Florida Supreme Court Case Update – Auto Coverage
July 17, 2017
Atkinson, P.A. is writing today to alert you to a very recent case decided by Florida’s Supreme Court, which may impact your claims handling practices in the State of Florida. On July 13, 2017, the Florida Supreme Court decided Government Employees Insurance Company v. Macedo, finding that the carrier owed costs and attorneys’ fees pursuant to Florida’s offer of judgment statute, Fla. Stat. 768.79.
The Macedo case arose out of an automobile accident between Alysia Macedo and Zackery Lombardo in April 2012. Macedo sued Lombardo for damages resulting from bodily injuries she sustained as a result of that accident. During the lawsuit, Macedo served Lombardo with a proposal for settlement for $50,000, which was not accepted. The case proceeded to trial and the jury returned a verdict in favor of Macedo in the amount of $243,954.55.
Lombardo was insured by GEICO with limits of $100,000 per person and $300,000 in the aggregate. After the verdict, Macedo joined GEICO to the judgment and sought taxable fees and costs pursuant to section 768.79. The trial court awarded those fees and costs against GEICO jointly and severally with its insured.
On appeal, Florida’s Fifth District Court of Appeals affirmed the trial court’s judgment based on a previous decision, New Hampshire Indemnity Co. v. Gray, 177 So.3d 56 (Fla. 1st DCA 2015), in which the First District held that a provision providing coverage for “other reasonable expenses incurred at our request” included costs associated with litigating the case. In Gray, the First District held that the provision “necessarily encompasses incurring litigation costs, which may mean not only the insurer’s litigation costs, but also those incurred by the opposing party should that party prevail.”
In Macedo, the Florida Supreme Court interpreted the Additional Payments section of Lombardo’s policy, which provided:
ADDITIONAL PAYMENTS WE WILL MAKE UNDER THE LIABILITY COVERAGES
- All investigative and legal costs incurred by us.
* * *
- We will upon request by an insured, provide reimbursement for the following items:
(c) All reasonable costs incurred by an insured at our request.
The Court noted that the index of the policy listed “Legal Expenses and Court Costs” as items that were covered under the Additional Payments section. The Court also noted that the term “costs” was not defined in the Policy.
Drawing on the language of the index and the fact that the term “costs” was undefined, the Court concluded there was an ambiguity as to whether attorneys’ fees were included under the Additional Payments section. As is settled in Florida, ambiguities in the policy are generally construed against the drafter and in favor of coverage.
The Court also rejected GEICO’s argument that the attorneys’ fees awarded against Lombardo under the offer of judgment statute were not incurred by the insured at GEICO’s request. The Court noted that the GEICO policy gave it authority to settle the case. The Court then reasoned that since GEICO had authority to settle, “in essence GEICO controlled the litigation.” It concluded that “any cost or fee incurred as a result of GEICO exercising its authority and control is something that it intended to pay.”
The Court concluded that because of the purported ambiguities in the Additional Payments section of the Policy must be construed to provide coverage for the costs and attorneys’ fees awarded against Lombardo pursuant to the offer of judgment statute.
This case is significant for several reasons. First, it illustrates a tendency of the Florida Supreme Court to rule in favor of insureds in coverage and bad faith cases. In the past, Florida courts have declined to find ambiguities in a policy simply because a term was undefined. Further, there is a large body of case law in which Courts look at the popular meaning or definition of a term, at times referring to Webster’s dictionary or Black’s law dictionary, in order to avoid a finding of ambiguity. The Macedo Court does the opposite. Rather than look at the popular meaning of the term “costs” or any definition of the term “legal costs,” the Court simply concluded that the term was undefined and, therefore, ambiguous.
The case is also significant because the Court relied on the index to the Policy in making its coverage determination as if it were part of the Policy language. Traditionally, insurance coverage disputes have always been decided on the basis of the language of the policy itself. Florida Courts typically do not consider the language of the index in making coverage determinations. In this case the Court looked at the index to conclude an ambiguity in the policy existed. Thus, the Macedo case signifies a departure from what is traditionally considered by Courts in determining coverage.
We recommend sending this decision to your underwriting departments for review. In particular, we recommend that underwriters consider the effect of this decision on the Additional Payments section of the policy in traditional ISO forms. Should a carrier wish to specifically exclude attorneys’ fee awards from coverage, consideration should be given to modification by way of endorsement.
As always, we will continue to keep you advised regarding any pertinent appeals or decisions from the Supreme Court. Should you have any questions regarding the above, do not hesitate to contact the undersigned.
Very Truly Yours,