How FIGA Settlement Rules Can Shrink Your Insurance Recovery

When a Florida property insurer becomes insolvent while a claim is still unresolved, policyholders may discover that a negotiated settlement is not worth what they expected. Florida appellate courts have continued to hold that the Florida Insurance Guaranty Association, or FIGA, does not have to pay attorneys’ fees that were separated out of a settlement reached before the insurer failed. That means the way a settlement is written and divided can sharply reduce a policyholder’s final recovery if the carrier goes under before the money is paid. Because insureds usually get no advance notice of insolvency, the best protection is to prepare early: document property conditions before a storm and follow through carefully after a loss.

A Changed Insurance Market, With Very Different Views

Florida’s property insurance market now looks nothing like it did three years ago. Senate Bill 2-A, passed during a special session in December 2022, and House Bill 837, the 2023 tort reform measure, ended one-way attorneys’ fee awards in property disputes, limited assignment-of-benefits arrangements, and shortened deadlines for filing claims. Supporters say those changes have helped cut first-party litigation significantly. Even so, people on both sides of the issue strongly disagree about what the reforms have meant for consumers.

Backers of the changes point to lower premiums, more insurers entering or returning to the state, and a broader drop in litigation.

Opponents argue that denials have become more common and that insurers are no longer being held accountable in a meaningful way when payments do not cover what policyholders need.

One area where there is at least some agreement is that FIGA is returning money to policyholders, at least for the time being. FIGA has said it will end its 1% emergency assessment on homeowners’ and commercial property and casualty policies two years earlier than planned. The assessment continues to apply to policies renewing through September 30, 2026, and is set to end on October 1, 2026.

FIGA’s Growing Reach and the Case Law Around It

FIGA is still unfamiliar to many consumers, but it has become increasingly important in Florida courts. When a Florida insurer is liquidated, FIGA steps in and handles the carrier’s unpaid claims. With repeated hurricane damage and the insolvencies that have followed, FIGA has taken on many more claims in recent years. That has led to more appeals when one side disagrees with a ruling, and it has also built a growing body of case law on issues homeowners frequently face when FIGA takes over a claim.

Because there is usually little warning that an insurer is heading toward insolvency, insureds often do not realize what is about to happen. If insolvency occurs in the middle of resolving a claim, represented policyholders may lose part of the insurance proceeds depending on how the settlement agreement was structured.

That has already happened to many insureds: a claim settles for one amount, but FIGA later refuses to pay part of it.

FIGA relies on section 631.57(1)(a), Florida Statutes, which limits its duty to “covered claims” that existed against the insolvent insurer before liquidation. Although section 631.54 defines “covered claim,” the Florida Supreme Court has explained that the term has two elements: the claim must arise from an insurance policy, and it must fall within the policy’s coverage, meaning it must be among the risks the policy was designed to cover.

How Settlement Allocation Can Create a Problem

This issue typically arises when an insured sues an insurer or FIGA and hires counsel on a contingency-fee basis, meaning the lawyer is paid only if there is a recovery. If the matter settles, the insurer will often require the insured to sign a release ending further liability before payment is made. The insurer may also insist that the settlement be divided between property-damage compensation and attorneys’ fees and costs.

If an insured agrees to split a global settlement into separate parts — one for repairs and another for fees and costs — and the insurer becomes insolvent before paying, FIGA will take over the remaining obligation. In that situation, the insured will likely recover less. Florida’s district courts of appeal continue to reach that result.

The Fourth District’s Decision in Cantwell

In Florida Insurance Guaranty Association, Inc. v. Cantwell, the insureds reached a global settlement with their insurer calling for one check for “indemnity” and another for attorneys’ fees and costs. The insurer then went into liquidation. After FIGA replaced the insurer in the case, it refused to pay the part of the settlement assigned to attorneys’ fees and costs. The trial court rejected FIGA’s position and enforced the settlement in full, but the Fourth District Court of Appeal reversed that ruling.

The appellate court said that because the complaint requested attorneys’ fees, the agreement stated the payment included those fees, and the payment was divided between the insureds and their lawyers, FIGA did not have to cover the fee portion. The result was a reduction of more than 28% in the total settlement amount. The insureds’ actual net recovery may have been reduced even further depending on the percentage owed to counsel under the retainer agreement.

Cantwell is one of several decisions in the past year in which policyholders saw their settlements cut substantially because of drafting choices that better planning might have avoided. The case was also cited in a later appellate decision, Rosenbaum v. Fla. Ins. Guar. Ass’n, to support the same outcome. Together, these rulings reflect a wave of appellate decisions and reversals that has shifted the landscape after a period in which settlement agreements appeared more likely to be enforced as written.

Practical Steps for Policyholders

Because policyholders rarely know whether their insurer will remain solvent through the life of a claim, hurricane preparation should go beyond protecting the home and valuables from wind and water damage.

It also means getting ready for a possible claim as a storm strengthens and forecast models begin filling the screen.

Policyholders should also understand the common reasons courts have recently dismissed insurance claims. With those trends in mind, the following guidelines may help if a storm is headed your way:

1. Photograph and video your property regularly. This is especially important before a hurricane is expected to reach your area. Good documentation can help if the insurer later argues the damage was unrelated to the storm or existed beforehand.
2. Create an inventory after the storm. Do not throw away damaged items, including furniture, clothing, and roof shingles or tiles, before photographing them and listing each item.
3. Obtain an actual cash value estimate before filing suit. Many policies now require an estimate that accounts for depreciation before a lawsuit can be filed. Following that requirement may determine whether the claim moves forward or gets dismissed.
4. Report the claim promptly. Most policies require notice as soon as reasonably possible once damage becomes reasonably apparent. Waiting can lead to a denial because conditions may change over time and after repairs.
5. Mitigate damage when needed. Policies usually require reasonable steps to prevent additional damage. Document the original condition as fully as possible and let the insurer inspect the property before making permanent repairs so it cannot later argue it lacked the chance to evaluate the loss in its original state.
6. Keep an eye on your carrier’s financial condition. If your insurer appears to be under stress, talk with counsel before signing anything about how any settlement should be structured and allocated.

For a possible quick savings, check your property insurance renewal statement for any renewal on or after October 1, 2026, and make sure the 1% FIGA assessment is not included.

¹Fla. Ins. Guar. Ass’n, Inc. v. Cantwell, 2026 WL 2327958 (Fla. 4th DCA Aug. 12, 2026).