State law limits a homeowner’s rights under a sinkhole policy once the insurer becomes insolvent and the claim goes to the Florida Insurance Guaranty Association, the Florida Supreme Court ruled Thursday.
It doesn’t matter if the policy was issued before a statute constraining the association’s obligation took effect, Justice Charles Canady wrote for a unanimous court.
“When obtaining an insurance policy, the policyholder obtains no vested right to a future government bailout if the insurer becomes insolvent,” Canady wrote.
The Legislature created the association, often referred to as FIGA, to pay at least a portion of any claim against an insolvent insurance company, the court said.
Every company that sells insurance in Florida must share in these costs. The result, the court said, is “a limited statutory safety net for the insured.”
“The Florida Legislature — not the insurance policy — determines what coverage, if any, FIGA provides to those who experience a covered loss within the meaning of the statute in effect when their insurer is declared insolvent,” the court said.
That statute, it added, does not allow FIGA to pay a lump sum “which the insured might or might not use for its intended purpose — repair of the damage.” Rather, it may pay only the costs of actual repairs, not including appraisal costs.
The case, de la Fuente v. Florida Insurance Guaranty Association, involved Tampa homeowners who bought a policy that included sinkhole coverage from HomeWise Preferred Insurance Co., effective in May 2009. They informed the company on March 1, 2010, that their home had suffered sinkhole damage.
HomeWise was declared insolvent on Sept. 2, 2011, while the parties were still arguing over the claim, and FIGA assumed responsibility for the coverage.
The homeowners argued the more permissive state law in effect when the policy was issued controlled the case. FIGA’s position — that a more restrictive 2011 statute should apply — would be an invalid retroactive application of the law, the homeowners contended.
A Leon County trial judge agreed and awarded $130,000 to the homeowners.
The case landed before Florida’s Second District Court of Appeal, which ruled against the homeowners but asked the Supreme Court to rule on the underlying questions “of great public importance.”
The high court concluded the trial judge improperly applied contracts law instead of following the statute’s intent.
“FIGA was not and is not a party to petitioners’ insurance contract. FIGA, as we stated above, is ‘strictly a creature of statute,’ ” the court said.
“As a result, the Florida Legislature — not the insurance policy — determines what coverage, if any, FIGA provides to those who experience a covered loss within the meaning of the statute in effect when their insurer is declared insolvent.”
Although the Legislature said the courts should read the statute in question liberally, “this does not mean that the court may ignore the plain meaning of the statutes defining FIGA’s statutory obligations,” the court said.