If you are having to deal with a FIGA claim, you have been a victim of the insurance industry’s greatest weapon of mass destruction…..a planned corporate decision to file bankruptcy evading the payment of full benefits under every insurance policy to each and every insured who has a pending claim with the bankrupt insurer at the time the insurer is declared insolvent.

This is a premeditated decision by an insurer to delay adjustment of pending claims or low ball pending claims, knowing that a bankruptcy filing is on the horizon.

On its face, this use of the bankruptcy laws when the carrier knows or should know, that it fails to have the financial capacity to pay its pending claims, appears to violate criminal laws. Particularly, if this was just an individual citizen intentionally running up bills fully intending to defraud creditors by filing bankruptcy protection. Some business men will say its just shrewd business tactics.

You would think that there would be something more than an insured could do to secure recovery against the principals,officers and directors of these mismanagement insurers, when the corporation actions appear to be fraudulent.

Insurers should not get a pass by protecting themselves and the company, from the full measure of its corporate and personal liability when evading these pending claims.

Alas, I personally don’t have the financial arsenal to proceed against these directors and officers individually, for recovery of these losses but Floridians are seeing this every time an insurer goes bust. Some lawyers may specialize in this type of litigation but they are probably dealing with the type of fraud this found in Wall Street corporate collapses where the stakes are millions of dollars or even billions of dollars lost to corporate fraud.

The FIGA Act was enacted by the Legislature in 1970 and was patterned after a 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).

The FIGA Act created FIGA in section 631.55, Florida Statutes, and 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 FIGA claim is not designed to fully cover the insured as the insurance contract was designed to do. Nevertheless, limited recovery is better than no recovery. If you are dealing with sinkholes in Florida, the statutory cap is $300,000 regardless of the actual damages suffered by the insured.