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West Palm Beach Business & Personal Injury Attorney
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Insurance Companies Can, and Do, Go Under-What Happens Next?


We rely on insurance not just in our daily lives, personally, but in our businesses as well. Insurance allows us to operate, allows us to live safely, and allows us to mitigate legal risk.

But although we think of insurance companies as these unstoppable, invincible corporate figures, the truth is that insurance companies can, and do, go out of business. And if you’re relying on that insurance company to safely operate your business, you may be wondering what happens when or if that happens?

How Does it Happen?

Insurance companies going out of business often happens to homeowners, and bankruptcies of homeowners insurance companies do make news quite often.

But when those companies go under, they often carry with them commercial lines and other insurance that also protects businesses, meaning that your business could be a casualty of something like a hurricane, that carries enough claims to bring down your business insurance carrier.

What Does FIGA Cover?

When insurance companies go under, the state will step in with a state operated insurance company, called FIGA, or the Florida Insurance Guarantee Program.

When FIGA kicks in, it acts the way that your old, defunct insurance company would have acted, and insures you in the same way that your old insurance company would have insured you, with the same coverage, and the same exclusions as your original policy.

FIGA is funded by insurance companies—or more specifically, by you, who pays your insurance premium. Part of your premium gets passed onto FIGA by your insurance company.

How is FIGA Different?

FIGA does get some benefits that your original insurance company would not have had.

For example, FIGA is allowed to take more time in evaluating insurance claims, whereas your old, original insurance company may have been acting in bad faith if it had done the same thing. You can sue FIGA if it completely denies an insurance claim that it should have, in good faith, known should be paid.

Liability limits also apply to FIGA. There is a liability limit of $300,000, which sounds like a lot, but if you are insuring expensive commercial property, or even business losses, that $300,000 can come up short, especially if your old policy insured you for much more.

FIGA also doesn’t last forever, and is not intended to be long term coverage. If your insurance company goes under, you will get notification, and after that, you only have 30 days to get new coverage. FIGA will only insure you during those 30 days.

If you don’t get coverage after that time, you could be uninsured—and for commercial leases or mortgages that require insurance, that deadline could mean being in default of your mortgage contract, commercial lease, or other business contracts that require the maintenance of valid insurance.

Legal problems with your business insurance? Let us help. . Call our West Palm Beach business attorneys with any questions you may have at Pike & Lustig today.




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