Background
Synergy Contracting Group, as assignee of insured Arlette Schmidt, sued United Property & Casualty Insurance Company over an insurance-policy claim. Synergy and United reached a settlement providing for a $90,000 settlement amount, including a provision that $20,000 be paid directly to Synergy’s law firm. The agreement stated that the settlement amount was inclusive of attorney’s fees, costs, and interest.
Before United performed the settlement, it became insolvent and the circuit court substituted the Florida Insurance Guaranty Association (FIGA) as defendant. Synergy sought to enforce the entire agreement against FIGA. The trial court entered final judgment enforcing the settlement, including the $20,000 payment to counsel.
The Court’s Holding
The Second District reversed. FIGA’s obligations are limited by statute to “covered claims”—claims arising from and within the coverage of the insolvent insurer’s policy. Attorney’s fees imposed by law or agreed to in a post-loss settlement are not covered claims when the underlying policy itself does not cover attorney’s fees.
The settlement language showed that the $20,000 direct payment to Synergy’s attorney was intended to satisfy attorney’s-fee liability, rather than merely to route policy damages to counsel for convenience. Synergy’s contrary theory lacked record support, and it had the burden to establish that the amount sought from FIGA was a covered claim. The court remanded for further proceedings consistent with its opinion.
Key Takeaways
- FIGA does not assume every obligation of an insolvent insurer; its liability is limited to statutory covered claims.
- A settlement allocation for attorney’s fees is not payable by FIGA when fees are outside the policy’s coverage.
- The claimant bears the burden to show that a settlement obligation falls within FIGA’s statutory coverage.
Why It Matters
Parties settling insurance disputes should recognize that an insurer’s later insolvency can affect enforcement of settlement allocations. Labeling or directing part of a settlement to counsel will not make that amount recoverable from FIGA if it represents fees outside the policy’s coverage.
The concurring judges agreed reversal was required. One concurrence cautioned against treating every direct-to-counsel settlement payment as necessarily resolving statutory fee liability; another noted Synergy had not preserved its alternative convenience theory below.