Background
Ray Wilson’s home was damaged by a tropical storm and his insurer denied the claim. Wilson sued for breach of contract, seeking attorneys’ fees under Florida Statutes § 627.428, which permits fee awards against insurers who refuse to pay covered claims. Before settlement payment was made, the insurer became insolvent and FIGA (Florida Insurance Guaranty Association) was substituted as defendant.
The parties executed a settlement agreement for $65,000: $43,500 to Wilson, the mortgage company, and public adjuster, and $21,500 to Wilson’s counsel. The settlement agreement stated the settlement was “inclusive of any claim for attorneys’ fees.” FIGA made partial payment but refused to pay the remaining $21,500, contending it was for statutory attorneys’ fees which FIGA is not obligated to pay. Wilson moved to enforce the settlement. The trial court granted the motion, finding the $65,000 was a global settlement with no designation that the $21,500 was for § 627.428 fees.
The Court’s Holding
The Fourth District reversed. Under Fla. Stat. § 631.54(4), a “covered claim” must both arise out of an insurance policy AND be within the policy’s coverage. Applying precedent from Petty v. Fla. Ins. Guar. Ass’n, FIGA is obligated to pay attorneys’ fees under § 627.428 only if the underlying insurance policy expressly provides coverage for such fees. The court rejected FIGA’s argument that statutory fee claims automatically fall outside FIGA’s obligation.
However, the court held that although the settlement agreement did not expressly label the $21,500 as “attorneys’ fees,” the agreement stated the settlement was “inclusive of any claim for attorneys’ fees” and designated that amount to be paid directly to counsel. Under the doctrine that general settlements presume inclusion of all existing demands, and given that Wilson pled attorneys’ fees in his complaint, the separate payment to counsel was attributable to statutory attorneys’ fees under § 627.428. Since the underlying insurance policy did not expressly provide coverage for § 627.428 fees, FIGA was not obligated to pay this portion of the settlement.
Key Takeaways
- FIGA’s obligation to pay attorneys’ fees is limited to fees covered by the underlying insurance policy itself—statutory fee-shifting under § 627.428 does not create an obligation for FIGA unless the policy expressly covers such fees.
- Settlement agreements that expressly reference attorneys’ fees as part of the claim and allocate separate payments to counsel will be construed as including statutory attorneys’ fees, even without explicit labeling.
- The presumption that general settlements include all existing demands shifts the burden to the party claiming certain items were excluded from the settlement.
Why It Matters
This decision clarifies a critical limitation on FIGA’s liability in settled insurance disputes. While § 627.428 provides a powerful remedy allowing insureds to recover attorneys’ fees against insurers who wrongfully deny claims, FIGA’s obligation does not extend to these statutory fees unless the underlying insurance policy itself contains express prevailing-party or fee-shifting language. This creates an important gotcha: an insured whose insurer becomes insolvent before payment may recover the claim amount through FIGA but lose the attorneys’ fees component.
The decision also confirms that courts will interpret settlement structures pragmatically—when funds are allocated separately to counsel in a settlement addressing a dispute where attorneys’ fees were claimed, those payments will be treated as statutory fees, not as additional “covered claim” damages. Counsel advising insureds in insurance disputes should be aware that settlement negotiations with insolvent carriers require attention to whether the underlying policy covers statutory fees, as FIGA’s substitution may alter the fee-recovery calculus.
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