It has been held under Florida law that a claim of “insurance coverage by estoppel” is not a bad faith claim. In the case of Bishop v. Progressive Express Insurance Co.,FN1 a trial court entered summary judgment in favor of the policyholder on a claim of “insurance coverage by estoppel,” which the Florida appellate court reversed on appeal.
Florida’s First District Court of Appeal set forth the standing limitations on a claim of “insurance coverage by estoppel” under Florida law:
Undertaking communication, conduct, and steps in defense of an underlying action, heavily dependent upon the circumstances, may rise to a coverage by estoppel claim. This appeal involves an allegation an insurer made statements and undertook actions which led a business owner to believe she had insurance coverage for the underlying action; all this despite the insurer's knowledge of facts which would have permitted it to deny coverage.FN2
From an objective standpoint, the legal standard provides for the following elements: “This ‘coverage by estoppel’ claim requires a representation of material fact, reasonable reliance, and a detrimental change in position (i.e., prejudice) as a result of the reliance.”FN3
FN1 Bishop v. Progressive Express Ins. Co, 154 So. 3d 467 (Fla. 1st DCA 2015).
FN2 Bishop v. Progressive Express Ins. Co., 154 So. 3d 467, 468 (Fla. 1st DCA 2015). The reader would be excused if, after reading the quoted statement of Florida law, you did not come away knowing that the rule of “coverage by estoppel” has previously been applied under Florida law only in cases involving a liability carrier with a duty to defend which undertook its policyholder’s defense but did not reserve rights to contest coverage, and in which cases the absence of a reservation misled the policyholder to its prejudice to rely on the liability carrier’s undertaking the policyholder’s defense without reservation.
FN3 Bishop v. Progressive Express Ins. Co., 154 So. 3d 467, 468 (Fla. 1st DCA 2015).
Reprinted with the permission of Thomson Reuters and the author from the manuscript of the author's 2015 Supplement chapters, and in particular Section 5:15, in “Litigation and Prevention of Insurer Bad Faith, 3d” ©2015 by Thomson Reuters.