No Duty to Defend Lawsuit Alleging Remuneration to which Insured was Not Legally Entitled

The United States District Court for the Middle District of Florida, applying Florida law, has held that a professional liability insurer had no duty to defend a lawsuit alleging that the insured, a closing agent, wrongfully collected closing costs to which it was not entitled.  RLI Ins. Co. v. Coastline Title of Pinellas, LLC, 2022 WL 686274 (M.D. Fla. Mar. 8, 2022).  Notably, the pertinent exclusion did not have an “in fact” or final adjudication requirement.

The buyer of a property sued the closing agent for allegedly charging closing costs to the buyer instead of the seller in violation of the purchase agreement.  In a putative class action, the buyer alleged that he and putative class members were damaged by paying fees “they should not have paid” under the purchase agreement.  The lawsuit was dismissed with prejudice.

In a declaratory judgment action brought by the insured’s liability carrier, the court considered whether the insurer owed a duty to defend the insured against the buyer’s lawsuit under an E&O policy.  Among other grounds, the insurer argued that no coverage existed under the policy’s personal profit/advantage exclusion, which bars coverage for claims arising “out of, directly or indirectly resulting from or in consequence of or in any way involving . . . the gaining by [the insured] of any personal profit, remuneration or advantage to which [the insured] was not legally entitled.”

The court held that the exclusion applied because the lawsuit concerned the collection of fees by the insured in the absence of a contractual right to do so, regardless whether the claimant alleged illegal or criminal conduct.  The court rejected the insured’s argument that the court was required to determine whether the insured actually lacked a legal entitlement to the fees; it held that “Florida law is clear that an insurer’s duty to defend depends on the complaint” and “not its merits.”  Finally, the court held that the exclusion was broad enough to encompass and bar coverage for the entire action, noting that the underlying case was about the wrongful collection of fees, and the clause, “or in any way involving” in the exclusion is a “mop-up clause” “intended to exclude anything not already excluded by the other clauses.”