For UPC policyholders, the strikes keep coming. On February 27, 2023 United Property and Casualty Insurance Co. (“UPC”) filed for bankruptcy, leaving thousands of policyholders—many with extensive damage from Hurricane Ian—scrambling to get their claims paid as well as secure insurance from another carrier. Sadly, for policyholders already in desperate need of payment, UPC's bankruptcy only delayed things further as it triggered—automatically, as a matter of law—a six month pause (known as a “stay”) on the claim, stalling claim negotiations and preventing policyholders from enforcing their legal rights against FIGA during that time. Although the automatic stay would have ended on August 27, 2023 a recent court order extended the stay another six months, forcing UPC policyholders with open claims to wait an entire year before they can pursue legal action against FIGA. Here's how the stay and litigation against FIGA works.
FIGA's Responsibility to Pay Claims of Bankrupt Insurance Companies
As we have explained here previously, when an insurance company in Florida goes bankrupt, the Florida Insurance Guaranty Association (“FIGA”) steps in to fulfill the insolvent (bankrupt) company's obligations to its policyholders, within certain preset statutory caps. Generally, the maximum amount FIGA will cover is $300,000 per covered claim with an additional $200,000 available for structures and contents on homeowners' claims and all claims being subject to a $100 deductible. However, FIGA will not pay any amounts in excess of the $500,000 cap for residential homeowners' claims. We have provided guidance previously on how to file a claim against FIGA if your insurance company goes bankrupt.
The Six-Month Automatic Stay for FIGA
When a Florida insurance company files for bankruptcy Fla. Stat. 631.67 provides an automatic six month stay preventing current or new lawsuits against FIGA from proceeding in order to give FIGA time to gather the claims information and prepare a proper defense of the claim. If a lawsuit had already been filed against the insurance company at the time it filed for bankruptcy, nothing happens in the litigation for six months. At the end of the six-month period, the policyholder can then substitute FIGA as the defendant in the lawsuit (in place of the insolvent, bankrupt insurance company) if litigation had already been initiated, or sue FIGA, and then proceed to enforce their legal rights against FIGA.
FIGA's Request to Extend the Automatic Stay for UPC Claims
Pointing to the massive amount of UPC claims FIGA was required to take over following UPC's insolvency—over 22,000 claims with 5,000 claims in litigation and more expected to be filed—FIGA asked the court presiding over UPC's insolvency (the Second Judicial Circuit Court for Leon County) for an extension of the automatic stay an additional six months to allow FIGA time to receive and import claims data and prepare and adequately defend the claims on UPC's behalf. You can read a copy of FIGA's Motion for an extension of the automatic stay here.
The Court's Grant of the Extended Stay
Unfortunately, FIGA's request for a second six-month stay was granted on September 26, 2023, requiring UPC policyholders to wait not only the automatic six months—but now an entire year—before they can proceed against FIGA to recover the amounts they are legally entitled to recover on their open insurance claims. You can read a copy of the Leon County Court's Order granting the extended stay here.
UPC Policyholders Are the Real Victims Here
This is very disheartening news for UPC policyholders as many continue to live in, or have been uncomfortably displaced from, their damaged homes., particularly in the wake of Hurricane Ian. These homeowners will now have to wait an entire year before they can resume their efforts to get paid on their insurance claim. The real injustice here is that recent reports show the likely reason many insurance companies went bankrupt in 2022 and 2023 was improper internal management and inadequate capitalization, not excessive lawsuits as touted by lobbyists pushing laws curtailing insurance litigation. Struggling UPC policyholders are the real victims here, and they will continue to suffer an additional six months as the result of UPC's mismanagement and ultimate failure, which has now swamped FIGA and significantly stalled claim payments.
As insurance attorneys who have been following the volatile Florida property insurance market and sweeping insurance reform laws over the last two years, we have been watching developments such as these closely. Pursuing an open insurance claim against FIGA can be complicated and confusing, particularly in light of FIGA's recent conduct in taking the same bullying and delay tactics as the insolvent insurance companies. If you have an open insurance claim that will be taken over by FIGA and you have questions about how to proceed, never hesitate to contact us for a free insurance claim review. We never require any fee, cost, or obligation to simply answer your questions and make sure you understand your rights.