An intermediate appeals court in Florida held that an insurer’s decision to refuse separate independent counsel for an additional insured (AI) was wrong and awarded the AI indemnification for attorney’s fees and costs for independent counsel. In University of Miami v. Great American Assurance Company, etc., (No. 3D09-2010, Florida Third District Court of Appeal), the insured ran a summer swim camp on the AI’s campus. The claimant sued both entities for lack of supervision, claiming bodily injuries from being pulled unresponsive from the bottom of the pool. AI notified insurer that there was a conflict of interest in the single representation of both insured and AI and demanded independent counsel. The insurer declined and the AI sued for indemnification of attorney’s costs related to the defense of the underlying matter.
In a matter of first impression, the court noted it “important” that there were only two entities being placed in the defensive posture in the underlying matter. Within the underlying matter, the court noted that among other things, the insured asserted an affirmative defense that the injuries were caused by no fault of its own, but rather, through the fault of AI. The AI similarly claimed the same defense and allegation against the insured by way of a letter. The AI relied on precedent in Illinois, New Jersey, and Pennsylvania for its position.
Agreeing with the AI, and determining the cases it relied on persuasive, the court found that “legal counsel would have had to necessarily imply blame to one co-defendant to the detriment of the other. On these facts, we believe this legal dilemma clearly created a conflict of interest … sufficient to qualify for indemnification… .”
The dissent disagreed, pointing to indemnification language in the agreement between the insured and AI, the fact that neither party filed a claim against the other, and finding the cases cited by the AI to involve “real,” “imminent,” and “actual” conflicts unlike this matter. Accordingly, the dissent believed that the majority’s decision would “open[] a new frontier in insurance litigation… .”