Florida Ends Waiting Game and Creates Statutory Right of Contribution for Defense Costs

While Florida’s new Omnibus Insurance Bill for the most part updates laws relating to Florida surplus lines, its provision relating to a right of contribution for defense costs will have far-reaching effects on Florida’s insurance industry, especially in the context of multiple-policy/insurer actions, construction defect claims, and premises liability claims.

Florida House Bill 301, signed by the governor on June 18, 2019, creates Florida Statute Section 624.1055. This section effectively reverses the established prohibition in Florida for causes of action between insurers for contribution or subrogation for expenses incurred in the defense of a mutual insured. Now, a liability insurer who defends an insured may file suit against other insurers asserting a right of contribution for defense costs. According to the Florida Insurance and Banking Subcommittee analysis, the section addresses legislative concerns regarding a waiting game when multiple co-primary insurers have potential defense obligations due to the current absence of a right of contribution among co-primary insurers at common law. In the past, liability insurers, in claims where multiple insurers’ policies were triggered, were hesitant to defend the common insured until other insurers agreed to assume the defense. The first insurer to pick up the defense was penalized for protecting its insured, but a carrier who failed to act in a timely fashion to contribute to the defense benefitted.

A non-defending insurer need not contribute to defense costs incurred prior to the insurer’s receipt of notice of the claim or suit. This limitation reflects the general principle that an insurer should not be compelled to provide coverage for pre-tender defense costs, as these costs are incurred without the insurer’s consent.

The new cause of action is available to admitted and surplus lines liability insurers, but not to motor vehicle liability or medical professional liability insurers. It applies to insurance policies issued within the state of Florida and whenever the underlying claim is filed within the state of Florida. The bill is effective July 1, 2019 and the statutory right of contribution will be available with respect to actions initiated on or after January 1, 2020.

Section 624.1055 instructs courts to apply the terms of the relevant insurance policies in allocating defense costs, while also permitting courts to “use such equitable factors as the court determines are appropriate in making such allocation.” We expect Section 624.1055 will result in earlier agreements between insurers to co-defend their mutual insureds.

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