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Fortune Insurance Co. v. Owens3/2/1999
een entered in this state; it therefore "is subject" to the law of Florida, the state where the contract was entered.
By its terms, the Owens Policy does not extend bodily injury liability coverage to Hart and Gilmore. The Owens Policy only covers injuries "sustained by . . . the named insured, . . . any relative [of the named insured], . . . any other person while occupying the insured motor vehicle, or . . . a pedestrian . . . struck by the insured motor vehicle." This provision complies with Florida's no-fault insurance scheme. See Fla. State. Ann. §§ 627.730-627.7405 (West 1996 & Supp. 1999). Accordingly, neither Hart nor Gilmore are covered parties under the Owens Policy.
II.
Hart and Gilmore alternatively contend that Fortune should be estopped from denying coverage. We disagree.
As a general rule, estoppel may not be used "to broaden the coverage of a policy so as to protect the insured against risks not included therein . . . ." Currie v. Insurance Co., 17 N.C. App. 458, 459-60, 194 S.E.2d 642, 643 (1973). Where an insurer defends its insured without a reservation of its right to deny coverage, however, courts recognize an exception to this general rule and estop the insurer from subsequently denying coverage if the denial results in prejudice to a party. See Early v. Insurance Co., 224 N.C. 172, 174, 29 S.E.2d 558, 559-60 (1944) (" he insurer having come in and assumed charge of the defense in the action of the plaintiff [without a reservation of its rights to deny coverage] and continued in charge of such defense until an adverse judgment was rendered against the insured, . . . the insurer cannot now be heard to deny liability . . . ."); Insurance Co. v. Surety Co., 1 N.C. App. 9, 13, 159 S.E.2d 268, 272 (1968) (noting that estoppel is found where "the insurer, having knowledge of facts which would result in noncoverage, nevertheless assumes and conducts the defense of an action brought against its insured" without reserving its right to deny coverage); see generally 14 Ronald A. Anderson, Couch on Insurance §§ 51:82-51:99 (2d ed. 1982). The filing of a declaratory judgment action to clarify coverage issues "has the same effect as serving the insured with a reservation of rights." 2 Eric Mills Holmes, Appleman on Insurance § 8.4 (2d ed. 1996).
In this case, the record is equivocal as to whether Fortune reserved its right to deny coverage at the time it hired Morgan to undertake the representation of Owens. There is no reservation of rights letter in the record; however, Morgan's motion to withdraw states that he was informed by Fortune that it had "sent a reservation of rights letter to [Owens]." In any event, Fortune filed a petition for declaratory judgment denying coverage to Hart and Gilmore approximately one and a half years prior to trial. Accordingly, Hart and Gilmore proceeded to trial with full knowledge that Fortune contested coverage.
Affirmed.
Judges LEWIS and HORTON concur.
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