What To Do When An Insurance Company Becomes Insolvent

By Kyle Hyman, Esq.

When an insurance company becomes financially insolvent, policyholders understandably will have a lot of questions. Whether you are still insured for future insurance claims and what will happen to your open claims certainly jumps to mind.

Luckily, Florida law has set procedures in place to ensure that policyholders remain protected.

Where To Turn

If you have an open claim when your insurer becomes insolvent, you will undoubtedly look towards the Florida Insurance Guaranty Association, or FIGA, for help. FIGA is a statutorily created organization that is tasked with resolving open insurance claims when an insurance carrier becomes insolvent.

FIGA will step into the shoes of your insurance company to adjust your claim as your insurance company would otherwise be required to do. They will investigate damages, make coverage determinations, and issue payments for covered losses even if your original carrier is not financially capable to do so.

Coverage & Payment

When it comes to interpreting coverage and issuing payment, your original insurance policy will govern. FIGA does not write its own insurance policies nor does it alter any of the coverages you previously paid a premium for. They are there simply to apply the terms and conditions of the original policy to your claim and then adjust it as your original insurance carrier otherwise would have.

If you do not have an open claim, but your insurance carrier becomes insolvent, you will likely receive written notice that your carrier has been forced into receivership.

According to FIGA, once an insurance carrier goes into receivership, the order typically cancels all active policies within 30 days. While this will not affect any open claims prior to the date of cancellation, it could affect future claims if you do not have an active policy at the time of the loss.

Therefore, it is important to contact a licensed insurance agent immediately upon receiving notice of your carrier’s receivership so that you can obtain new insurance and avoid any lapses in coverage.

What To Do When An Insurance Company Becomes Insolvent