What happens if your insurance carrier goes under? Many people never consider this as a possibility, but as more and more insurance carriers go insolvent in Florida, this is becoming a very common reality.
In Florida since 2018, seven Florida insurers have gone insolvent, including three in just this year.1 The three ordered into liquidation so far this year have been Lighthouse Property Insurance Corporation, Avatar Property Insurance, and St. John’s Insurance Company.2 FedNat, in an attempt to restructure, even announced the cancellation of 68,000 of their policies.3 “The fact there are now several Florida insurers failing each year at a time when the state has been spared from landfalling hurricanes should be a cause for alarm.”4
So if your insurance company does go under, what happens next?
When insurance companies go under, the Florida Guaranty Association (“FIGA”) takes over.5 FIGA is a statutorily-created and state-based system that pays certain FIGA proceeds to handle any claims or payments from those liquidated or insolvent insurance companies.6
By going to FIGA’s website and their section on Insolvencies,7 you can see not only what insurance companies have become insolvent but also their liquidation date, the receiver for the company, and important claim deadlines, among other information.8 It is important to know your claims filing deadline if you find yourself in this situation.
So what outstanding claims get paid by FIGA? Guaranty associations provide coverage according to the insurance policy or state law.9 FIGA will process and pay for covered claims.10
FIGA statute F.S. 631.54 defines a covered claim as “. . . ‘Covered claim’ means an 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 . . . .”11
There are also certain claims FIGA will not pay for, such as non-policy claims, claims of self-insured groups, or other exempted entities from the guaranty association system.12
There are limits, though, on what FIGA will pay.13 FIGA’s cap is at $300,000 with further limits on homeowners claims with damage to structure and contents, and condominium and homeowners associations claims.14 Homeowners’ claims with damage to structure and contents are capped by FIGA at an additional $200,000.15 Claims from condominium and homeowner associations are capped at the lesser of $200,000 multiplied by the number of units in the association or policy limits.16
With the current reality of many insurance companies in Florida going under, it is important to be informed about what this could mean for you, your policy, and your claims.
For more information on finding out the status of a claim, next steps, and information on getting a new insurance policy, check out the Frequently Asked Questions Page on FIGA’s website: https://figafacts.com/frequently-asked-questions/
For more information on FIGA, check out our previous blog posts on the subject: https://www.propertyinsurancecoveragelaw.com/?s=FIGA
1 Jerry Theodorou, Florida’s Failing Insurers – Who’s Next?, R Street Blog, Insurance Journal, https://www.insurancejournal.com/blogs/right-street/2022/05/12/667368.htm, May 12, 2022.
2 Sheldon Dutes, ‘Stuck with the Bill’: How Florida insurance companies going under leaves buyers out to dry, WESH 2, https://www.wesh.com/article/florida-insurance-bankruptcy/40044775#, May 19, 2022.
3 Lawrence Mower, Florida Does Financial Autopsies on Failed Insurance Companies. Few People Read Them, Miami Herald, https://www.miamiherald.com/news/politics-government/state-politics/article261495072.html, May 17, 2022.
4 Jerry Theodorou, Florida’s Failing Insurers – Who’s Next?, R Street Blog, Insurance Journal, https://www.insurancejournal.com/blogs/right-street/2022/05/12/667368.htm, May 12, 2022.
5 Sheldon Dutes, ‘Stuck with the Bill’: How Florida insurance companies going under leaves buyers out to dry, WESH 2, https://www.wesh.com/article/florida-insurance-bankruptcy/40044775#, May 19, 2022.
6 Frequently Asked Questions, Florida Insurance Guaranty Association, https://figafacts.com/frequently-asked-questions/
7 Insolvencies, Florida Insurance Guaranty Association, https://figafacts.com/category/insolvency/
9 Frequently Asked Questions, Florida Insurance Guaranty Association, https://figafacts.com/frequently-asked-questions/.