Funds received via third-party indemnity can be used to satisfy a self-insured retention under Florida law. Also, policy language at issue governing transfer of rights does not abrogate the “made whole doctrine.”

Company A was not an additional insured under the policy of Company B, but the subcontract gave A the right to contractual indemnity in the event of negligence of B. A’s insurance policy had a $1 million SIR. In settlement of a third-party personal injury suit, B paid to A $1 million in satisfaction of the indemnity clause, and A in turn paid those funds to the injured plaintiff. A then sought coverage from its own insurer for the settlement amount in excess of $1 million. The Florida Supreme Court held that policy language requiring the SIR to be paid “by A” was insufficient to require A to pay the SIR with its own funds. Therefore, A’s SIR was exhausted by payment using the indemnity funds and coverage was triggered. The opinion also analyzed the “make whole doctrine” and concluded that the transfer of rights clause in the policy at issue was insufficient to alter the common law doctrine in this case.

Case Law Alerts, 2nd Quarter, April 2014