Embroidme.com, Inc. v. Travelers Property Casualty Company of America
845 F.3d 1099
| 11th Cir. | 2017Background
- EmbroidMe was sued in 2010 for alleged copyright infringement and had a liability policy with Travelers that included a duty/right to defend and indemnify for covered claims.
- EmbroidMe never tendered the claim to Travelers for ~18 months; it retained counsel and incurred roughly $400,000+ in pre-tender legal fees before notifying Travelers in October 2011.
- Travelers agreed it had a duty to defend going forward, reserved coverage defenses (fraudulent acts, breach of contract, etc.), and expressly refused to reimburse pre-tender fees because the policy barred reimbursement of expenses the insured voluntarily incurred without insurer consent.
- Travelers sent a reservation-of-rights letter 39–42 days after learning of the pre-tender fees; EmbroidMe argued this missed the 30-day deadline in Florida’s Claims Administration Statute (CAS), Fla. Stat. § 627.426, estopping Travelers from denying reimbursement.
- District court granted Travelers summary judgment; Eleventh Circuit affirmed, holding Travelers relied on a policy exclusion (not a coverage defense) so the CAS did not bar enforcement of the exclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travelers’ refusal to reimburse pre-tender attorney’s fees was a “coverage defense” subject to the CAS notification deadlines | Beville/ CAS: Travelers failed to give timely notice of a coverage defense, so it is estopped from denying reimbursement of pre-tender fees | Policy language created an exclusion: fees voluntarily incurred without insurer consent are excluded from coverage, so CAS does not apply | Held for Travelers — refusal was based on a policy exclusion, not a coverage defense; CAS inapplicable |
| Whether the policy permits reimbursement of fees an insured unilaterally incurs before tendering a claim | EmbroidMe contends tardy reservation triggers CAS estoppel and permits recovery | Travelers points to express contractual provision requiring insurer consent before reimbursement | Held for Travelers — policy explicitly disallows reimbursement absent consent, EmbroidMe was an informed, sophisticated insured |
| Whether Block Marina/AIU principle prevents enforcement of an express exclusion when insurer misses CAS deadlines | EmbroidMe argued CAS estoppel should bar Travelers’ denial similar to some CAS cases | Travelers relied on Block Marina: CAS cannot create coverage where policy expressly excludes it | Held: Block Marina controls — CAS cannot be used to create coverage inconsistent with an express exclusion |
| Whether Beville requires a different result | EmbroidMe relied on Beville to recover pre-notice fees where insurer violated CAS | Travelers distinguished Beville (different facts and coverage-defense context) and argued it’s not controlling | Held: Beville is distinguishable; even assuming Beville permits fees, here Travelers’ position rested on an exclusion so Beville does not compel recovery |
Key Cases Cited
- AIU Ins. Co. v. Block Marina Inv., Inc., 544 So.2d 998 (Fla. 1989) (CAS cannot create coverage where policy expressly excludes it)
- Nationwide Mut. Fire Ins. Co. v. Beville, 825 So.2d 999 (Fla. 4th DCA 2002) (insurer’s CAS violations can, in certain circumstances, permit recovery of pre-notice defense costs)
- Fans & Stoves of Jacksonville v. Aetna Cas. & Surety Co., 549 So.2d 1178 (Fla. 1st DCA 1989) (CAS penalty is preclusion of coverage defenses, not an award of attorney’s fees)
- Mid-Continent Cas. Co. v. Am. Pride Bldg. Co., LLC, 601 F.3d 1143 (11th Cir. 2010) (articulating Florida law distinction between duty to defend and duty to indemnify)