HomeWise denied the claim in May 2010 after hiring HSA Engineers and Scientists to inspect the property.

HomeWise advised the insureds that, under Florida law, they could obtain additional subsurface testing on the property and that they could request a neutral evaluation of their claim. See Sections 627.707, 627.7074, Fla. Stat. (2009).

The insureds requested that testing and, in the summer of 2010, obtained a neutral evaluation from W.A. Neumann Construction, Inc.

HSA also conducted additional testing and revised its conclusion, finding that sinkhole activity was present on the property.

Nevertheless, HSA determined that the home had not incurred “structural damage” from such activity, and HomeWise again denied the claim.

The insureds in November 2010 filed suit in a Florida court against their insurer in a one-count complaint for breach of their homeowners' insurance contract. The insureds alleged that HomeWise had failed to pay them for damage to their home from sinkhole loss under the terms of the policy. HomeWise answered, denying the breach and raising defenses.

HomeWise then became insolvent, and FIGA entered the case in its stead.

The insureds filed an amended complaint that substituted FIGA as the defendant in place of HomeWise. FIGA answered the amended complaint, noting that its obligations were limited to the payment of “covered claims” within the meaning of the FIGA Act.

On May 16, 2012, FIGA wrote the insureds and notified them that it had determined that sinkhole activity had been a cause of damage to their residence. FIGA included with its letter a report from its consultant outlining the scope of the recommended repairs and the cost of accomplishing them. FIGA offered to issue payment for ground stabilization and cosmetic repairs to the residence once the insureds provided FIGA with executed contracts with contractors for the completion of the necessary repairs.

The insureds, however, did not proceed with obtaining the requested contracts because their consultant disagreed with FIGA's consultant concerning the appropriate method for the repair of the residence. The method recommended by the insureds' consultant was substantially more costly than the method recommended by FIGA's consultant.

In November 2012, the insureds sent FIGA a letter demanding appraisal of the sinkhole loss under the terms of their HomeWise insurance policy. The HomeWise insurance policy required each party to the contract – the insurer and the insureds – separately to obtain an appraisal of the sinkhole loss. If the appraisers did not agree on the amount, they would jointly choose an umpire, and the amount of loss would be determined by agreement of any two of the three. The insurance policy provided that the amount of loss determined under this appraisal process was to be paid by the insurance company directly to the insureds.

Attached to the letter were the estimates from the insureds' experts for subsurface remediation requiring both underground grouting and underpinning. FIGA's expert estimated subsurface remediation of grouting only and included cosmetic repairs. FIGA's attorney then offered payment for implementation of its remediation plan upon the insureds' execution of contracts for the repairs in accordance with the statutory definition of “covered claim” as it had been amended by the Florida legislature effective May 17, 2011.

Over FIGA's objection, the trial court ordered appraisal under the insurance policy of the sinkhole loss and compelled FIGA to participate.

On May 1, 2013, the appraisers entered their award determining the amount of the loss to be $130,600. The appraisal award included a line item for future incurred costs for additional living expenses that was left open. The insureds promptly filed a motion asking the trial court to confirm the appraisal award and to enter judgment against FIGA on the award.

FIGA objected to the confirmation of the appraisal award on the ground that the statutory definition of “covered claim” in effect in 2011 when HomeWise was adjudicated insolvent applied to the insureds' sinkhole loss and should govern any payments made on the claim. The application of the new definition of “covered claim” to the insureds' claim would prohibit any direct payment to the insureds for a sinkhole loss.

The trial court rejected FIGA's argument and ruled that the law in effect when the policy was issued, in 2009, determined the scope of FIGA's payment obligation together with the loss payment provisions in the policy. In accordance with this ruling, the trial court entered an amended final judgment confirming the appraisal award and entering judgment in favor of the insureds and against FIGA in the amount of $130,600.

An intermediate appellate court reversed, holding that the definition of “covered claim” in effect on November 4, 2011, the date that HomeWise was adjudicated to be insolvent, governed the scope of FIGA's liability to the insureds for the sinkhole loss at their property.

The appellate court also answered the following two questions in the affirmative, and then certified them to the Florida Supreme Court:

I. Does the definition of “covered claim” in Section 631.54(3), Florida Statutes, effective May 17, 2011, apply to a sinkhole loss under a homeowners' policy that was issued by an insurer before the effective date of the new definition when the insurer was adjudicated to be insolvent after the effective date of the new definition?

II. Does the statutory provision limiting FIGA's monetary obligation to the amount of actual repairs for a sinkhole loss preclude an insured from obtaining an appraisal award determining the “amount of loss” in accordance with the terms of the homeowners' policy of insurance?

The FIGA Act

FIGA is made up of:

[a]ll insurers defined as member insurers … as a condition of their authority to transact insurance in this state.

Section 631.55, Fla. Stat. (2011).

The statutory purposes of the FIGA Act are to:

(1) Provide 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;

(2) Assist in the detection and prevention of insurer insolvencies;

(3) Create a nonprofit corporation to administer and supervise the operation of such association; and

(4) Assess the cost of such protection among insurers.

Section 631.51, Fla. Stat. (2011).

The 2009 definition in effect at the time HomeWise issued its insurance policy consisted of subsections (3)(a)-(b) of the statute. By the time of the 2011 insolvency of HomeWise, the statute had been amended with the addition of paragraph (3)(c). Thus, the 2011 statute defined “covered claim” as:

(3) “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. The term does not include:

(a) Any amount due any reinsurer, insurer, insurance pool, or underwriting association, sought directly or indirectly through a third party, as subrogation, contribution, indemnification, or otherwise;

(b) Any claim that would otherwise be a covered claim under this part that has been rejected or denied by any other state guaranty fund based upon that state's statutory exclusions, including, but not limited to, those based on coverage, policy type, or an insured's net worth. Member insurers have no right of subrogation, contribution, indemnification, or otherwise, sought directly or indirectly through a third party, against the insured of any insolvent member; or

(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.

Section 631.54(3), Fla. Stat. (2011) (emphasis added).

The Florida Supreme Court's Decision

The court affirmed.

In its decision, it first ruled that FIGA's duty to an insured arose under the statute applicable at the time an insurer was declared insolvent and the insured was determined to have a “covered claim.” The insurer's insolvency, the court added, triggered FIGA's statutory duties – FIGA assumed no contractual duties absent statutory direction.

As a result, it ruled, the definition of “covered claim” in Section 631.54(3), Florida Statutes (2011), applied to the insureds' sinkhole loss claim, and the amended Florida statute was applicable “prospectively,” not “retroactively.”

The court then answered the second certified question in the affirmative, reasoning that the limitation on FIGA's monetary obligation to payment for actual repairs of a sinkhole loss precluded the insureds from obtaining an appraisal award under the terms of the insurance policy as to which FIGA was not a party. FIGA's responsibilities were contained in the statute, not the homeowners' insurance policy, the court concluded.

The case is de la Fuente v. Florida Ins. Guaranty Ass'n, No. SC15–519 (Fla. Oct. 20, 2016). Attorneys involved include Robert Erich Biasotti and Christine R. O'Neil of Biasotti and Associates, St. Petersburg, FL, for Petitioners; G. William Bissett, Jr., of Kubicki Draper, PA, Miami, FL, for Respondent; George Alexander Vaka and Nancy Ann Lauten of the Vaka Law Group, P.L., Tampa, FL, for Amicus Curiae United Policyholders; Kirsten Hope Matthis, Timothy Jon Meenan, Jr. and Thomas Porter Crapps of Meenan, P.A., Tallahassee, FL, for Amicus Curiae National Conference of Insurance Guaranty Funds.