Supplementary Payments Coverage

In Pac. Employers Ins. Co. v. Alex Hofrichter, P.A., 670 So. 2d 1023, 1024 (Fla. 3rd DCA 1996), the policy at issue contained a “Supplementary Payments” provision which read:

1. The Company shall pay the following as part of the limits of liability under this policy:

(1) All expenses incurred by the Company, all costs taxed against the Insured in any suit defended by the Company and all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the company has paid or tendered or deposited in court that part of the judgment which does not exceed the limits of the Company’s liability thereon.

 

The Third DCA held that under the language of the “supplemental payments” provision of the policy, once the insurer defended, substantive coverage was not necessary to trigger the obligation to pay costs taxed against the insured in the suit.  The court noted that the policy contained no restrictions or limitations on the promise to pay supplementary payments. 

Unlike the “supplementary payments” provision at issue in Pac. Employers Ins., some policies “supplementary payments” provisions do contain restrictions or limitations on the promise to pay. These “supplementary payments” read:

If Coverage A or B apply, we will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:

. . .

5. All costs taxed against the insured in the “suit.”

While there is currently no Florida case law interpreting such language, there is a valid argument that the plain language of these “supplementary payments” provisions restricts the carrier’s obligation to pay costs to situations where Coverage A or B is ultimately determined to apply to the claim.