A Florida appellate court has ruled against a state agency battling a private insurer over liability coverage.

Florida's Third District Court of Appeal issued an opinion Wednesday reversing and remanding a final declaratory judgment entered in Miami-Dade Circuit Court for the Florida Department of Children and Families against Diamond State Insurance Co. The appellate panel determined the lower court granted the DCF's motion for summary judgement against the insurer prematurely, and ruled issues of material fact remained in the case.

The dispute began after two minors filed complaints against Our Kids of Miami-Dade/Monroe Inc., a private company contracted by the DCF to render child protective services. As noted in the Third DCA's opinion, Florida's foster care system was privatized in 2000.

The suits alleged Our Kids allowed abuse to happen under its watch, and the parties eventually settled for a combined total of $2,990,000 between the two plaintiffs.

According to the Third DCA, Diamond State provided professional liability insurance to Our Kids with a limit of $1 million per claim and $3 million in the aggregate.

Read the opinion:

After the settlements, the plaintiffs pursued additional litigation against DCF. The lawsuit cited DCF's contract with Our Kids and contended the state agency's negligence enabled the alleged abuse outlined in the complaints.

DCF responded to the suits and asked Diamond State to intervene as the company's plan with Our Kids provided coverage to the state agency as well.

The insurer refused, arguing the $2,990,000 in settlements had exhausted the policy's limits and relinquished the company from having to defend claims against the policyholder. The Third DCA also said the disputed plan didn't cover "where DCF was sued for its own negligence."

DCF subsequently brought legal action against Diamond State and sought a declaratory judgment outlining that the insurer "had a duty to defend" the organization. The agency filed a motion for partial summary judgment, asserting that "the duty to defend is determined by looking only to the pleadings, which made no reference to policy limits" and that Diamond State did not firmly establish the policy had been fully spent.

Diamond State responded with an affidavit from its senior claims examiner claiming otherwise. DCF's reply attacked the affidavit's credibility, maintaining "the insurer admitted in discovery that it lacked some of the documentation normally associated with such a payment of the policy limits" in addition to purporting Diamond State had made false statements and failed to provide the court with crucial documents.

The lower court granted DCF's motion for partial summary judgment and entered a final judgment declaring Diamond State had a duty to defend the organization from the claims. The ruling prompted the insurer to appeal to the Third DCA.

The appellate court ruled the questions of credibility surrounding Diamond State's affidavit necessitated further proceedings in the case.

"Because the existence and exhaustion of policy limits is not a matter normally addressed in a complaint, it would be impossible to enforce the bargain reached by the parties if the court refused to look beyond the pleadings," the opinion said, noting DCF's suit against Diamond State "presents a narrow exception to the general rule that the duty to defend is determined by looking only at the pleadings."

"In order to resolve a duty to defend dispute which turns on whether the policy limits were exhausted, courts must look to the actual facts behind the pleadings," the opinion added. "While a trier-of-fact may well agree with DCF as a factual matter that the testimony of the senior claims examiner lacks credibility, summary judgment is not the vehicle to make such a determination."

Ezequiel Lugo and Chris W. Altenbernd of Banker Lopez Gassler's Tampa office represented Diamond State before the Third DCA. Neither attorney responded to press inquiries by deadline.

DCF's appellate counsel, Coral Gables attorney Andrew J. Anthony, declined to provide comment.

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