With the passage of Senate Bill 408, (Chapter Law 11-39), many have asked how the new laws will affect their current insurance claims. While sweeping changes are rarely passed, even a small change in a law can determine the outcome of a claim.

Yesterday, the Florida Supreme Court re-affirmed its previous decisions in Florida Insurance Guaranty Association, Inc. v. Devon Neighborhood Association, Inc., No. 10-347 (Fla. June 30, 2011).

Like many associations, Devon Neighborhood Association suffered hurricane damage to its property in 2004. Unfortunately, Devon’s insurer at the time, Southern Family Insurance, became insolvent and the policy and claim were taken over by the Florida Insurance Guarantee Association (FIGA).

Unsatisfied with the amounts paid, Devon filed suit and FIGA responded by asking the court to stay the action and compel appraisal. Relying on a 2005 amendment to the Florida Statute § 627.7015, Devon’s attorneys successfully fought the appraisal process because Southern Home failed to provide notice that the statutory mediation process was available for disputed property insurance claims.

Despite the fact that the amendment allowing an insured to avoid appraisal if a carrier does not provide the statutorily required notice was passed after the policy was issued, the trial court and Fourth District Court of Appeals found that the statute was retroactive and held Devon did not have to participate in the appraisal process.

Reversing these decisions, the Supreme Court re-affirmed its previous determinations regarding what law applies to an insurance policy. As the Court noted:

We also made clear in Menendez that “[i]n our analysis, we look at the date the insurance policy was issued and not the date that the suit was filed or the accident occurred, because the “statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.

Based on this reasoning, any changes to the Florida Statutes made after a policy is first issued would not generally be applicable to a claim made on a policy. While this is the general rule, the Court also addressed instances where a statute may be retroactive and could apply to previously issued policies. The Court reaffirmed its two-pronged test to determine whether a statute may apply retroactively:

[I]n determining if a statute is retroactive, two factors are to be considered. The first factor is whether the statute itself expresses an intent that it apply retroactively, and if so, the second factor is whether retroactive application is constitutional. . . .[I]f the plain language of the statute does not evince an intent that the statute apply retroactively, the Court ―need not address the second prong. (citations omitted)

Determining whether retroactive application of a law is constitutional will require a more stringent analysis, and it is important for associations, managers, and practitioners to understand generally what laws may affect any given claim. Failing to do so could result in an outcome less favorable than it should be.