MSC Wins Insurance Coverage for Contractor After Protracted Coverage Battle in the U.S. District Court for the Middle District of Florida

MSC Partner Douglas McIntosh and Senior Associate Dale S. Dobuler succeeded in obtaining vindication in a years-long coverage dispute between two large casualty insurers. MSC secured victory for its client-insurer in an action for equitable subrogation in Federal Court.

The litigation began in 2014 when, a General Contractor and an additional insured under a general liability policy issued by the Defendant insurer, was sued in a personal injury action.  The operative pleading alleged that the work of the insured subcontractor hired by the general contractor likely caused the plaintiff’s injury.  Accordingly, the General Contractor and its insurer tendered its claim to the subcontractor’s GL carrier and requested AI coverage pursuant to a contractual indemnity agreement between the parties, and under an AI endorsement in the Defendant insurer’s policy.  Pursuant to the terms of the contract and the respective policy language, the Defendant insurer should have been deemed a primary carrier for AI coverage to the General Contractor, and the Plaintiff-insurer only an excess carrier.

The Defendant insurer, however, disclaimed any coverage obligation, claiming that the General Contractor was independently negligent and that the complaint did not trigger coverage.  After the General Contractor’s own GL carrier dropped down and defended and settled the personal injury litigation, MSC pursued coverage on equitable subrogation theories against the subcontractor’s insurer.

The litigation, which spanned years, was finally resolved in May of this year on the eve of trial by the presiding U.S. District Court Judge, who ruled in favor of MSC’s Plaintiff-insurer on all counts and found that Defendant, subcontractor’s insurer, which had summarily denied any obligation to the General Contractor without pursuing a declaratory judgment on the question of coverage, had breached its policy when it denied coverage.  The Court, recognizing the broad duty to defend standard applied in Florida and applying the “arising out of” language in the Defendant-insurer’s policy, agreed with each of Plaintiff’s positions and found that coverage was in fact triggered, and indemnity owed back to the Plaintiff-insurer and MSC clients.

As a result of the Court’s Order, MSC was able to recoup both its client’s costs and indemnity payment from the recalcitrant sub-contractor insurer. Motions for fees and costs remain pending.  To read the full decision, CLICK HERE.

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