At its core, Horn v. Liberty Ins. Underwriters, Inc., No. 18-80762 (S.D. Fla. May 30, 2019), is a case about coverage for a consent judgement for a TCPA claim that included an assignment of the insured’s rights under its policy.  [The consent judgment was a whopper -- $60 million and change].

As the claim arose under a professional liability policy, the coverage issues were different from those usually on the table under a CGL policy.  Here, the question whether there was invasion of privacy went to the applicability of an Invasion of Privacy exclusion.  In a TCPA claim, under a CGL policy, whether there was invasion of privacy goes to whether the definition of “personal and advertising injury” has been satisfied.  

The insurer here argued that the TCPA action arose out of an invasion of privacy and, therefore, excluded under the policy.  Following a lengthy analysis, with resort to lots of case law, the court held that coverage for the TCPA violations was precluded by the TCPA exclusion.  Then the court went further, concluding that coverage for the entire action was precluded and not just those aspects that involve invasion of privacy.

If the case had ended there, I would not be writing about it here.  Yes, it involved a lot of money.  And, yes, it addressed a TCPA claim from a different angle than a CGL policy.  But, at its core, it’s a straightforward TCPA claim and not one I’d get excited about.

But then the court went on, stating that “even assuming that coverage is available under the Liberty Policy for the other, non-invasion of privacy harms identified in the iCan Action, Plaintiffs still cannot recover under the Liberty Policy because of their failure to allocate the lump sum settlement between covered and non-covered losses.”

The Plaintiffs (assignees) sought to get around this problem by asserting that the insurer “waived the allocation issue by failing to raise it as a coverage defense in its denial of coverage letters to the iCan plaintiffs, in violation of the Claims Administration Statute, §627.426, Fla. Stat.”  But the court concluded that the statute does not apply to the allocation/apportionment issue: “The CAS provides that an insurer can be estopped from denying coverage based on the non-disclosure of a ‘coverage defense’  Both federal and state cases, including the Florida Supreme Court, have narrowly construed the term ‘coverage defense’ to include defenses to coverage where coverage would otherwise exist, such as the insured’s breach of a contractual policy condition. . . . However, the CAS does not apply to on-point policy exclusions or issues that result in a complete lack of coverage.  Here, the burden of an insured to allocate/apportion a settlement is established by the common law and is not a ‘coverage defense’ under the CAS.”

Admittedly, given that the allocation issue arose in the context of a Florida statute, it could be said that the decision is not strong support for a wider rule that an insurer, by failing to include it in its reservation of rights letter, does not waive the insured’s obligation to allocate a settlement between covered and uncovered claims. 

However, the basis for the court’s conclusion was that “waiver and estoppel may not be used to create coverage beyond the terms of the policy.”  This is a general rule nationally.  Therefore, while the allocation issue arose in the context of a Florida statute, the decision, based on its reasoning, has the opportunity to provide wider support for a rule that an insurer does not waive the insured’s obligation to allocate a settlement, between covered and uncovered claims, by not including this requirement in its reservation of rights letter.