Florida Ruling on Insurance Guaranty Association's Obligations

Ruling Clarifies Florida Insurance Guaranty Association's Coverage Obligations

A recent development in insurance litigation has clarified the obligations of the Florida Insurance Guaranty Association (FIGA) when an insurance company becomes insolvent. The Third District Court of Appeal ruled on January 14 that FIGA is not responsible for attorneys' fees as part of any settlement agreement finalized before the insurer's failure. This decision has significant implications for the industry regarding regulatory compliance requirements and risk management strategies.

In the case of Florida Insurance Guaranty Association v. Alfredo Ramos, et al., homeowners Alfredo Ramos and Maria Carranza initially filed a lawsuit against United Property & Casualty Insurance Company over unfulfilled claims relating to Hurricane Irma from 2017. A settlement was reached in January 2023, which outlined payment terms. However, United P&C went into receivership in February 2023 before any payments were distributed, compelling the homeowners to request FIGA to assume the insurer's settlement obligations.

FIGA compensated the homeowners with $45,000 but declined to pay the $27,000 in attorneys' fees, leading to legal proceedings over the definition of a "covered claim" under Florida law. The trial court initially sided with the homeowners, but the appeals court overturned the decision. The crux of this ruling lies in the distinction between claims covered under an insurance policy and obligations arising from insurer conduct, as per Florida law's regulatory compliance requirements.

Judge Logue stated that attorneys' fees derive from statutory rights rather than policy coverage. Although United P&C agreed to these costs in the settlement, the responsibility stemmed from its claim handling, not from the insurance contract itself. Florida law explicitly prevents FIGA from covering statutory attorneys' fees unless FIGA itself has denied a claim, which was not the case here since FIGA paid the coverage claims in full.

This ruling aligns with a November 2025 decision by the Fourth District Court of Appeal, which reached a similar conclusion concerning regulatory obligations and compliance standards. For insurers and guaranty associations, this decision delineates the limits of FIGA's financial exposure with respect to pre-insolvency settlements, especially regarding statutory attorneys’ fees under carrier agreements and underwriting protocols.

Overall, this decision serves as a critical reminder for industry professionals navigating Florida's challenging property insurance market. FIGA's role is to secure policyholders’ actual claims, and statutory remedies like attorneys' fees fall beyond its designated scope, emphasizing the need for vigilant compliance and proactive risk management within the industry.