Analyzing AOBs: Are the Courts Splitting Hairs or Seeking Statutory Compliance?
February 23, 2024
An issue that remains contentious is whether the Supplementary Payments provisions in the general liability policy provide coverage for attorney’s fees, which the insured is ordered to pay at the conclusion of litigation. Recently, the Federal Court for the Middle District of Florida in Prime Property & Casualty Insurance, Inc. v. O Mendoza Trucking, Inc., 2023 WL 2162196 (M.D. Fla. Feb. 22, 2023), addressed this issue.
In O Mendoza, Prime Property & Casualty Insurance, Inc. (Prime) provided O Mendoza Trucking, Inc. (O Mendoza) with a commercial auto policy. O Mendoza’s vehicle was involved in an auto accident and the claimant filed a lawsuit for personal injuries. During the litigation, the claimant served a proposal for settlement within policy limits, which Prime rejected on behalf of the driver of O Mendoza’s vehicle. Following a trial, the jury returned a verdict that triggered attorney’s fees due to the rejection of the proposal for settlement. Prime filed a declaratory judgment action arguing that no coverage existed for the award of attorney’s fees against the driver of O Mendoza’s auto.
Like most general liability policies, the policy contained Supplementary Payments provisions stating that the insurer would pay all reasonable expenses incurred by the insured at Prime’s request (subsection (4)). In addition, the policy contained a specific provision that coverage existed for court costs taxed against the insured, but no coverage existed for any award of attorney’s fees or attorney’s expenses taxed against the insured (subsection (5)). Prime argued that the latter provision barred coverage for the attorney’s fees found against the driver of O Mendoza’s vehicle. O Mendoza and the underlying claimant argued that former provision provided coverage for the award of attorney’s fees.
Back in 2017, I wrote a blog discussing the Florida Supreme Court’s decision in Government Employees Insurance Company v. Macedo, 2017 WL 2981812 (Fla. July 13, 2017) (Macedo II), in which the court analyzed whether an automobile liability insurance policy provided coverage for attorney’s fees and costs imposed against an insured defended by the insurance carrier. Specifically, the Court held that the other policy provisions providing coverage for costs, along with the index citing legal expenses, created an ambiguity regarding whether coverage for attorney’s fees was included. Therefore, the court held that coverage for such damages existed.
The court in O Mendoza cited to Mercado II and held that the Supplemental Payments provisions in the policy provided coverage for the attorney’s fees that O Mendoza was ordered to pay. Specifically, the court explained:
Subparagraphs (4) and (5) address different coverages. Subparagraph (4) discusses “reasonable expenses” that the insured incurs at the insurer’s request, while subparagraph (5) discusses “court costs taxed against the insured, without regard to whether they were incurred at the insurer’s request. Subparagraph (5) excludes attorney’s fees from “these payments,” which in context plainly refers only to the court costs covered under that subparagraph. Nothing in the subparagraph suggests a broader exclusion of fees that would also apply to coverage provided under subparagraph (4) or the Policy as a whole.
The policy language in the O Mendoza case and Mercado II are a little different. In Mercado II, the Florida Supreme Court analyzed provisions contained in GEICO’s policy, “[a]ll investigative and legal costs incurred by us” and “[a]ll reasonable costs incurred by an insured at our request.” Critically, however, the index to the policy listed “Legal Expenses and Court Costs” as costs and expenses covered under the policy. Therefore, the Florida Supreme Court found the provisions to be ambiguous. Nothing in the court’s opinion states the policy in O Mendoza contained this same index. In addition, the policy in Mercado II did not use the word “fees,” while the policy in O Mendoza specifically states that no coverage is owed for attorney’s fees awarded against the insured. Therefore, it appears that the court in O Mendoza expanded coverage under the Supplementary Payments provisions.
It will be interesting to monitor whether additional courts address this issue and whether they expand or limit a carrier’s obligation to pay attorney’s fees imposed against an insured under a general liability policy.
For any further questions, please contact J. Blake Hunter.
Click here to read Part I.
February 23, 2024
January 26, 2024
October 19, 2023