FPCA Members: Guaranty Fund Legislation Proposed by FIGA and FWCIGA
Feb 28, 2011
FPCA Members:
The Florida Insurance Guaranty Association (FIGA) and the Florida Workers’ Compensation Insurance Guaranty Association (FWCIGA) are proposing changes to their governing statutes. A copy of the draft bill is attached. Please send any comments or questions you may have to Katie Webb (kwebb@cftlaw.com).
The draft bill addresses the following:
1) As a result of recent insolvencies with large deductible policies, it is recommended that language be added to the definition of covered claim which would exclude from coverage by FIGA and FWCIGA claims from other states where the state legislature has excluded large deductible policies from guaranty fund coverage. Currently at least 3 states have enacted legislation excluding large deductible policies from coverage by their guaranty funds. Some residents and corporations of other states get turned down for a claim from their guaranty fund, and then find a nexus to Florida to try and get their claim paid here…it’s the worst kind of forum shopping to expect Florida assessments to pay the claims of these other state companies or residents. While these recent insolvencies have only involved workers’ compensation claims, future insolvencies could result in other types of claims being transferred to FIGA for payment.
2) In some insolvencies, the defunct insurer used outside claims adjusters and other vendors to adjust claims, issue policies, take phone calls, etc. When the insurer becomes insolvent, we need more legal authority to obtain the claims files and records belonging to the insurer from these third parties, so FIGA and FWCIGA can properly pay claims quickly. For example, it would be difficult to pay a claim that the insurer partially paid prior to insolvency, and after insolvency FIGA cannot get the claim file to finish paying the claim. To prevent any disputes relating to the responsibility of FIGA to adjust claims of Florida policyholders of insolvent insurers, the guaranty funds would be given the legal authority to take action to obtain claim records, or copies of claims records, held by third parties that formerly administered for the insurer.
3) Board Members of the Guaranty Fund are elected by the industry, or appointed by the CFO. In the unlikely event one of the insurers with a Board representative becomes insolvent, we want to make sure that Board member is automatically removed.
4) One provision that has been recommended by the staff of CFO Atwater applies to the liquidation statute, not the guaranty fund statute. This provision would be sure that employees of the CFO are not personally liable for damages as they pursue their work in liquidating insurers, in accordance with this Federal Priority of Claims act. Specifically, the Federal Government believes that they get the first priority in an insurer receivership if the insurer owed the federal government any funds, but the Florida legislature has made them a class 4 creditor behind paying insureds claims, and receivers and guaranty fund expenses. The Division of Risk Management is the self insurance fund of the State of Florida, and is administered by a different division within the office of CFO Atwater, and would indemnify these state employees of the CFO.
