E&O Insurer Has No Duty to Defend Dispute Limited to Recovery of Fees

Applying Florida Law, the United States District Court for the Middle District of Florida has held that a professional liability insurer had no duty to defend an action that exclusively sought the return of fees charged by the insured where such amounts fell within an exception to the definition of “damages.”  RLI Ins. Co. v. Baywalk Title Inc., 2021 WL 4437163 (M.D. Fla. Sept. 27, 2021).

A buyer in a real estate transaction filed a putative class action suit against the insured title insurance company for allegedly charging buyers for closing service fees despite contractual language that obligated sellers to pay those fees.  The buyers’ sole theory of damages rested on the closing services fees charged.

The insured title insurance company sought coverage for this suit from its professional liability insurer.  The insurer denied coverage on the basis that the relief sought fell within the exception to the definition of “damages” for “the return, reduction or dispute over any fees, deposits, expenses, costs, or commissions charged or collected by [the insured].”

In the ensuing coverage litigation, the court found that the insurer did not have a duty to defend the suit because the suit did not state a cause of action that sought damages covered under the policy.  The court explained that, while the complaint asserted numerous theories of liability including negligence, breach of fiduciary duty, and unjust enrichment, each claim rested upon the allegation that the title insurance company charged buyers a fee that should have been collected from sellers.  Accordingly, the court held that the suit constituted a dispute over fees and, therefore, did not seek damages covered under the policy.