When a Florida carrier went insolvent mid-settlement, its state backstop refused to cover the lawyers' share - and an appeals court agreed.
On September 2, 2026, Florida's Third District Court of Appeal reversed a Miami-Dade trial court and sent a $75,000 hurricane settlement back for a closer look at what the money actually paid for.
It started with Hurricane Irma. A homeowner sued her carrier, United Property & Casualty Insurance Company, over storm damage. In November 2022, the two sides mediated and settled for a lump sum of $75,000, described as inclusive of all claims.
The payout was structured as three checks: $37,500 to the homeowner and related parties, $22,500 to her current lawyers, and $15,000 to a former firm holding a fee lien.
Then the timing turned messy. After the settlement but before any check cleared, United Property & Casualty was declared insolvent. That pulled in the Florida Insurance Guaranty Association, or FIGA, the fund that steps in when a carrier fails.
FIGA paid the homeowner her $37,500. It refused the other $37,500 set aside for the lawyers and the public adjuster, arguing attorney's fees are not a "covered claim" it must pay.
The trial court disagreed, calling the settlement too "generic" to split fees from benefits, and enforced the full amount.
The appeals court read the law more narrowly. FIGA owes only what the policy covered. Fees flowing from a post-loss settlement, rather than from policy coverage, sit outside that line.
The record pointed to a fee component, the court said. The homeowner had claimed fees in her complaint. The mediator's email flagged a firm's charging lien. And her own counsel conceded the checks to the firms "were not just checks that the client was paying us for fees, it included other parties' money as well."
Because she sought fees in her complaint, the court said, the burden fell on her to prove the settlement excluded them. She did not meet it.
The court did not rule that every withheld dollar was legal fees. It sent the case back for a hearing to determine which portions were fees, and which, if any, came from policy coverage.
For claims professionals, the lesson lands fast: when a carrier fails mid-settlement, the state guaranty fund does not automatically inherit every dollar the insurer promised.
