Legal Memorandum: Insurer Duty to Defend an Action against Insured

Issue: Under Florida law, is a suit brought by a bank customer’s bankruptcy trustee covered by the bank’s insurance on claims brought by customers, so that the insurer has a duty to defend against the claim?

  Extensive research did not locate any Florida cases specifically addressing whether an insurer must defend against a negligence claim brought by a bank’s customer’s bankruptcy trustee.  However, provided the policy does not explicitly exclude the coverage, the bank could construct a credible argument that the insurer should defend against the claim.

Florida courts “have adopted a strict rule that an insurer’s duty to defend an action against its insured is determined solely by the allegations in the complaint.”  Auto Owners Ins. Co. v. Travelers Cas. & Sur. Co., 227 F. Supp. 2d 1248, 1258 (M.D. Fla. 2002).  If a complaint contains allegations, some of which would be within the policy coverage, then the carrier must defend the case even if other allegations are not within the coverage pursuant to the policy.  Id. at 1258.  The insurer’s duty to defend is broader than its duty to indemnify because an insurer must defend even if the alleged facts are not true or the proposed legal theories are not sound.  Id.; see also Wendy’s of N.E. Fla., Inc. v. Vandergriff, 865 So. 2d 520 (Fla. Dist. Ct. App. 2003).  Therefore, the insurer must defend the insured if the complaint’s allegations could bring the insured within the policy’s coverage provisions.  Amerisure Ins. Co. v. Gold Coast Marine Distrib., Inc., 771 So. 2d 579 (Fla. Dist. Ct. App. 2000).  Because the duty to defend is separate and apart from the duty to indemnify, the insurer must defend even if the facts later […]