Assignment of Rights Against Liability Insurer is Useless if no Coverage

A Pig in a Poke is not as Valuable as a Collectible Judgment Against a Tortfeasor

As a movie star once said: “Greed is good!” With regard to torts and insurance greed is not only bad, it is useless and expensive. When a plaintiff has a viable case against a defendant whose insurer, intelligently, and based upon clear and unambiguous language of an insurance policy denied the claim, taking an assignment helps the tortfeasor and does nothing for the plaintiff.

The plaintiffs in Mark Chapman, individually and as personal representative of the Estate of Gregory Chapman, deceased, and the Estate of Barbara Chapman, deceased, Irene Chapman, Kathy Ruff,  et al. v. ACE American Insurance Company, a foreign corporation f.k.a. Cigna Insurance Company, No. 18-12972, United States Court of Appeals for the Eleventh Circuit (May 21, 2019) learned the lesson after long years of litigation and gave it away.


Plaintiffs Mark Chapman – individually and as personal representative of the Estates of Barbara Chapman and of Gregory Chapman – and Irene Chapman appeal the district court’s grant of summary judgment in favor of ACE American Insurance Company (“ACE”). The district court concluded that ACE owed no duty to defend or to indemnify its insured, Robert Taylor, against Plaintiffs’ claims in an underlying state court lawsuit (the “Underlying Suit”).

Mark and Barbara Chapman’s ten-year old son, Gregory, was diagnosed with Attention Deficit Hyperactivity Disorder (“ADHD”) and had a history of behavioral problems, including stealing and a self-inflicted gunshot to the leg. After receiving a referral from the Department of Children and Family Services, the Chapmans engaged Taylor to provide mental health counseling services to Gregory. Taylor conducted counseling sessions with Gregory between January and May 1998. In May 1998, Gregory committed suicide.

In 1999, Taylor pleaded guilty in state court to four felony counts of organized fraud and twenty felony counts of grand theft. Taylor’s offense conduct included, among other things, providing – and collecting payment for – unlicensed counseling services to patients, including Gregory. In simple language Taylor was a very bad man who was probably responsible for the death of Gregory.

Plaintiffs sued Taylor and his business, Recovery Concepts. Plaintiffs asserted claims for wrongful death, unjust enrichment, unfair and deceptive trade practices, and infliction of severe emotional distress. Briefly stated, Plaintiffs alleged that Taylor held himself out to the public as a licensed provider of mental health counseling and substance abuse services to minors, when he was neither licensed nor qualified by education and experience to provide such services. Plaintiffs contend that Taylor’s “counseling” contributed to Gregory’s death and caused Plaintiffs emotional and financial injury.

Taylor was insured under an Allied Health Care Provider Professional and Supplemental Policy issued by ACE (“Policy”). ACE refused, however, to defend Taylor. ACE first determined that no coverage existed under the Policy because Plaintiffs’ alleged injuries did not arise from covered “professional services” and the Policy’s exclusions defeated coverage.

Pursuant to a settlement Agreement the parties agreed to the entry of a consent judgment in excess of $5 million against Taylor and Recovery Concepts, to be collected from available insurance proceeds. Plaintiffs then sued seeking recovery from ACE.

The district court granted summary judgment in favor of ACE. The district court concluded that the acts or omissions alleged by Plaintiffs constituted no “professional services” under the Policy.


Finding itself bound by the substantive law of Florida the Eleventh Circuit used the state law in deciding the diversity case. To recover the injured party must bring an action against the insurer and prove coverage, wrongful refusal to defend, and that the settlement was reasonable and made in good faith.

Under Florida law, an insurer owes a duty to defend its insured when the complaint alleges facts that fairly and potentially bring the suit within policy coverage. If the alleged facts and legal theories asserted in the complaint fall outside a policy’s coverage, no duty to defend arises.

Under the Policy, ACE agreed to “pay all amounts up to the limit of liability, which you become legally obligated to pay as a result of injury or damage to which this insurance applies.” The Policy provides that Professional Liability Coverage is available only if the “injury or damage” was “caused by a medical incident arising out of professional services by you . . ..” Likewise, Supplemental Liability Coverage is available only for “injury or damage” that “occur[red] in the course of providing your professional services.”

Defendant Taylor was not qualified by education, experience or any license issued by the State of Florida to provide mental health counseling to juveniles or adults.

Under Florida law, mental health counseling and substance abuse counseling are treated as distinct professions, governed by different statutes, and licensing and training requirements. In light of Plaintiffs’ allegations in the Underlying Suit, Taylor’s complained-of conduct falls clearly outside the Policy’s definition of “professional services.”

Under the plain language of the Policy, “professional services” means “Drug & Alcohol Abuse Counsel[ing]” services for which Taylor was “licensed, trained, or being trained to provide.” Plaintiffs’ allegations that Taylor lacked the required licensure, education, or experience to provide mental health counseling to Gregory compels a conclusion that Taylor’s complained-of counseling services were not “professional services” under the Policy.

Viewing the record in the light most favorable to Plaintiffs, no genuine issue of material fact exists.

Because Plaintiffs failed to allege facts that fairly and potentially bring the suit within policy coverage, the district court concluded correctly – as a matter of Florida law – that ACE owed no duty to defend or to indemnify Taylor against Plaintiffs’ claims in the Underlying suit.


Greed, giving up the right to recover from Taylor the $5 million settlement amount, the plaintiffs went after ACE only to find the could recover from no one. In jail Taylor probably would not have been able to pay but he would be out of jail at some time and would earn a living that could be recovered. His fraud probably brought in some money and that could be recovered. The greed seeking damages plus punitive damages resulted in a judgment that was only valuable as a picture to hang on a wall. It is worthless.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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