Florida's insurance guaranty fund just drew a hard line on what it owes when an insurer fails - and legal fees didn't make the cut.
When an insurer collapses, the Florida Insurance Guaranty Association (FIGA) steps in to cover certain claims policyholders were owed. On July 10, 2026, a state appeals court set a limit on that reach.
The dispute involved a couple whose insurer became insolvent while their claim was still in litigation. FIGA was substituted into the case in place of the failed company. Before the collapse, the policyholders had settled with that insurer, and a Polk County trial court enforced the deal against FIGA.
The settlement split the money in two: $9,386.69 for the covered claims, and $35,613.31 for attorney's fees the policyholders had run up before the insolvency. The trial court ordered FIGA to pay all of it, plus pre-judgment interest.
The Sixth District Court of Appeal reversed. FIGA, it ruled, owes only the $9,386.69.
The reasoning is what claims professionals will want to note. The legal fees, the court said, accrued before FIGA ever entered the case, so they could not "result from FIGA denying a covered claim" under s. 627.428 and 631.70 of the Florida Statutes. The court also pointed out that both statutes were repealed effective March 24, 2023.
Even setting those statutes aside, the court said the outcome held. The fees came from a post-loss settlement, not from coverage written into the policy itself. That put them outside the definition of a "covered claim" under s. 631.54(4). Covered claims FIGA pays, the opinion said, "must come from coverage within the policy, and not merely from a post-loss settlement agreement."
The interest went too. Under s. 631.57(1)(b), the court noted, "In no event shall [FIGA] be liable for any . . . interest."
The lesson for insurers: a guaranty association does not inherit everything an insolvent insurer signed off on. Pre-insolvency legal fees folded into a settlement, and interest on top, fall outside FIGA's obligations. The court sent the case back with instructions to enter a new order for the $9,386.69 - and nothing else.
