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The Intersection of Family Law & Insurance Claims in the Age of Covid-19

By: Katherine Coba, Esq. and Dolly Hernandez, Esq.[1]

            The novel coronavirus (COVID-19) pandemic continues to disrupt the basic underpinnings of our society: health, wealth, and emotional security.  In this uncertain and tumultuous time, individuals faced with support obligations, such as alimony and child support, may seek court intervention to modify support obligations due to a number of different bases, which include, but may not be limited to, a decrease in income, a disruption to a business, and a loss of employment. 

            In the case of a self-employed restaurateur, the disruption of that individual’s business, as a result of the circumstances that have ensued due to the coronavirus, could lead to a modification or, in the alternative, an abatement of that individual’s support obligations depending on the facts and circumstances of the matter.  When examining these claims, the family law practitioner should request any insurance policy obtained by the business, including business interruption policies. While coverage for a business interruption claim will largely depend on the language of the specific policy and the facts at issue, it is important to review any available insurance policy to determine its potential effect on the modification claim. For example, property insurance programs often include coverage for business interruptions and lost profits. The business may also have contingent business interruption coverage, which could potentially cover disruptions caused by a disruption in the supply chain. Thus, in order to assess all recourses and potential income streams it is important to request copies of all business insurance policies, including specialized business interruption policies or endorsements made available to certain industries.

 Further, during the discovery process, a copy of all source documents in support of the business interruption claim should be requested from the party seeking a reduction to his or her support obligation along with copies of monthly profit and loss statements, monthly inventory reports, general ledger, historical sales, and annual budgets and forecasts.  When crafting narrowly tailored discovery requests for a specific industry or business, it is helpful to review the Audit Techniques Guides (ATGs) published by the Internal Revenue Service.

A party seeking a reduction in their support obligations, whether child support or alimony, bears the burden of establishing that a reduction is necessary.  See Overbey v. Overbey, 698 So.2d 811, 814 (Fla. 1997) (“child support based on an agreement by the parties that was subsequently incorporated into an order, a heavier burden rests on the party seeking a reduction that would otherwise be required”).  A reduction in income, alone, does not warrant a modification of alimony as the focus is on the payor’s total inability to pay.  See Schaefer v. Schaefer, 344 So.2d 902 (Fla. 3d DCA 1977).

              An alimony award may be modified if the following elements are met:  (1) a substantial change in circumstances has occurred since entry of the final judgment; (2) the change was not contemplated at the final judgment; and (3) the change is sufficient, material, permanent, and involuntary.  See Eisemann v. Eisemann, 5 So.3d 760, 762 (Fla. 2d DCA 2009).  A child support award may be modified when the modification is in the best interests of the children, when the children reach the age of majority, or when there is a substantial change in circumstances of the parties.  Fla. Stat. §61.13 (1)(a)(2).  A party may request an increase or decrease in support if the circumstances or financial ability of either party changes.  Fla. Stat. §61.14 (1)(a). The same three prong test, which applies in an alimony modification, applies in a child support modification.  Overbey, 698 So. 2d at 813.

            In sum, whether a party prevails on a petition for modification of their support obligations will, most likely, be contingent on meeting the third prong of the substantial change in circumstances test addressing whether the change is sufficient, material, permanent, and involuntary.  Therefore, to defend against a petition for modification of support, the non-petitioning party must, through the discovery process, obtain information regarding any business interruption claims that are being advanced by the petitioning party in an effort to show the financial resources of the petitioning party, should a claim be granted, and, ultimately, the ability to pay the support obligations.