By Alec Schultz

Law360 (June 10, 2020, 6:09 PM EDT )

Alec Schultz

Florida's legal landscape offers fertile ground for an expected crop of class actions involving insurance coverage for business and personal losses stemming from the coronavirus pandemic.

These cases will be filed everywhere, but Florida will likely attract a disproportionate share of them. Businesses throughout the state, and especially ones in densely populated areas, have suffered greatly from the impact of government closures. Many of these businesses have insurance policies that could cover their losses, and established law favors policyholders when it comes to assessing the scope of coverage and determining exclusions.

Also, since Florida is a populous state and a tourism hub, many residents suffered losses from abandoned spring travel, and expect to suffer losses this summer, that could be covered by travel insurance policies.

With insurers already denying claims and blaming policy exclusions, litigation will inevitably follow.

As disappointed business owners and individuals are already discovering, many insurance policies contain exclusionary language related to pandemics. After the World Health Organization declared on March 11 that the spread of COVID-19 disease from the novel coronavirus is a global pandemic, predictably, insurers with pandemic exclusions in their policies started citing this language and denying claims.

They should brace for policyholders to fight back in court. Many insurers use uniform, or nearly uniform, policies to cover travel or business interruption situations for small- and medium-sized businesses. Whenever policies are uniform or substantially similar, policyholders have an incentive to pursue class actions as a means of marshaling claims and preserving their own litigation resources.

Courts in Florida take these class action filings seriously, routinely certifying insurance coverage disputes involving uniform policies.[1]

The propensity of courts to certify claims involving standard insurance policies would likely be enough to generate substantial class litigation in Florida. But when that's combined with the courts' tilt in favor of policyholders for assessing coverage, the two combined virtually guarantee an avalanche of class actions.

Specifically, Florida law construes ambiguity in an insurance policy in favor of the insured and in favor of coverage. If a policy is "susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage," it is considered ambiguous.[2] Whether an ambiguity exists in an insurance contract is a matter of law, and ambiguities regarding coverage are to be construed against the drafter and should be resolved in favor of the policyholder.[3] To assess whether ambiguity exists in an insurance contract, the court must "read each policy as a whole, endeavoring to give every provision its full meaning and operative effect."[4]

Applying this governing law, courts in Florida often find ambiguity in insurance policies.[5]

The reason for all this ambiguity is that many insurance policies do not contain complete sets of defined terms. While certain terms are defined and clearly set out in the policy, most standard insurance policies routinely reference a host of other terms that lack stated definitions. In such cases, there is an increased chance that a court will find ambiguity exists and construe this ambiguity in favor of the policyholder.

As the U.S. District Court for the Southern District of Florida stated in Glover v. Liberty Mutual Insurance Co., quoting State Farm Fire and Casualty Co. v. CTC Development Corp.:

While "[t]he lack of a definition of an operative term in a policy does not necessarily render the term ambiguous and in need of interpretation by the courts," "where policy language is subject to differing interpretations, the term should be construed liberally in favor of the insured and strictly against the insurer."[6]  

The court also quoted State Farm to note that "when an insurer fails to define a term .... the insurer cannot take the position that there should be a narrow, restrictive interpretation of the coverage provided."[7]

The lack of a definition for a particular policy term does not automatically result in legal ambiguity, but courts consistently find undefined terms to be ambiguous, resulting in coverage. "[B]ecause there are multiple reasonable interpretations regarding whether attorneys' fees are included by the terms 'expenses' and 'costs,' the Additional Payments section is ambiguous and must be construed in favor of coverage."[8]

Applying this to coronavirus coverage litigation, there is no question that many insurance policies contain exclusions for pandemics. Here again, however, Florida law favors policyholders. Although ambiguities are already construed in their favor, courts use even greater scrutiny in assessing whether a potential policy exclusion is valid and enforceable.[9]

Based upon this, it is not uncommon for Florida courts to find that exclusion language does not bar coverage, particularly when the law places the burden on the insurer to demonstrate the existence of an enforceable exclusion.[10]

Therefore, practitioners can expect to see Florida courts awash in class actions challenging coverage denials for business interruption claims and for losses under consumers' personal insurance policies. Pandemic exclusions, while clear on their face, may not hold up to scrutiny from the Florida courts that review them, especially when policy terms are written in contradictory language.

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Alec Schultz is a partner at Leon Cosgrove LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] See Joffe v. GEICO Indem. Ins. Co. , No. 18-61361-CIV, 2019 WL 5078228, at *6 (S.D. Fla. July 31, 2019) ("the class action is manageable, as the uniform policy provision in question lies at the heart of this case") (certifying class of insureds); Roth v. GEICO Gen. Ins. Co. , No. 16-62942-CIV, 2018 WL 9403428, at *6 (S.D. Fla. May 4, 2018) ("class certification is superior to other methods for adjudicating this controversy."); A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co. , 321 F.R.D. 688, 700 (S.D. Fla. 2017) (certifying class in case of "a uniform practice applicable to all members of the putative class"); Hirsch v. Jupiter Golf Club LLC , No. 13-80456-CIV, 2015 WL 2254471, at *4 (S.D. Fla. May 13, 2015) (certifying class and noting "when a group of plaintiffs suffer under a uniform policy, the commonality test is often satisfied"). Internal citations and quotations omitted unless noted.

[2] Travelers Indem. Co. v. PCR Inc. , 889 So. 2d 779, 785 (Fla. 2004).

[3] See Allstate Ins. Co. v. Orthopedic Specialists, 212 So. 3d 973, 976 (Fla. 2017).

[4] Id.

[5] See, e.g., Whitely v. Am. Integrity Ins. Co. of Fla. , 249 So. 3d 1312, 1314 (Fla. Dist. Ct. App. 2018) (reversing summary judgment for insurer and finding policy language ambiguous); Lopez v. GEICO Gen. Ins. Co. , 723 F. App'x 779, 782 (11th Cir. 2018) (reversing summary judgment and noting "[w]e construe that ambiguity in favor of Lopez, the insured."); Hepp v. Paul Revere Life Ins. Co. , 120 F. Supp. 3d 1328, 1347 (M.D. Fla. 2015) (finding ambiguity in policy and denying summary judgment).

[6] Glover v. Liberty Mut. Ins. Co., 418 F. Supp. 3d 1161, 1171 (S.D. Fla. 2019).

[7] Id.

[8] Gov't Employees Ins. Co. v. Macedo, 228 So. 3d 1111, 1114 (Fla. 2017).

[9] Auto-Owners Ins. Co. v. Anderson , 756 So. 2d 29, 34 (Fla. 2000)("exclusionary clauses are construed even more strictly against the insurer than coverage clauses"). "[I]n order for an exclusion or limitation in a policy to been forceable, the insurer must clearly and unambiguously draft a policy provision to achieve that result." Geico Gen. Ins. Co. v. Virtual Imaging Servs., Inc. , 141 So. 3d 147, 157 (Fla. 2013).

[10] See Amerisure Ins. Co. v. Auchter Co. , No. 3:16-CV-407-J-39JRK, 2017 WL 3584896, at *25 (M.D. Fla. Mar. 30, 2017) (denying insurer's motion for summary judgment alleging valid exclusion to coverage existed); Empire Fire & Marine Ins. Co. v. Floyd , 631 F. App'x 686, 689 (11th Cir. 2015) ("The Florida court decisions make it clear that if an exclusionary clause with undefined terms—such as the present case—has not been stated with sufficient clarity, then the rule of strict construction requires a construction in favor of the insured. Hence, we conclude that the district court erred under Florida law in the present case because it should have strictly construed the exclusion in favor of the insured.") (reversing summary judgment for insurer).

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