The Florida Insurance Guaranty Association (“FIGA”), generally assumes the liabilities of insolvent insurance companies. Pursuant to Florida Statute Chapter 631 FIGA assumes the rights, duties, defenses and obligations of an insolvent insurer. Florida Statute §631.70 excludes FIGA from the provisions of Florida’s attorney’s fee statute, §627.428, unless FIGA denies by affirmative action, other than delay, a covered claim or a portion thereof. Many Florida condominium associations were insured with insurance companies that have become insolvent, and so FIGA has stepped in to resolve pending claims by such associations. Often in these situations, associations and their representatives have important questions regarding whether FIGA is obligated to pay a reasonable amount of attorney’s fees if litigation against FIGA is necessary. A recent opinion from the Florida Fourth District Court of Appeal has some impact on these questions.
In Florida Insurance Guaranty Association v. Ehrlich, No. 4D09–3886, — So. 3d — (Fla. 4th DCA May 4, 2011), the policyholder filed an insurance claim with FIGA after the insurance company that issued their policy became insolvent. A few weeks later, before FIGA completed its investigation of the claim and likely to avoid expiration of the statute of limitations, the policyholder filed suit against FIGA. FIGA asked the court to grant it two extensions of time to respond to the complaint and eventually requested the trial court to stay the proceedings or dismiss the complaint pending completion of its investigation. The policyholder opposed FIGA’s motion to stay/dismiss. The trial court denied FIGA’s motion to stay/dismiss and compelled FIGA to “answer the complaint in 10 days.”
Pursuant to that trial court order, FIGA filed its answer and affirmative defenses, in which it claimed that the policyholder had not complied with all conditions precedent to filing suit so no valid coverage existed. The parties later settled the underlying claim, and the policyholder moved the court for an award of attorney’s fees. The policyholder argued to the trial court that FIGA’s filing of affirmative defenses in the lawsuit challenging coverage was “affirmative action” pursuant to the statute triggering FIGA’s obligation to pay attorney’s fees under §631.70. The trial court agreed with the policyholder and entered a final judgment for attorney’s fees and costs in the amount of $41,775.50 against FIGA.
FIGA appealed that award of attorney’s fees to the Fourth District Court of Appeal. The Court overturned the trial court’s award of attorney’s fees and held that the facts of this case did not satisfy the exception to FIGA’s exclusion from attorney’s fees under §627.428. Essentially, the appellate Court ruled that FIGA did not deny the policyholder’s claim by affirmative action other than delay to trigger the obligation for fees. While this opinion overturned the fee award, part of the analysis may be beneficial for future cases. The Fourth District Court stated:
Based on the specific facts of this case, we find that [FIGA’s] filing of an answer and affirmative defenses pursuant to a court order did not constitute a “denial” of [the policyholder’s] claim by affirmative action other than delay. [FIGA] was compelled to answer the complaint by the trial court; [FIGA] did not voluntarily deny the claim. Rather, [FIGA] simply asserted its legitimate defenses under the policy. Essentially, [FIGA] “delayed” paying the claim until it had sufficient time to investigate. At no time did [FIGA] explicitly deny the claim itself. (Emphasis added).
The Fourth District Court ties its ruling pretty tightly to the specific fact that the trial court compelled FIGA to answer the Complaint. It is unclear from this opinion whether the Fourth District would have upheld the attorney’s fee award and would have found that FIGA denied the policyholder’s claim by affirmative action if FIGA had filed affirmative defenses challenging coverage on its own initiative. The trial court’s order compelling FIGA to file its answer appears to be critical to this decision.