A recent Insurance Journal story, “Florida Supreme Court Rules Guaranty Fund Not Responsible for Legal Fees” reports that Florida’s high court has ruled that the state fund charged with paying claims from insolvent insurers is not responsible for paying a claimant’s legal fees on a pre-insolvent claim unless they are specifically covered under the terms of the policy.  In Petty v. Florida Insurance Guaranty Association the Florida Supreme Court resolved a conflict between two lower court rulings that addressed the guaranty association’s liability for paying claimant’s attorney fees based on the definition of a “covered claim.”

The case is from 2004 when Diane Petty’s home sustained damage from Hurricane Charley.  At the time, her property was covered through Florida Preferred Property Insurance Co., which initially made a partial payment to Petty.  Afterwards, Petty later demanded an appraisal to resolve a dispute over monetary value of her loss.  Although the insurer paid Petty more money, it went bankrupt before the court could decide whether the insurer owed her any legal fees.

Since Florida Preferred’s policies were assumed by FIGA, Petty sued the guaranty fund seeking to collect the legal fees.  Petty’s lawyers argued that under the Third District Court of Appeals case, Florida Insurance Guaranty Association v. Soto, was owed the legal fees based on a state law that grants policyholders’ legal fees when there is a disputed claim and the policyholder prevails.

Supreme Court Justice J. Polston, however, agreed with the decision by the Second District Court of Appeals in another case.  “In order to recover from FIGA, Petty’s claim for fees must also be within the coverage of her underlying insurance policy,” wrote Polston.  “Her underlying insurance policy does not expressly provide coverage for her fee award.”  By way of an example, Polston noted that the state’s workers’ compensation law includes a specific statutory provision that requires claimants attorneys to be paid if they prevail in court based on a contingency fee schedule.