Florida Supreme Court Addresses Scope of Florida Insurance Guaranty Association in Sinkhole Losses

 

In an Opinion issued October 20, 2016, the Florida Supreme Court considered the scope of the liability of the Florida Insurance Guaranty Association (“FIGA”) for sinkhole losses.

In its Opinion, the Florida Supreme Court affirmed two certified questions in the underlying case, which dealt with whether the scope of FIGA’s obligations is determined by statutory provisions in effect when a policyholder’s policy was issued, or the more restrictive provisions in effect when the insurer has been adjudicated to be insolvent.

The two questions were:

DOES THE DEFINITION OF “COVERED CLAIM” IN SECTION 631.54(3), FLORIDA STATUTES, EFFECTIVE MAY 17, 2011, APPLY TO A SINKHOLE LOSS UNDER A HOMEOWNERS’ POLICY THAT WAS ISSUED BY AN INSURER BEFORE THE EFFECTIVE DATE OF THE NEW DEFINITION WHEN THE INSURER WAS ADJUDICATED TO BE INSOLVENT AFTER THE EFFECTIVE DATE OF THE NEW DEFINITION? 

DOES THE STATUTORY PROVISION LIMITING FIGA’S MONETARY OBLIGATION TO THE AMOUNT OF ACTUAL REPAIRS FOR A SINKHOLE LOSS PRECLUDE AN INSURED FROM OBTAINING AN APPRAISAL AWARD DETERMINING THE “AMOUNT OF LOSS” IN ACCORDANCE WITH THE TERMS OF THE HOMEOWNERS’ POLICY OF INSURANCE?

Regarding the first question, the Second District Court had held that the statutory definition of “covered claim” effective on the date of an insurer’s adjudicated insolvency determines the scope of FIGA’s statutory liability to insureds for sinkhole loss.   Therefore, the Second District concluded that, in this case, the 2011 statutory definition effective at the time of Petitioners’ “covered claim” of sinkhole loss limited FIGA’s coverage to the actual cost of repair up to the insurance policy’s limits. 

Answering the second question, the Second District Court concluded that the 2011 statute precludes insureds from obtaining an appraisal award for their sinkhole loss directly from FIGA under the terms of their insurance policy.

The Florida Supreme Court agreed with the Second District Court and answered both questions in the affirmative.

To read the Opinion, click here.

 

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