A Florida appeals court ruled that an insurer did not breach its duty to indemnify in U.S. Fire Ins. Co. v. Hayden Bonded Storage Co., No. 4D05-4, 2006 WL 862845 (Fla. App. April 5, 2006).

 

Hayden Bonded Storage Company, a moving and storage business, contracted with Gayle Jacobs to pick up and deliver or store some furniture and personal property. Handwritten on the storage contract and customer protection plan documents was the valuation amount of $35,070.

 

Jacobs claimed that some of the delivered items were damaged; she claimed that the stored items that she received at a later date were damaged, too. She refused delivery of the stored property, stopped making her monthly storage payments, and Hayden sent her a letter notifying her that she was $11,000 in arrears. She sought injunctive relief to prevent Hayden from selling her property.

 

Hayden notified its inland marine insurer, United States Fire Insurance Company (USFIC), and requested a defense. USFIC paid the valuation amount on the storage contract and customer protection plan documents—$35,070—and refused to provide a defense. Jacobs did not accept the payment and filed suit against Hayden, seeking damages of over $500,000.

 

USFIC claimed that its limit of liability was $35,070, and it was not obligated to provide a defense.

 

Hayden and Jacobs executed a settlement agreement in which Jacobs would receive $475,000 if Hayden was successful in recovering funds from USFIC; otherwise, Hayden would be required to pay Jacobs $100,000, as well as the previously tendered $35,070.

 

The court examined the circumstances of this case against the standard stated in Coblentz v. American Surety Co. of New York, 416 F.2d 1059 (5th Cir. 1969), in which the court held that “an insurer which had 'refused to handle' its insured's defense, thereby leaving the insured 'to its own resources,' was bound by the terms of a negotiated final consent judgment entered against its insured.”

 

The court also listed three criteria under which an insured is bound to a settlement its insured negotiated with a claimant:

 

(1) the damages are covered by the policy;

(2) the insurer wrongfully refuses to defend; and

(3) the settlement is reasonable and made in good faith.

 

This case did not fit the criteria for two reasons: the insurer was under no duty to defend, and, as USFIC asserted, it did not breach its duty to indemnify.

 

Hayden argued that USFIC's refusal to tender more than $35,070 constituted a breach of duty to indemnify. The court, however, said, “The policy in this case clearly provided the insured property was to be valued in an amount that would not exceed 'the value shown in tariff documents, bills of lading or shipping receipts if any.'” The court further stated that the storage contract and warehouse receipt showed a declared value of $35,070, the amount USFIC tendered. Thus, the court concluded that USFIC fulfilled its duty to indemnify.