Fla. Ins. Guar. Ass'n, Inc. v. Bernard

• Court: Florida District Court of Appeals
• Writing for the Court: WETHERELL
• Citation: Fla. Ins. Guar. Ass'n, Inc. v. Bernard, 140 So.3d 1023 (Fla. App. 2014)
• Decision Date: 19 June 2014
• Docket Number: No. 1D13–3208.,1D13–3208.
• Parties: FLORIDA INSURANCE GUARANTY ASSOCIATION, INC., as statutory successor in interest to Home Wise Insurance Company f/k/a First Home Insurance Company, Inc., Appellant, v. Tammy BERNARD, Appellee.

140 So.3d 1023

FLORIDA INSURANCE GUARANTY ASSOCIATION, INC., as statutory successor in interest to Home Wise Insurance Company f/k/a First Home Insurance Company, Inc., Appellant,

v.Tammy BERNARD, Appellee.

No. 1D13–3208.

District Court of Appeal of Florida, First District.

May 14, 2014.

Rehearing Denied June 19, 2014.

An appeal from the Circuit Court for Alachua County, Toby S. Monaco, Judge.

Gigi Rollini of Messer Caparello, P.A., and Mark K. Delegal of Holland & Knight LLP, Tallahassee, for Appellant.

George A. Vaka and Nancy A. Lauten, Vaka Law Group, P.L., Tampa, for Appellee.

WETHERELL, J.

Florida Insurance Guaranty Association, Inc. (FIGA), appeals the final summary judgment ordering it to pay approximately $237,000 directly to Tammy Bernard for sinkhole loss to her home. FIGA argues that the trial court erred in determining that its liability for this loss was governed by the 2010 definition of “covered claim” in section 631.54(3), Florida Statutes, rather than the more restrictive definition in the 2011 version of the statute. We agree. Accordingly, we reverse the final summary judgment.

Factual and Procedural Background

Bernard's home was insured under a homeowner's policy issued by First Home Insurance Company (First Home) on May 28, 2010. The policy covered structural damage to the home caused by sinkhole activity, but limited First Home's obligation to pay for any necessary subsurface repairs until Bernard entered into a contract for the performance of the repairs.¹ Accordingly, unless and until Bernard entered into a contract for the performance of the subsurface repairs, First Home was only obligated to pay Bernard for what the parties refer to as the cosmetic or above-ground repairs costs.

On November 20, 2010, while the policy was in full force and effect, Bernard discovereddamage to the walls and floors of her home. Bernard submitted a claim to First Home in December 2010, and First Home retained an engineering firm to conduct a geotechnical investigation to determine the cause of the damage. The investigation determined that the damage to Bernard's home was consistent with damage caused by sinkhole activity and recommended subsurface remediation and other repairs. First Home nevertheless denied the claim, and in October 2011, Bernard filed a breach of contract action against First Home's successor-by-merger, HomeWise Insurance Company (HomeWise).

On November 18, 2011, a Consent Order was entered by the Leon County Circuit Court adjudicating HomeWise insolvent and appointing the Department of Financial Services as the receiver of HomeWise for purposes of liquidation. The order stayed all pending litigation against HomeWise, including Bernard's suit, and also triggered FIGA's obligations under part II of Chapter 631, Florida Statutes (“the FIGA Act”).

In January 2012, FIGA informed Bernard that it would be handling her sinkhole claim. FIGA subsequently invoked the “neutral evaluation” dispute resolution process in section 627.7074, Florida Statutes, to determine whether the damage to Bernard's home was caused by sinkhole activity and, if so, what remediation and repairs were necessary. In December 2012, the neutral evaluator determined that sinkhole activity could not be ruled out as a cause for the damage to Bernard's home and found that the necessary repair costs included approximately $170,000 for subsurface remediation and approximately $57,000 for cosmetic repairs.

While the neutral evaluation process was underway, Bernard filed an amended complaint substituting FIGA for HomeWise as the defendant. The amended complaint alleged that the damage to Bernard's home was a “covered claim” for purposes of the FIGA Act and that FIGA breached its statutory obligations by not paying the claim. FIGA's answer denied the allegation that the claim submitted by Bernard was a “covered claim” under the FIGA Act and asserted as an affirmative defense that FIGA was only obligated to make payment “to the contractor(s) of the policyholder's choice, not the policyholder.”

In January 2013, FIGA notified the trial court and Bernard that it intended to comply with the recommendation of the neutral evaluator. However, FIGA took the position that it was not obligated to make payment directly to Bernard and that it would only make payment to the contractor selected to perform the repairs recommended by the neutral evaluator.

Shortly thereafter, Bernard filed a motion for partial summary judgment seeking a determination that FIGA was obligated to pay the above-ground repair costs directly to her in accordance with the terms of her insurance policy. The motion did not seek direct payment of the subsurface repair costs, and as Bernard's counsel candidly acknowledged at oral argument, her insurance policy did not require direct payment of those costs.

The motion argued, among other things, that the 2010 statutory definition of “covered claim” in effect when the policy was issued and when the loss occurred did not prohibit FIGA from making payments directly to her. FIGA filed a response and cross-motion for summary judgment in which it argued that its obligations were not triggered until November 18, 2011, when HomeWise was adjudicated insolvent and that the 2011 definition of “covered claim” in effect at that time prohibits it from making any payment directly to Bernard.

After a hearing, the trial court granted Bernard's motion and denied FIGA's cross-motion. The court found that FIGA had accepted coverage of the sinkhole loss and the findings of the neutral evaluator concerning the cost of the necessary repairs and explained that the only remaining issue was whether the 2010 or 2011 statutory definition of “covered claim” applied. The court rejected FIGA's argument that the 2011 definition applied and instead found “as a matter of law that [Bernard] is entitled to payment of amounts due on a ‘covered claim,’ as defined by Section 631.54(3), Fla. Stat. (2010), and which are due to be paid directly to [Bernard] in accordance with the loss payment provisions of [her] Policy as well as the [FIGA] Act.” The court entered judgment in favor of Bernard for approximately $237,000, which included both the above-ground and subsurface repair costs.²

This appeal followed.³

Analysis

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 general principles stated above are not in dispute in this case. Indeed, the only issue in this case is whether FIGA's obligations are governed by the definition of “covered claim” in effect when the insurance policy was executed or when the loss occurred (here, the 2010 definition), or the definition in effect when the insurer was adjudicated insolvent (here, the 2011 definition). This is a pure issue of law, which we consider de novo. See Major League Baseball v. Morsani, 790 So.2d 1071, 1074 (Fla.2001) (“The standard of review governing a trial court's ruling on a motion for summary judgment posing a pure question of law is de novo.”).

The 2010 definition of “covered claim” provided:

“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,...