In Florida, the Florida Insurance Guaranty Association (FIGA), was created by statute to pay claims to policyholders if their insurers become insolvent. The FIGA Act, §631.54(3) defines a covered claim as:
[A]n unpaid claim, including one of unearned premiums, which arises out of, and is within the coverage, and not in excess of, the applicable limits of an insurance policy to which this part applies, issued by an insurer, if such insurer becomes an insolvent insurer and the claimant or insured is a resident of this state at the time of the insured event or the property from which the claim arises is permanently located in this state.
In a recent case, FIGA appealed a trial court’s final judgment awarding attorney’s fees of $29,300 to the insureds in their action related to Hurricane Charley. FIGA argued that it does not have to pay the attorney’s fee award since it was not a covered claim pursuant to the FIGA Act.
The insureds’ home was damaged by Hurricane Charley in August 2004. Florida Preferred Property Insurance Company insured the home at the time of loss. Florida Preferred partially paid their damages, and the insureds demanded appraisal to set the amount of loss. Florida Preferred refused to submit to appraisal, and the insureds sued to compel it. An appraisal was eventually conducted and the insureds filed a motion to confirm the award, motion for entry of final judgment, and motion for attorney’s fees. Florida Preferred paid the appraisal award, but shortly after became insolvent and an automatic stay entered in the lawsuit. Once FIGA officially stepped in for Florida Preferred, the insureds substituted FIGA in the lawsuit and sought an order to compel FIGA to pay their attorney’s fees and costs for the litigation, pursuant to Florida Statute §627.428.
The trial court ruled that Florida Preferred’s payment of the appraisal award was a confession of judgment that invoked the attorney’s fees provisions of §627.428. Relying in part upon a Third District Court of Appeals case, FIGA v. Soto, 979 So. 2d 964 (Fla. 3d DCA 2008), the trial court held that the insureds’ right to attorney’s fees and costs was a covered claim. FIGA appealed.
FIGA argued on appeal that §627.428,which provides for attorney’s fees, was not applicable since the association did not deny by affirmative action any portion of the insureds’ covered claim. The Second District Court of Appeal noted that to be a covered claim, it must: (1) arise out of the insurance policy; and (2) be within the coverage of the insurance policy. The Court noted that the parties did not point to any language in the policy that provided coverage for attorney’s fees. The Court held that the FIGA Act does not impose coverage for attorney’s fees claimed under Florida’s attorney’s fee statute (§627.428) when the fees are not within the insurance policy’s coverage provisions.
It should be noted that this recent opinion appears to be in conflict with the Third District Court of Appeals’ ruling in Soto, which determined that insurance policies are subject, as a matter of law, to the obligation to reimburse an insured for attorney’s fees and costs if the insured prevails in a lawsuit for payment of a claim under the policy. The Third District Court of Appeals in Soto recognized that §627.428 is an implicit part of all insurance policies and ruled that an attorney’s fee judgment is a covered claim under the FIGA Act.