The plaintiff, an insured under a “claims made and reported” professional liability policy, sued the insurer seeking a declaratory judgment that the insurer had a duty to defend a negligence claim against the plaintiff. The insurer had denied a defense based on a policy provision stating that the insurer’s “right and duty to defend when [it has] used up the applicable limit of insurance in the payment of judgments and settlements.” The insurer asserted that the policy’s $3 million aggregate limit had been exhausted before the plaintiff was sued.
The insured moved for summary judgment on the grounds that: (1) the duty to defend was determined based on the allegations of the underlying tort complaint, which did not mention the policy limits; and (2) the insurer could not show that the policy limits had been exhausted. The trial court agreed with the insurer and entered summary judgment against the insurer.
On appeal, Chris and Ezequiel argued that the traditional “eight-corners” rule (which states that the allegations of the complaint govern the duty to defend) did not apply because the existence and exhaustion of policy limits was not a matter normally raised in a tort complaint. The appellate court agreed with Chris and Ezequiel and held that this case presented a narrow exception to the “eight-corners” rule: “In order to resolve a duty to defend dispute which turns on whether the policy limits were exhausted, courts must look to the actual facts behind the pleadings.” Diamond State Ins. Co. v. Fla. Dep’t of Children & Families, No. 3D18-1571, 2019 WL 5582252 (Fla. 3d DCA Oct. 30, 2019).
The Third District Court of Appeals also rejected the plaintiffs’ arguments that the affidavit of the insurer’s senior claims examiner was not credible. The appellate court explained that questions of credibility could not be decided on summary judgment. For these reasons, the Third District Court of Appeal reversed the judgment for the insured and remanded for further proceedings.