Florida Supreme Court Reaffirms Applicability of Chapter 627 to Surplus Lines Insurers
July 21, 2008
The Florida Supreme Court recently reaffirmed that the provision of §627.021(2), Florida Statutes, stating that "this chapter does not apply to ...[s]urplus lines insurance" does not mean that none of the statutory provisions of chapter 627, a broad ranging insurance regulatory scheme, apply to surplus lines insurance. Essex Ins. Co. v. Zota, 2008 WL 2520879 (Fla. June 26, 2008).
An insured was sued by an injured employee of a party with whom the insured had contracted to paint the insured's home. The insurer, a surplus lines carrier, filed for declaratory relief based on policy provisions, and filed a motion for summary judgment. The insured argued that the insurer violated §§626.922 and 627.421, Florida Statutes, by not delivering the policy to the insured and therefore was precluded from denying coverage. The policy was delivered by the insurer's agent to the insured's agent, but the insured's agent failed to provide a copy of the policy to the insured. The insurer argued that chapter 627 in its entirety does not apply to surplus lines insurance.
The Florida Supreme Court, re-affirming its previous holding in Nat'l Corporacion Venezolana, S.A. v. M/V Manaure V, 511 So. 2d 968 (Fla. 1987), held that the insurer was incorrect in the assertion that none of the statutory provisions of chapter 627 apply to surplus lines insurance. The Supreme Court ruled that the legislature intended for the exclusionary provision of §627.021(2) to apply exclusively to Part I of chapter 627, not chapter 627 as a whole, citing a scrivener's error as the reasoning behind the statute's wording. Thus, the Court held that provisions of chapter 627 do apply.
The Supreme Court then addressed the insured's claim that the policy had not been delivered to the insured. It noted that §627.421 does not exclude delivery to authorized brokers of the insured. The Supreme Court held that where (1) a surplus lines insurer or its surplus lines agent delivers copies of an insurance policy to the representative of the insured acting as an independent broker; (2) the insured disputes that it received a copy of the policy; and (3) the insured fails to present any evidence that its broker was actually acting as an agent of the insurer, the insured may not rely on §627.421. The Supreme Court ruled that a surplus lines insurer or its agent complies with §627.421's command to deliver a copy of the policy "to the insured or to the person entitled thereto," by delivering a copy of the policy to the insured's independent broker.
