds against a lawsuit alleging that the insureds had negligently failed to disclose the presence of harmful Chinese drywall in the sale of the insureds’ home. Judge Moody noted that the Florida Supreme Court has limited a seller’s duty to disclose to circumstances where “the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer.”[ii] Thus, “[s]ince the negligence allegation against the Jassys [was] based entirely on the Jassys failure to disclose the Chinese Drywall, and the Jassys could only be liable for omissions of material facts of which they were aware at the time of the sale, the claim [is excluded] under the intentional act exclusions [of the policy].@[iii]
In Catlin Syndicate v. Rimkus[iv], Plaintiff, an employee of the insured, sued the insured after a high altitude crane fell on him and rendered him a paraplegic. Plaintiff claimed that the insured, in failing to stop its employees from operating the crane during unsafe wind conditions, had been “engaging in conduct that it knew … was virtually certain and/or substantially certain to result in death or injury” to the Plaintiff. The carrier claimed that it had no duty to defend, in part, because of the expected or intended injury exclusion in the policy.
Judge Middlebrooks rejected the notion that the pleaded and “much more liberal” “substantial certainty” standard necessary for an employee to sue an employer imposed a duty to defend. He noted that the Florida Legislature had replaced that standard with the more rigorous “virtual certainty” standard.[v] Accordingly, if the court “ considered [Plaintiff=s] allegation that [the insured] was only ‘substantially certain’ that its actions would result in Eric’s injury, [the carrier] would not have a duty to defend [the insured] against [Plaintiff=s] claim because [Plaintiff] failed to state a claim as a matter of law.” [vi] The court found that the expected or intended injury exclusion in the policy applied to preclude coverage.[vii]
While these cases are not unique, they represent an encouraging tendency of the courts to disregard “clever” pleadings designed to create a defense obligation that would not otherwise exist.[viii] As noted by Judge Moody, using “buzz words” in a Complaint will not trigger a duty to defend when the cause of action is for an act the policy does not cover.[ix]