The Florida Supreme Court recently held that Florida Insurance Guaranty Association’s (“FIGA”) duties to an insured arise under the statute in force at the time an insurer is declared insolvent and the insured is determined to have a “covered claim.” De La Fuente v. Fla. Ins. Guaranty Ass’n, 2016 WL 6137341 (Fla. Oct. 20, 2016).
The insureds submitted a claim to their homeowner’s insurer for loss because of a sinkhole. The insurer denied the claim, and the insureds sued the insurer for breach of contract. After answering the complaint, the insurer became insolvent and FIGA entered the case. The trial court adjudicated the insurer to be insolvent and FIGA was activated to handle the “covered claims” of the insolvent insurer in accordance with sections 631.50 through 631.70, Florida Statutes. However, the statute in effect when the policy was issued differed from the statute in effect at the time the insurer was adjudicated insolvent. The trial court entered an amended final judgment confirming the appraisal award and entering judgment in favor of the insureds against FIGA. The appellate court reversed, holding that, under the statutory definition of “covered claim” and the policy provisions that authorize appraisal and require payment of the appraisal award directly to the insured within 60 days of the filing of the award are inapplicable to a sinkhole loss once FIGA is activated. The appellate court certified questions to the Florida Supreme Court concerning the applicability of the statutory definition of “covered claim” to determine an amount of loss and the scope of FIGA’s obligations regarding “covered claims.”
The Florida Supreme Court affirmed, finding that FIGA’s duty arises under the statute in force at the time an insurer is declared insolvent and the insured is determined to have a “covered claim.” It concluded that, because the definition of “covered claim” in effect when the insurer became insolvent applied to the claim, FIGA could not directly pay the insureds a lump sum, but could only pay for actual repairs. The Supreme Court further noted that the limitation on FIGA’s monetary obligation to payment for actual repairs of a sinkhole loss precludes an insured from obtaining an appraisal award under a policy to which FIGA is not a party as FIGA’s responsibilities are statutory and not contained within the policy.