39 Fla. L. Weekly D1002a
Association — Covered claims — Scope of FIGA’s liability is properly
determined by statutory definition of “covered claim” in effect at time insurer
is adjudicated insolvent, rather than time when policy was executed or when loss
occurred — Under more restrictive statutory definition of “covered claim” when
insurer was declared insolvent, FIGA was required to pay for sinkhole damage
only to the contractor who performed repairs, and not directly to
interest to HOME WISE INSURANCE COMPANY f/k/a FIRST HOME INSURANCE COMPANY,
INC., Appellant, v. TAMMY BERNARD, Appellee. 1st District. Case No. 1D13-3208.
Opinion filed May 14, 2014. An appeal from the Circuit Court for Alachua County.
Toby S. Monaco, Judge. Counsel: Gigi Rollini of Messer Caparello, P.A., and Mark
K. Delegal of Holland & Knight LLP, Tallahassee, for Appellant. George A.
Vaka and Nancy A. Lauten, Vaka Law Group, P.L., Tampa, for Appellee.
the final summary judgment ordering it to pay approximately $237,000 directly to
Tammy Bernard for sinkhole loss to her home. FIGA argues that the trial court
erred in determining that its liability for this loss was governed by the 2010
definition of “covered claim” in section 631.54(3), Florida Statutes, rather
than the more restrictive definition in the 2011 version of the statute. We
agree. Accordingly, we reverse the final summary judgment.
Factual and Procedural Background
Insurance Company (First Home) on May 28, 2010. The policy covered structural
damage to the home caused by sinkhole activity, but limited First Home’s
obligation to pay for any necessary subsurface repairs until Bernard entered
into a contract for the performance of the repairs.1 Accordingly, unless and until Bernard entered into
a contract for the performance of the subsurface repairs, First Home was only
obligated to pay Bernard for what the parties refer to as the cosmetic or
above-ground repairs costs.
discovered damage to the walls and floors of her home. Bernard submitted a claim
to First Home in December 2010, and First Home retained an engineering firm to
conduct a geotechnical investigation to determine the cause of the damage. The
investigation determined that the damage to Bernard’s home was consistent with
damage caused by sinkhole activity and recommended subsurface remediation and
other repairs. First Home nevertheless denied the claim, and in October 2011,
Bernard filed a breach of contract action against First Home’s
successor-by-merger, HomeWise Insurance Company (HomeWise).
Court adjudicating HomeWise insolvent and appointing the Department of Financial
Services as the receiver of HomeWise for purposes of liquidation. The order
stayed all pending litigation against HomeWise, including Bernard’s suit, and
also triggered FIGA’s obligations under part II of Chapter 631, Florida Statutes
(“the FIGA Act”).
claim. FIGA subsequently invoked the “neutral evaluation” dispute resolution
process in section 627.7074, Florida Statutes, to determine whether the damage
to Bernard’s home was caused by sinkhole activity and, if so, what remediation
and repairs were necessary. In December 2012, the neutral evaluator determined
that sinkhole activity could not be ruled out as a cause for the damage to
Bernard’s home and found that the necessary repair costs included approximately
$170,000 for subsurface remediation and approximately $57,000 for cosmetic
complaint substituting FIGA for HomeWise as the defendant. The amended complaint
alleged that the damage to Bernard’s home was a “covered claim” for purposes of
the FIGA Act and that FIGA breached its statutory obligations by not paying the
claim. FIGA’s answer denied the allegation that the claim submitted by Bernard
was a “covered claim” under the FIGA Act and asserted as an affirmative defense
that FIGA was only obligated to make payment “to the contractor(s) of the
policyholder’s choice, not the policyholder.”
to comply with the recommendation of the neutral evaluator. However, FIGA took
the position that it was not obligated to make payment directly to Bernard and
that it would only make payment to the contractor selected to perform the
repairs recommended by the neutral evaluator.
seeking a determination that FIGA was obligated to pay the above-ground repair
costs directly to her in accordance with the terms of her insurance policy. The
motion did not seek direct payment of the subsurface repair costs, and as
Bernard’s counsel candidly acknowledged at oral argument, her insurance policy
did not require direct payment of those costs.
“covered claim” in effect when the policy was issued and when the loss occurred
did not prohibit FIGA from making payments directly to her. FIGA filed a
response and cross-motion for summary judgment in which it argued that its
obligations were not triggered until November 18, 2011, when HomeWise was
adjudicated insolvent and that the 2011 definition of “covered claim” in effect
at that time prohibits it from making any payment directly to Bernard.
cross-motion. The court found that FIGA had accepted coverage of the sinkhole
loss and the findings of the neutral evaluator concerning the cost of the
necessary repairs and explained that the only remaining issue was whether the
2010 or 2011 statutory definition of “covered claim” applied. The court rejected
FIGA’s argument that the 2011 definition applied and instead found “as a matter
of law that [Bernard] is entitled to payment of amounts due on a ‘covered
claim,’ as defined by Section 631.54(3), Fla. Stat. (2010), and which are due to
be paid directly to [Bernard] in accordance with the loss payment provisions of
[her] Policy as well as the [FIGA] Act.” The court entered judgment in favor of
Bernard for approximately $237,000, which included both the above-ground and
subsurface repair costs.2
Model Act promulgated by the National Association of Insurance Commissioners.
See Nat. Ass’n of Ins. Comm’rs, Post-Assessment Prop. & Liab. Ins.
Guar. Model Act (1969); see also ch. 70-20, Laws of Fla.; O’Malley v.
Fla. Ins. Guar. Ass’n, 257 So. 2d 9 (Fla. 1971). A purpose of the FIGA Act
is to “[p]rovide 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. Thus, “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). However, “the full gamut of a defunct insurance company’s liabilities was
not intended to be shifted onto FIGA.” Id. at 190 (quoting Fla. Ins.
Guar. Ass’n, Inc. v. Olympus Ass’n, Inc., 34 So. 3d 791, 794 (Fla. 4th DCA
2010)); Williams v. Fla. Ins. Guar. Ass’n, Inc., 549 So. 2d 253, 254
(Fla. 5th DCA 1989).
established its powers and duties in section 631.57. The latter statute provides
in pertinent part that FIGA “shall [b]e obligated to the extent of the
covered claims existing [p]rior to adjudication of insolvency and arising
within 30 days after the determination of insolvency.” § 651.57(1)(a)1.a., Fla.
Stat. (emphasis added). The term “covered claim” is specifically defined in the
FIGA Act, and because FIGA is a creature of statute, it is not responsible for
claims that do not fall within this statutory definition. Devon Neighborhood
Ass’n, 67 So. 3d at 190 (“FIGA is strictly a creature of statute. Thus, the
statutory language defines the extent of FIGA’s obligations. FIGA is not
responsible for claims against an insurer that do not fall within FIGA’s
statutory obligations.”) (internal quotes and citations omitted); see
also Petty v. Fla. Ins. Guar. Ass’n, Inc., 80 So. 3d 313, 317 (Fla.
2012) (holding that FIGA was not responsible for paying attorney’s fees under
section 627.428(1), Florida Statutes, because such fees were not expressly
authorized by the insurance policy issued by the insolvent insurer and, thus,
did not fall within the statutory definition of “covered claim”).
the only issue in this case is whether FIGA’s obligations are governed by the
definition of “covered claim” in effect when the insurance policy was executed
or when the loss occurred (here, the 2010 definition), or the definition in
effect when the insurer was adjudicated insolvent (here, the 2011 definition).
This is a pure issue of law, which we consider de novo. See Major
League Baseball v. Morsani, 790 So. 2d 1071, 1074 (Fla. 2001) (“The standard
of review governing a trial court’s ruling on a motion for summary judgment
posing a pure question of law is de novo.”).
“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 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. For
entities other than individuals, the residence of a claimant, insured, or
policyholder is the state in which the entity’s principal place of business is
located at the time of the insured event. “Covered claim” shall not
(a) Any amount due . . . as subrogation, contribution,
indemnification, or otherwise; or
(b) Any claim that would otherwise be a covered claim under this
part that has been rejected by any other state guaranty fund . . .
2011, to add a new paragraph (c), which reads:
(c) Any amount payable for a sinkhole loss other than testing deemed
appropriate by the association or payable for the actual repair of the loss,
except that the association may not pay for attorney’s fees or public
adjuster’s fees in connection with a sinkhole loss or pay the
policyholder. The association may pay for actual repairs to the property but
is not liable for amounts in excess of policy limits.
(2011)) (emphasis added).4
purposes of this case is that the 2011 definition prohibits FIGA from paying the
policyholder directly for sinkhole loss, whereas the 2010 definition included no
such restriction. Accordingly, if the 2011 definition applies in this case, the
trial court erred in ordering FIGA to pay the $237,000 in repair costs directly
to Bernard and the final summary judgment must be reversed. If, however, the
2010 definition applies, the judgment must be affirmed because FIGA did not
challenge any other aspect of the award to Bernard. See footnote 3.
in effect when its statutory obligations were triggered by the insolvency of
HomeWise, and prior to that event, Bernard did not have a cause of action
against FIGA for payment of a “covered claim” since such claims are contingent
upon the insolvency of the insurer. Bernard responds that the 2010 definition
applies because that was the version in effect when she executed the insurance
policy and on the date of her covered loss, and there is no indication that the
Legislature intended the 2011 amendment to the definition of “covered claim” to
apply retroactively. FIGA replies that the 2011 amendment is not being applied
retroactively in this case because Bernard’s cause of action against FIGA did
not accrue until HomeWise was adjudicated insolvent, which occurred after the
effective date of the 2011 amendment.
appellate decision expressly addressing the narrow issue presented in this case.
However, this issue has been addressed by courts in other states that adopted
the Model Act upon which the FIGA Act was based, and those courts have uniformly
held that the definition of “covered claim” in effect when the insurer is
adjudicated insolvent is the applicable definition.
(La. 1995), the Louisiana Supreme Court held that the Louisiana Insurance
Guaranty Association (LIGA) was not obligated to pay court costs because, after
the date of accident but before the insurer was declared insolvent, the
statutory definition of “covered claim” was amended to exempt LIGA from paying
court costs. The court initially determined that the amended definition could
not be applied retroactively,5 but on
rehearing, the court agreed with LIGA’s argument that the amended definition was
not being applied retroactively because it took effect before the insurer was
adjudicated insolvent. Id. at 837. The court explained:
[LIGA] argues that the law in effect on the date of the insurer’s
insolvency, rather than the law in effect on the date of the accident, should be
employed to determine its liability for court costs. LIGA asserts that the
statute operates prospectively here since [the insurer] was not declared
insolvent until May 17, 1993, over two years after the statute became effective.
The determinative point in time separating prospective from
retroactive application of an enactment is the date the “cause of action”
accrues. In Louisiana, a cause of action accrues when a party has a right to
Applying these principles, [the insured] acquired the right to sue
[the insurer], but not LIGA, on the date of the accident, September 4, 1989.
[the insured]’s cause of action against LIGA did not exist until [the insurer]
was declared insolvent, on May 17, 1993.
Accordingly, we find that LIGA’s obligation to pay court costs is
governed by the law in effect on the date that the insurer is declared
insolvent, not by the law in effect on the date of the event giving rise to the
Pac. Ins. Co., 978 So. 2d 964, 967 (La. Ct. App. 2007) (“The applicable law
governing claims against LIGA is the law in effect on the date of the insurer’s
insolvency. The reason for this is that the claim against LIGA does not accrue
until the insurer is declared insolvent.”) (citations omitted).
Ass’n, 610 P.2d 361 (Wash. 1980), the Washington Supreme Court held that the
Washington Insurance Guaranty Association (WIGA) was not obligated to pay claims
for unearned premiums because the statutory definition of “covered claim” in
effect at the time of the insurer’s insolvency excluded such claims from
coverage. The definition was amended after the insolvency to include certain
unpaid premiums, but the court held that the amendment did not apply
retroactively in that case because “the right to claim unearned premiums is
created by the adjudication of insolvency” and “[t]hat same event determines the
liability of [WIGA] to pay those claims.” Id. at 364.; see also
id. (agreeing with WIGA’s argument that the “precipitating event in this
case is . . . the adjudication of insolvency”).
Ct. App. 1991), a Texas intermediate appellate court held that “[t]he date for
determining whether a claim is a covered claim under the [Texas Guaranty Act] is
the date of impairment.” The
circumstances of Durish are analogous to this case because there, as
here, the trial court granted summary judgment in favor of the insured, the
Bank, on its claim that the Texas guaranty association violated its statutory
duties by not paying a claim the Bank submitted to its insurer, Union Indemnity,
prior to a 1985 statutory amendment eliminating coverage under the Texas
Guaranty Act for the claim at issue. Id. at 274-75. On appeal, the
Receiver representing the guaranty association argued that the Bank’s claim was
subject to the post-1985 version of the Texas Guaranty Act in effect when the
insurer was declared an “impaired insurer,” and the Bank argued that its claims
against the association were governed by the pre-1985 version of the Act in
effect when it made a demand to its insurer for payment of the claim. Id.
The Bank argues that its demand on Union Indemnity was sufficient to
constitute a covered claim that accrued before June 15, 1985, and thus, the
savings clause preserved the Bank’s
claims against the Association under the pre-1985 version of the
We disagree. The date for determining whether a claim is a covered
claim under the Act is the date of impairment. Our conclusion is based upon our
understanding of the text, the structure of the Act, and the relevant case law.
. . . .
The primary object of the Act is to provide funds in addition to
assets of impaired insurers for the protection of the holders of covered claims.
Act § 2 (1981). The Act does not purport to cover all circumstances in which
insureds attempt to recover claims against insolvent insurers. The Act sets
forth several criteria for coverage and carves out numerous exceptions. It is
apparent from the definitional section that a prerequisite for any covered claim
is that the insurer be impaired:
“Covered claim” is an unpaid claim of an insured or third
party liability claimant which arises out of and is within the coverage and not
in excess of the applicable limits of an insurance policy to which this Act
applies, . . . if such insurer becomes an “impaired insurer” after the
effective date of this Act and (a) the third party claimant or liability
claimant or insured is a resident of this State at the time of the insured
event; or (b) the property from which the claim arises is permanently located in
Act § 5(2) (Supp.1991) (emphasis added).
Section 5(2) is particularly important because the definition of a
term in the definitional section of a statute controls the construction of that
term wherever it appears in the statute. . . . . The Bank argues that the word
“becomes” suggests that the legislature anticipated the existence of covered
claims before impairment. We reject this explanation. The use of the word
“becomes” denotes that the Act does not apply to insurance companies in
receivership or conservatorship before the effective date of the Act. The
significant words in this subsection are “if” and “after.” Unless the insurer
becomes an impaired insurer after the effective date, an otherwise eligible
claim is not a covered claim within the meaning of the Act.
The only case construing this section holds that an otherwise
eligible claim is not a covered claim for the purposes of the Act unless the
insurer is impaired. “The plain language of § 5(2) . . . limits ‘covered claims’
for unearned premiums to persons who were residents of Texas when the policy of
insurance was issued or who are residents at the time the insurance company
is found to be an ‘impaired insurer.‘ ” Central Bank v. Harris, 623
S.W.2d 807, 810 (Tex.App.1981, no writ) (emphasis added). See also
Louisiana Guar. Ass’n v. Guglielmo, 276 So.2d 720, 726 (La.Ct.App.1973)
(decreeing an insurer insolvent as the sole operative factor upon which the
Association’s liability attaches); Mississippi Ins. Guar. Ass’n v. Gandy,
289 So.2d 677, 682 (Miss.1973) (controlling factor held to be the insolvency of
the insurance company after the effective date of the act, not when the claims
arose) (both construing similar statutes).
Accord John N. Carney & Assoc. v. Tex. Prop. & Cas. Ins. Guar.
Ass’n, 354 S.W. 3d 843, 844 n.1 (Tex. Ct. App. 2011) (“[A]ll references to
the Guaranty Act are based on the 2006 version of the law, the law in effect
when [the insurer] went into receivership.”); Campos v. Tex. Prop. & Cas.
Ins. Guar. Ass’n, 282 S.W. 3d 226, 228 n.1 (Tex. Ct. App. 2009) (“We apply
the Texas Property and Casualty Insurance Guaranty Act in effect on October
2001, when the worker’s compensation carrier became an impaired insurer.”).
Moreover, with respect to the Bank’s argument that the date of impairment was
irrelevant to the date that its claim accrued against the association, the court
We reject this contention because[, under the savings clause in the
1985 legislation,] the claim must have accrued as to the Association before the
effective date of the amendment and only claims that were covered claims within
the meaning of the statute could accrue against the Association.
* * *
As we construe the Act, on June 14, 1985, the Bank had no claim
against the Guaranty Fund, but only an expectancy that if the insurer became
impaired, then it might have a covered claim against the Fund at that
time. On June 15, that expectancy was cut off by the amendment to the
(Kan. 2011), the Kansas Supreme Court considered whether the definition of
“covered claim,” as amended in 2005, applied where the claim arose in 1999 and
the insurer was adjudicated insolvent in 2002. The 2005 definition, unlike the
version in effect in 2002, allowed the Kansas Insurance Guaranty Association
(KIGA) to offset its liability with amounts paid by a claimant’s other
insurance, thereby reducing the amount payable to the claimant. Id. at
108. The court held that the 2005 definition could not be retroactively applied
because it abolished the claimant’s vested right under the Act in effect when
the insurer was adjudicated insolvent. Id. at 113-14. Of particular
relevance to this case, the court observed that the claimant’s “statutory right
[against KIGA] arose at the time [the insurer] was declared insolvent,”
id. at 114, and that “if [the insurer]’s insolvency had occurred after
the 2005 amendment became law, the offset in controversy here would not present
a due process issue . . . .” Id. at 109.
hold that the statutory definition of “covered claim” in effect at the time the
insurer is adjudicated insolvent determines the scope of FIGA’s liability under
the FIGA Act. Accordingly, in this case, the 2011 definition applies.
decision in Devon Neighborhood Association, supra. However, we
find Bernard’s reliance on that case to be misplaced.
made by a neighborhood association under a 2004 insurance policy. See 67
So. 3d at 189. After the insurer became insolvent in April 2006, FIGA became
responsible for paying the claims. Id. at 190. FIGA paid the initial
claim, but after the neighborhood association submitted supplemental claims,
FIGA demanded an appraisal of the loss under the terms of the policy. Id.
The neighborhood association objected to the appraisal based upon a 2005 statute
that required the insurer to give notice of its right to participate in
mediation as a prerequisite to the insured having to participate in the
appraisal process. Id. The trial court agreed with the neighborhood
association and denied FIGA’s motion to compel the appraisal. Id. at 191.
The Fourth District affirmed, rejecting FIGA’s constitutional argument that the
2005 statute could not be retroactively applied to the 2004 policy at issue in
that case. Id.
several decisions concerning the proper test to be used in determining whether a
statute can be applied retroactively. Id. at 189 (citing the conflict
decisions establishing the Court’s jurisdiction). Thus, the narrow issue
presented in Devon Neighborhood Association was whether the Fourth
District applied the proper test in determining that the 2005 statute was
retroactive. Id. at 189, 193-94. The Court quashed the Fourth District’s
decision, “agree[ing] with FIGA . . . that the district court misapplied this
precedent in analyzing the question of retroactivity based solely on the second
prong of the test.” Id. at 194.
argument that the 2010 definition of “covered claim” applies in this case
because, in the course of its analysis, the Court cited Menendez v.
Progressive Express Insurance Co., 35 So. 3d 873 (Fla. 2010), for the
proposition that “the statute in effect at the time an insurance contract is
executed governs substantive issues arising in connection with that contract.”
Devon Neighborhood Association, 67 So. 3d 195 n.7 (internal quotation
omitted). Additionally, Bernard points out that there would have been no reason
for the Court to even discuss the issue of retroactivity if claims against FIGA
were governed by the statutes in effect at the time of the insurer’s insolvency
because the 2005 statute at issue in that case was adopted prior to the
adjudication of insolvency in 2006. We are not persuaded by these arguments.
included in a footnote in the part of the Court’s opinion discussing the second
prong of the retroactivity test. That discussion was effectively dicta because
the Court ultimately concluded that there was no evidence of legislative intent
that the 2005 statute be applied retroactively and, thus, it was unnecessary for
the Court to consider whether, under the second prong of the retroactivity test,
it would be constitutional to apply the 2005 statute in that case. Id. at
197 (“Because we have reached this conclusion under prong one of the two-prong
test, we need not address whether retroactive application of the amendments
would be constitutional.”).
Court simply assumed that the application of the 2005 statute would be
retroactive because the case involved a 2004 insurance policy. There is nothing
in the courts’ opinions suggesting that either court was asked to consider
whether the 2005 statute was being applied prospectively, and not retroactively,
because FIGA’s responsibilities were not triggered until 2006 when the insurer
was adjudicated insolvent. And, because that issue was not squarely presented,
the Florida Supreme Court’s opinion cannot be read to have held — implicitly or
otherwise — that the applicable statute in determining the scope of FIGA’s
obligations is the statute in effect when the policy was executed rather than
the statute in effect when the insurer is adjudicated insolvent. Indeed, such a
reading would create a potential conflict between Devon Neighborhood
Association and Petty because, in Petty, the Court cited the
2008 definition of “covered claim” in a case involving a 2004 date of loss.
See 80 So. 3d at 315.9
Neighborhood Association if the claim at issue was a “covered claim” under
the FIGA Act because FIGA had already accepted responsibility for the claim.
See 67 So. 3d at 190. And, having done so, FIGA was deemed to be the
insurer to the extent of the covered claims and it could take advantage of the
insurer’s rights and defenses under the policy. Indeed, it is noteworthy that
the statute at issue in that case — section 627.7015, Florida Statutes —
impacted FIGA’s rights under the policy, not its obligations or duties under the
should be governed by the general rule, most recently reaffirmed by the Florida
Supreme Court in Menendez, that “the statute in effect at the time an
insurance contract is executed governs substantive issues arising in connection
with that contract.” 35 So. 3d at 876. We find that rule inapplicable here
because it is derived from cases involving contractual claims under an
insurance policy, which are logically, and constitutionally, governed by the law
in effect at the time of the contract. See generally Lumbermens Mut.
Cas. Co. v. Ceballos, 440 So. 2d 612, 613 (Fla. 3d DCA 1983) (explaining
that the application of a statute to insurance contracts entered into prior to
the date the statute took effect “would constitute a legislative impairment of
contract in violation of article I, section 10 of the Florida Constitution”). By
contrast, because the FIGA Act exists as a matter of legislative grace and
claims against FIGA are statutory claims based upon its alleged failure
to meet its obligations under the FIGA Act, the insured has no cause of action
against FIGA that would be protected against changes to the FIGA Act until the
insurer is adjudicated insolvent. See Durish, 809 S.W. 2d at 277
(explaining that, prior to insolvency, an insured only has an “expectancy that .
. . it might have a covered claim” against the guaranty association if the
insurer becomes insolvent, but that expectancy can be “cut off” by statutory
amendments that take effect prior to the insurer being adjudicated insolvent).
cannot be governed by the definition of “covered claim” in effect at the time
the insurer is adjudicated insolvent because section 631.57(1)(a)1.a., Florida
Statutes, provides that FIGA is obligated to the extent of “the covered claims
existing [p]rior to adjudication of insolvency.” Read literally, this statute
appears to provide support for Bernard’s argument because if “covered claims”
can “exist” prior to insolvency, then the scope of such claims logically should
be based on the statutory definition in effect at the time of their existence.
However, because that interpretation would essentially read the insolvency
requirement out of the statutory definition of “covered claim,” we agree with
FIGA that the better reading of section 631.57(1)(a)1.a. is that it merely
provides a temporal limitation on the claims that FIGA is obligated to pay, but
such claims still have to meet the statutory definition of “covered claim” in
effect when FIGA’s obligations are triggered by the insurer’s insolvency.
See id. (explaining “covered claims” cannot accrue prior to
impairment because “a prerequisite for a claim to be a covered claim is that the
Commissioner [of Insurance] declare the insurer to be impaired”).10
of “covered claim” in effect at the time the insurer is adjudicated insolvent
determines the scope of FIGA’s liability. Accordingly, we reverse the final
summary judgment in this case because the trial court erred in applying the 2010
definition rather than the more restrictive 2011 definition in effect at the
time HomeWise was adjudicated insolvent, and we remand for entry of an order
granting FIGA’s motion for summary judgment and for any further proceedings that
may be necessary.
PERILS INSURED AGAINST
* * *
We insure for direct physical loss to property . . . caused by a
“sinkhole loss,” including the costs to:
a. Stabilize the land and building; and, or
b. Repair the foundation:
In accordance with the recommendations of the professional engineer
who verifies the presence of a “sinkhole loss” . . . .
* * *
Sinkhole loss means:
Structural damage to the building, including the foundation, caused
by sinkhole activity. Contents coverage shall apply only if there is structural
damage to the building caused by sinkhole activity.
* * *
* * *
In the event of sinkhole activity:
(i) We will limit our payment to the actual cash value of the
covered sinkhole loss, not including underpinning or grouting or any other
repair technique performed below the existing foundation of the building, until
you enter into a contract for the performance of building stabilization or
(ii) After you enter into the contract, we will pay the amounts
necessary to begin and perform such repairs as the work is performed and
expenses are incurred. We shall not require you to advance payment for such
(iii) If repair had begun and the professional engineer selected or
approved by us determines that repair cannot be completed within the policy
We must either complete the professional engineer’s recommended
repair or tender the policy limits to you without a reduction for the repair
* * *
We will adjust all losses with you. We will pay you unless some
other person is named in the policy or is legally entitled to receive payment. .
. . .
of the judgment “represents $69,774.63 in cosmetic repair costs as well as the
additional [subsurface] remediation costs outlined in the Neutral Evaluation
Report less the applicable policy deducible and statutory FIGA deductible” and
that the $69,774.63 in cosmetic repair costs was the amount determined by the
neutral evaluator (approximately $57,000) plus “profit, overhead and sales tax.”
Neither party has challenged the amounts stated in the judgment.
for rehearing in the trial court challenging the directive that it pay the
subsurface repair costs directly to Bernard even though (1) Bernard did not seek
payment of such costs in her motion for partial summary judgment, and (2)
Bernard’s policy expressly precluded payment for the subsurface repair costs
unless and until she contracted for the performance of the repairs. Cf.
State Farm Fla. Ins. Co. v. Phillips, 39 Fla. L. Weekly D361 (Fla. 5th
DCA Feb. 14, 2014) (reversing order requiring insurer to pay subsurface repair
costs because the policy gave the insurer the authority to withhold payment for
such costs until the insured contracted for the repairs).
one of a number of provisions in chapter 2011-39 intended to ensure that
sinkhole insurance claim proceeds are actually used to remediate the sinkhole
damage and repair the property. See ch. 2011-39, § 21, Laws of Fla.
(making legislative finding concerning the adverse impact of sinkhole claims on
the public health, safety and welfare, including the finding that “many
properties remain unrepaired even after loss payments, which reduces the local
property tax base and adversely affects the real estate market”); id. at
§§ 22-27 (amending various provisions of the Insurance Code pertaining to the
investigation and payment of sinkhole claims); see also Fla. S. Comm. on
Rules, CS for CS for CS for SB 408 (2011) Staff Analysis, at 9 (Apr. 7, 2011)
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(noting that there had been a substantial increase in both the number and cost
of sinkhole insurance claims and explaining that representatives of the Florida
Office of Insurance Regulation and the insurance industry believed that “a major
driving force” for the increase is the fact that “many policyholders are
incentivized to file such claims because they can keep the cash proceeds from
the claim instead of effectuating repairs to their home or remediating the
655 So. 2d 303 (La. 1995).
“impairment” rather than “insolvency,” but the terms appear to have the same
meaning. Compare § 462.004(5), Tex. Ins. Code (defining “impaired
insurer”) with § 631.54(6), Fla. Stat. (defining “insolvent insurer”).
legislation amending the Texas Guaranty Act provided that “[c]overed claims that
accrue before the effective date of this Act are governed by the law as it
existed at the time the covered claim accrued . . . .” Id. at 275
(quoting 1985 Tex. Gen. Laws, ch. 904, § 6, at 3032). However, the court
explained that “only claims that were covered claims within the meaning of the
statute could accrue against the Association” and that “a prerequisite for a
claim to be a covered claim is that the Commissioner [of Insurance] declare the
insurer to be impaired.” Id. at 277.
Fla. L. Weekly S804 (Fla. Nov. 7, 2013) (“[I]n interpreting a statute modeled
after a uniform law, it is pertinent to resort to the holdings in other
jurisdictions where the act is in force.”) (internal quotations omitted)
Petty did not contain any analysis of the applicable version of the
statutory definition, but as FIGA argued in its briefs, the Court’s citation of
the 2008 statute rather than the 2004 statute could be viewed as an implicit
holding that the governing statute is not the version in effect on the date of
the loss. However, as was the case in Devon Neighborhood Association, we
are not persuaded that Petty has any significance to our consideration of
the narrow issue in this case because it does not appear that there was any
dispute in Petty concerning the applicable statute, either because the
issue was not raised or because there was no material difference between the
statutory definition in effect on the date of the loss and the definition in
effect when the insurer was adjudicated insolvent. The same is true of the other
cases relied on by FIGA in its briefs. See Jones v. Fla. Ins. Guar.
Ass’n, 908 So. 2d 435 (Fla. 2005) (citing, without analysis, the 1995
version of FIGA Act in a case involving a May 1994 date of loss and a December
1994 insolvency); Fla. Ins. Guar. Ass’n v. Olympus Ass’n, Inc., 34 So. 3d
791 (Fla. 4th DCA 2010) (citing, without analysis, the 2008 version of FIGA Act
in a case involving a 2005 policy and date of loss and a 2006 insolvency);
Fla. Ins. Guar. Ass’n v. All The Way With Bill Vernay, Inc., 864 So. 2d
1126 (Fla. 2d DCA 2003) (citing, without analysis, the 2002 definition of
“covered claim” in a case involving an April 2000 date of loss); but see
Williams v. Fla. Ins. Guar. Ass’n, 549 So. 2d 253 (Fla. 5th DCA 1989)
(citing, without analysis, the 1983 version of the FIGA Act in a case involving
a 1985 insolvency).
relying on language similar to that in section 631.57(1)(a)1.a., Florida
Statutes, to hold that claims arising prior to the effective date of the
guaranty act can be “covered claims” because the statutory definition of that
term merely “categorize[s] the class or nature of claims covered, and [does] not
[ ] fix the time when claims shall arise as a condition precedent to their
falling into the classification of covered claims.” La. Ins. Guar. Ass’n v.
Guglielmo, 276 So. 2d 720, 726 (La. Ct. App. 1973), cert denied, 279
So. 2d 690 (La. 1973); see also Tenn. Ins. Guar. Ass’n v. Pack,
517 S.W. 2d 526, 528 (Tenn. 1974); Miss. Ins. Guar. Ass’n v. Gandy, 289
So. 2d 677, 682 (Miss. 1973); but see Smith v. Ohio Valley Ins.
Co., 272 N.E. 2d 131, 136 (Ohio 1971) (holding that the Ohio Guaranty Act
does not apply to claims that pre-dated the effective date of the Act because
the statutory definition of “covered claim” refers to unpaid claims in the
present tense (“which arise”), not the past tense (“which arose”)). However, we
find these cases distinguishable because they did not directly address the issue
framed by this appeal — i.e., whether the association’s liability is
governed by the definition of “covered claim” in effect on the date of the loss
or the date the insurer is adjudicated insolvent — and when that issue was
addressed in one of these states, the state supreme court expressly held that
the guaranty association’s obligation to pay a claim is governed by the “law in
effect on the date that the insurer is declared insolvent, not by the law in
effect on the date of the event giving rise to the insurer’s liability.”
Prejean, 660 So. 2d at 837.
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