Undertaking Communication, Conduct, and Steps in Defense of an Underlying Action May Give Rise to a Coverage by Estoppel Claim.

In Bishop v. Progressive Express Ins. Co., 2015 Fla. App. LEXIS 97, plaintiff filed a claim of insurance coverage by estoppel against an insurance company. The plaintiff claimed that the insurer made statements and undertook actions that led the plaintiff to believe she had insurance coverage for the underlying action. The insurer allegedly engaged in this conduct despite the insurer’s knowledge of facts that would have permitted it to deny coverage. The trial court entered summary judgment in favor of the insurer and the plaintiff appealed.

The First District Court of Appeal of Florida reversed the summary judgment and remanded the case for the trier of fact to determine the ultimate weight to give the insurer’s conduct versus the reasonableness of the plaintiff’s reliance. The Court outlined that when an insurance company assumes the defense of an action, with knowledge, actual or presumed, of facts which would have permitted it to deny coverage, it may be estopped from subsequently raising the defense of non-coverage. This “coverage by estoppel” claim requires a representation of material fact, reasonable reliance, and a detrimental change in position (i.e., prejudice) as a result of the reliance. Prejudice and whether the promisee’s reliance was reasonable are generally questions for the trier of fact.