Mid-Continent Casualty Company v. First Coast Energy, L.L.P., ___So. 3d ___, 36 Fla. L. Weekly D1783 (Fla. 1st DCA August 15, 2011)
Insurance Company Two was a subsidiary of Insurance Company One. The insured appled for environmental coverage with Two, but the policy was written by One because Two’s application for rate approval was pending. The insured obtained renewal coverage with Two without any gap in coverage. Nevertheless, the trial court ruled that One provided coverage for an environmental claim filed after the first policy expired. The appellate court reversed because the trial court misapplied 40 C.F.R. §280.97, which, under federal law, was incorporated into the policies. One subsection of this regulation “provide[d] that ‘cancellation or any other termination’ of the insurance is effective only upon written notice and only after the expiration of 60 days after written notice is received by the insured. Termination or cancellation in this context is defined as ‘only those changes that could result in a gap in coverage’ as where the insured has not obtained substitute coverage or has obtained substitute coverage with a different retroactive date.'” The court interpreted “this provision to apply where there is an affirmative act of cancellation or termination by the insurer.” The court “[did] not read the provision to apply where an insured allows the policy to expire of its own terms, as was the case here.” Another subsection of the regulation “provides for a six-month extended reporting period after the effective date of cancellation or non-renewal of a policy except where the new or renewed policy has the same retroactive date as the prior policy.” In this case, the first and second policies had the same retroactive date. As a result, the portion of the regulation providing for an extended reporting period was inapplicable, and the trial court erred by extending the duration of coverage under the first policy.