A Florida court recently ruled on a significant insurance case that could affect how claims are processed after an insurer goes bankrupt. The case, Florida Insurance Guaranty Association v. Albert Broome and Deborah Broome, revolves around a dispute over attorney fees following the insolvency of the Broome's former insurer. This ruling is important because it clarifies the responsibilities of the Florida Insurance Guaranty Association (FIGA) when handling claims from policyholders whose insurers can no longer fulfill their obligations.
The Broome couple found themselves in a complicated situation after their insurance provider became insolvent. They filed a complaint against FIGA, seeking to enforce a settlement agreement made with their former insurer. This agreement included a request for attorney fees, which led to a legal battle over what FIGA would be required to pay. The outcome of this case is crucial for policyholders who may face similar situations in the future.
In this case, the Broomes were originally insured by a company that later declared insolvency. After the insurer's failure, they sought to substitute FIGA as the defendant in their ongoing litigation. Their amended complaint included a request for attorney fees based on Florida law, specifically section 627.428. The trial court initially sided with the Broomes, granting a motion to enforce the settlement agreement against FIGA, which included significant attorney fees.
The case reached the District Court of Appeal of Florida after FIGA appealed the trial court's decision. FIGA argued that the attorney fees awarded were not appropriate because they were incurred before the Broomes' former insurer became insolvent. The court had to consider whether FIGA could be held responsible for these fees and whether they fell within the scope of covered claims under Florida law.
On July 10, 2026, the District Court of Appeal issued its ruling. The court reversed the trial court's decision and instructed it to amend the order regarding the settlement enforcement. The court stated, "The $35,613.31 allocated by the settlement agreement for payment of Appellees’ pre-insolvency attorney’s fees must be excluded because pre-insolvency attorney’s fees... do not result from FIGA denying a covered claim." This ruling emphasized that FIGA's liability is limited to what is defined as a covered claim under Florida law.
The judges on the panel included Judge Pratt, along with Judges Wozniak and Mize, who concurred with the decision. The court's ruling clarified that FIGA is only responsible for the $9,386.69 allocated for covered claims and not for the attorney fees incurred prior to the insurer's insolvency.
This ruling has significant implications for policyholders and insurers alike. It establishes a clear boundary regarding what FIGA is liable for when an insurer goes bankrupt. The decision indicates that attorney fees incurred before insolvency do not fall under the responsibilities of FIGA, which may influence how future claims are handled. Policyholders may need to be more cautious about their settlements and the timing of incurred fees.
Moreover, this case reinforces the legal principle that covered claims must arise from the insurance policy itself, not merely from agreements made after a loss. This could lead to changes in how settlements are negotiated and documented in the future, as policyholders will need to ensure that any agreements are clearly defined within the context of their insurance coverage.
Looking ahead, the Broomes may have limited options for appealing this decision. The court's ruling provides a clear legal framework that could be difficult to challenge. However, it remains to be seen whether FIGA will face similar claims in the future that could lead to further legal scrutiny. The implications of this ruling may also prompt related cases as policyholders navigate the complexities of insurance claims in the wake of an insurer's insolvency.