TALLAHASSEE, Florida – According to an Oct. 20 Florida Supreme Court ruling, a homeowner’s rights under a sinkhole policy are limited once an insurer becomes insolvent and the claim goes to the Florida Insurance Guaranty Association (FIGA).

“The Legislature created the association, often referred to as FIGA, to pay at least a portion of any claim against an insolvent insurance company,” an Oct. 20 Florida Politics article said.

According to the FIGA’s website, a legislative act created it to handle claims of insolvent property and casualty insurance companies.

“Pursuant to the Florida Insurance Guaranty Association Act, we have a duty to settle claims in accordance with the Act, the policy and Florida insurance laws, in a timely manner,” the FIGA site says.

Justice Judge Canady wrote the opinion for the official Oct. 20 court decision. "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.

In de la Fuente v. Florida Insurance Guaranty Association, it was explained that plaintiffs Leandro de la Fuente and Ana Delia Garcia insured their home with a policy from HomeWise Preferred Insurance Company for one year, starting on May 7, 2009.

“The policy included coverage for ‘sinkhole loss,’ the determination of which requires the presence of structural damage to the home resulting from ‘sinkhole activity,’” the official court document said. “On March 1, 2010, the insureds notified HomeWise of loss on the insured property from sinkhole activity that was first noticed in June 2009. HomeWise denied the claim in May 2010 after hiring HSA Engineers and Scientists (HSA) to inspect the property.”

Despite additional testing, and evidence of sinkhole activity, HomeWise denied their claim again, explaining that the additional testing showed that there was cosmetic damage, but no structural damage. The plaintiffs filed suit for breach of contract, but HomeWise became insolvent shortly afterward, which is when FIGA had the responsibility to step in.

On top of the other roadblocks throughout this litigation, certain statutes changed for FIGA in 2011, which created more debate during the trial.

“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,” the Florida Politics article said.

According to the official court document, a Leon County trial judge initially agreed and awarded $130,000 to the homeowners, and then there was an appeal that was set before the Second District Court of Appeal, which ruled against the homeowners. Despite its reversal, the Second District asked the Florida Supreme Court to rule on the underlying questions “of great public importance.”

After investigation of FIGA responsibilities, the Supreme Court explained that FIGA was not responsible for the insolvent insurance claim and that FIGA is simply a “creature of statute,” which means it is only responsible for current statutes, not previous, more lenient ones.

“Under the revised statute, FIGA may not directly pay insureds a lump sum of money for sinkhole loss, which the insured might or might not use for its intended purpose — repair of the damage,” the court said. “Instead, the amended statute requires FIGA to pay for ‘the actual repair of the loss’ not exceeding the policy’s limits.”

The court, therefore, upheld the Second District’s decision.

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