With the recent collapse of numerous insurance companies in Florida (St. Johns, Avatar, Southern Fidelity, United P&C, etc.), particularly in the wake of Hurricane Ian, we've been fielding a lot of questions from our clients and policyholders wondering what happens now?  Who is going to pay my claim?  The answer in most cases is: FIGA, the Florida Insurance Guaranty Association.  But many do not know what FIGA is, how it is funded, and how it works.  As insurance attorneys who have been handling hurricane claims for decades and have dealt with the collapse of insurance companies many times before, we have vast experience dealing with FIGA in the aftermath of a failed insurance company and we want to share some of our FIGA knowledge with you. 

What is the Florida Insurance Guaranty Association (FIGA)?

FIGA is a fund created by Florida statute in 1970 that takes over the claims of insolvent (collapsed) property and casualty insurance companies. FIGA was created to step into the shoes of a failed insurance company so that homeowners would not be left holding the bag if their insurance company collapsed.  FIGA is obligated by statute to fulfill the same obligation your insurance company had to pay your claim—up to the limits set by the FIGA Act (Chapter 631, Florida Statutes), outlined below.  Meaning, just as your insurance company was required to do pursuant to your policy, FIGA must pay your claim timely and in full, up to the FIGA limits.  Do not feel that you are required to settle your insurance claim for less than you are owed within the FIGA limits simply because FIGA has been brought in to handle your claim. 

The primary purpose of the FIGA Act is to provide “a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer.” § 631.51(1), Fla. Stat.  Therefore, “when an insurer becomes insolvent, FIGA becomes obligated to respond to covered claims that arise prior to adjudication of the insurer's insolvency and within a specified time after insolvency.” Fla. Ins. Guar. Ass'n, Inc. v. Devon Neighborhood Ass'n, 67 So. 3d 187, 189 (Fla. 2011).

How is FIGA funded?

FIGA receives its funding from three sources:

1. Estate distributions (the funds recovered from the liquidated assets of the bankrupt insurance company);
2. Income received from investing those funds; and
3. Assessments levied on insurance companies to help FIGA pay claims—a charge that is then passed down to homeowners in their insurance premiums as a “FIGA Surcharge.”

Meaning, one of the key contributors to the FIGA fund is you—Florida homeowners—who will continue to pay increased premiums as more insurance companies collapse and FIGA has to take over and pay more claims.

How Does FIGA Work and How Much Is It Obligated to Pay?

Once a failing insurance company has been declared insolvent (bankrupt) and a final order of liquidation has been entered, FIGA steps in to process open claims and assumes responsibility for those claims that have gone to litigation.  All FIGA claims are subject to a $100 deductible.  The maximum amount FIGA will cover is generally $300,000 per covered claim.  An additional $200,000 is available for structures and contents on homeowners' claims.  However, no amounts will be paid in excess of the $500,000 cap for residential homeowners' claims.  For more information on FIGA's claim handling you can visit the FAQ section of their website.

FIGA covers claims for losses that occurred prior to the liquidation of the failed insurance company or within 30 days after the order of liquidation, unless the homeowner replaces the policy prior to the 30 days expiring.  FIGA also refunds unearned premiums (the amount homeowners are entitled to recover for the balance of the policy period for which they received no benefit due to insolvency).  There is a statute of limitations to resolve claims transferred to FIGA.  As a homeowner, you must either fully settle your claim with FIGA, or sue FIGA, before the deadline.  That deadline is one year after the “Claim Deadline” established for the failed insurance company. 

Have Questions About Your Failed Insurance Company or FIGA Claim?

FIGA claims can be complicated, with certain deadlines and criteria that have to be met.  They are also governed by the FIGA Act and, therefore, treated differently than a typical insurance claim.  If you have an open claim with an insurance company that went bankrupt and you have questions about transfer of your claim to FIGA and how it will be paid, you need answers and guidance.  Let our experienced insurance attorneyshelp.  We never charge any fee, cost, or obligation to simply talk to you about your insurance claim and answer your questions.  You deserve to know your rights.  Contact us.