Section 624.1055, Florida Statutes, is part of the recent Omnibus Insurance Bill, HB 301: Contribution Rights Among Insurance Carriers. This new legislation impacts those involved in Florida construction defection litigation and applies to claims, suits or other actions initiated after January 1, 2020.

Old Rule – No Right of Contribution

The longstanding rule in Florida has been that there is no right of contribution among insurance carriers for attorney fees incurred in defending a mutual insured. The rationale has historically been that each carrier owes a complete and independent obligation to provide a defense under the insuring policy, such that, by issuing the policy, the carrier did so without contemplation that it would be entitled to recover payment from another carrier for such defense costs. The Florida Supreme Court described the rationale for the current rule in the case of Argonaut Ins. Co. v. Maryland Cas. Co., 372 So.2d 960, 964 (Fla. 1979), as follows:

The Legislature has not seen fit to allow contribution for costs or attorney’s fees between insurance companies. If contribution for costs were allowed between insurance companies, there would be multiple claims and law suits. The insurance companies would have no incentive to settle and protect the interest of the insured, since another law suit would be forthcoming to resolve the coverage dispute between the insurance companies. This is contrary to public policy, particularly since the insured has been afforded legal protection and has not had to personally pay any attorney’s fees.”

New Legislation and Impact

The new legislation changes this rule of law by providing that:

A liability insurer who owes a duty to defend an insured and who defends the insured against a claim, suit or other action has a right of contribution for defense costs against any other liability insurer who owes a duty to defend the insured against the same claim, suit or other action, provided that contribution may not be sought from any liability insurer for defense costs that are incurred before the liability insurer’s receipt of notice of the claim, suit or other action.”

There are a few additional interesting aspects of the new legislation. For example, for purposes of allocating obligations, the statute directs the court to “allocate defense costs . . . in accordance with the terms of the liability insurance policies. The court may use such equitable factors as the court determines are appropriate in making such allocation.” Further, the legislation applies to “policies issued for delivery in this state, or liability insurance policies under which an insurer has a duty to defend an insured against claims asserted or suits or actions filed in this state.” By its terms, the legislation does not apply to motor vehicle liability insurance or medical professional liability insurance.

It obviously remains to be seen as to whether the new legislation will lead to additional litigation, but the legislation appears to have been motivated by a desire to encourage insurers to more readily accept a defense obligation, knowing that they may be entitled to recover a portion of their fees from another insurer. It should be noted that the right to contribution does not begin until notice has been provided, so insurance carriers wishing to take advantage of this right of contribution are well advised to put other potential carriers on notice as soon as possible.

As always, please feel free to call or email with any questions or comments. I may be reached at 239-344-1205 or via email at matthew.belcastro@henlaw.com.