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Eleventh Circuit Recently Ruled Insured Owes Reimbursement of Defense Costs when No Duty to Defend Existed

Pekar Law, P.A. May 23, 2014

In a recent decision by the U.S. Eleventh Circuit Court of Appeal, the Court held that an insured business owner had to reimburse the insurance company for all attorney’s fees and costs that the insurance company paid while defending the insured business owner since no duty to defend existed. See Halikoytakis v. Certain Interested Underwriters at Lloyd’s, London, Case No. 13-12590.

In Halikoytakis, the insurance company agreed to defend its insured under the insured’s liability policy subject to a reservation of all rights, including the right to seek reimbursement of attorney’s fees and costs that the insurance company paid on behalf of the insured. The insurance company then filed a declaratory judgment action against the insured asking the court to determine that it had no duty to defend or indemnify its insured in a trip and fall case. While the declaratory judgment action was being litigated, the insurance company defended the insured in the trip and fall case and incurred in excess of $80,000 in attorney’s fees and costs in the defense.

The trial court determined that the insurance company had no duty to defend or indemnify the insured in the trip and fall case. The insurance company then filed a motion seeking reimbursement of attorney’s fees and costs pursuant to the reservation of rights letter, including the right to seek reimbursement of attorney’s fees and costs. The trial court granted the insurance company’s motion for reimbursement of attorney’s fees and the insured appealed to the Eleventh Circuit. The Eleventh Circuit’s opinion affirmed the trial court’s ruling.

This ruling is important to all insureds, including small business owners, who have liability insurance policies because it gives an insurance company a right to seek reimbursement of all attorney’s fees and costs that the insurance company pays on behalf of an insured, which could be significant. It is important to note that the Eleventh Circuits’ ruling is limited to situations where the insurance company sent a reservation of rights letter to the insured and the reservation of rights letter explicitly noted that it included the right to seek reimbursement of attorney’s fees.

Jeff Pekar of Pekar Law P.A. handled this case for the insurance company before forming Pekar Law P.A., including obtaining the award of attorney’s fees from the trial court and assisting in preparing the appellate brief. If you have any questions about this case or its impact on your case, or if you received a reservation of rights letter and have questions about it, please contact us.