In Florida, the Florida Insurance Guaranty Association (“FIGA”) handles and resolves claims of insolvent insurers under certain statutory guidelines. But what happens when the underlying insurer had reached a settlement agreement with a claimant before becoming insolvent? You would hope that FIGA would be ordered to honor such an agreement. It is a beautiful thing when the law follows common sense. This happened recently in the case, Alessio ex rel. Estate of Garza v. FIGA.1
On December 26, 2008, while leaving Miami International Airport with her parents, six-year-old Paola Garza was struck and killed by a taxicab. Her parents retained an attorney who requested disclosure of the policy limits of any insurance coverage applicable to the taxicab’s owner and driver. In response to this request, the Garzas were advised that coverage was provided by FCIC, also known as First Commercial Transportation & Property Insurance Company. Correspondence revealed the liability limits to be $125,000 per person and $250,000 per occurrence.
FCIC readily offered to pay $125,000, representing the per person policy limit of the insured, payable to the Estate of Paola Garza. However, the Garzas rejected this offer, insisting on the additional $125,000 under the per occurrence limit to resolve the separate causes of action for their own personal injuries. Ultimately, the parent corporation of FCIC, accepted the Garzas’ $250,000 settlement offer. In doing so, the insurer expressed some reservations about the merits of the parents’ individual claims but stated that it wished “to avoid exposing our insured to any future litigation on this point and since you have indicated in your letter that you would accept the full $250,000 aggregate limit, we are hereby enclosing two checks; the first for $125,000 payable to the Estate of Paola Garza and a second check for $125,000 payable to the Garzas individually.” The acceptance letter enclosed the two checks, dated March 19, 2009, as well as separate release forms to be signed and notarized by the Garzas and the Estate.
By letter dated March 30, 2009, the Garzas accepted the checks as the policy limits and advised the insurer that the individual releases would be executed and returned as soon as possible. The Estate was in the process of being opened, and once it was open, the personal representative would execute the release required of the Estate. On June 4, 2009, the Garzas delivered their executed releases to FCIC and notified FCIC that they were opening the Estate. The Garzas’ attorney continued to hold the $125,000 check, payable to the Estate of Paola Garza.
In July 2009, the Florida Department of Financial Services initiated insolvency proceedings with regard to FCIC, requiring that FIGA administer FCIC’s covered claims. In the fall of 2009, the Estate of Paola Garza was finally opened. By that time the settlement draft payable to the Estate was stale. Counsel for the Estate requested that the draft be reissued, but FIGA refused, asserting that the $125,000 the Garzas were paid was all that they were entitled to receive.
As a result of FIGA’s refusal to reissue the second settlement check, the Estate filed a lawsuit alleging breach of the settlement agreement. The Estate filed a motion for summary judgment asserting that there was no genuine issue of material fact and that judgment should be entered in favor of the Estate as a matter of law as a result of FIGA’s breach. In response, FIGA filed a countermotion for summary judgment and contended that the undisputed facts entitled it to summary judgment because plaintiffs were paid all that they were entitled to receive under the policy since the Garzas had only derivative claims for emotional distress. The circuit court denied the Estate’s motion and granted FIGA’s motion. The Estate filed the appeal of that trial court order.
The appellate court noted that the question on appeal is whether FIGA is bound by the settlement agreement entered into by its predecessor, FCIC. FIGA’s contention that the Garzas had only derivative claims was irrelevant. The court specifically noted that:
In its eagerness to resolve all claims relating to this tragedy for the total payment of $250,000, FCIC was apparently willing to tender payment to the Garzas and forego additional discovery because of its desire to quickly procure global releases on behalf of its insured, a strategy that certainly appears reasonable under the circumstances.
The appellate court vacated the final judgment remanded the case for entry of final summary judgment in favor of the Estate. FIGA was bound by the settlement agreement reached by the underlying insurer. The result seems to follow common sense, particularly in a world where settlement agreements are favored and upheld by the law unless contrary to law or public policy.