This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
Picture a Florida deal that signs in late June. The target is a Gulf Coast manufacturer with a waterfront plant, the purchase agreement gives the parties until mid-September to satisfy closing conditions, and everyone is watching licensing approvals and payoff letters. Nobody is watching the National Hurricane Center. Then, three weeks before the scheduled closing, a named storm organizes in the Caribbean and the cone of uncertainty swallows the county where the plant sits. The buyer’s lender emails first: confirm wind coverage and the deductible. The seller’s broker emails second: the carrier has suspended binding while the storm is inside the box. And both deal teams discover, more or less simultaneously, that the purchase agreement they signed says almost nothing about who bears the loss if the roof is in the parking lot on closing day.
In most states, property insurance is a diligence checkbox. In Florida it is a deal term. The market here prices and excludes risk differently than anywhere else in the country, and a purchase agreement drafted off a national form tends to import assumptions — insurance is available, premiums are stable, policies behave — that Florida does not honor.
The Florida coverage map has holes exactly where a buyer assumes it doesn’t
Start with what the target’s insurance program actually covers, because in Florida the answer is narrower than the declarations page suggests. Property policies covering Florida risks almost universally carry separate hurricane or named-storm deductibles calculated as a percentage of the insured value rather than a flat dollar amount. On a plant insured for eight figures, a mid-single-digit percentage deductible is a seven-figure retained loss before the carrier pays anything — a number that should show up in the buyer’s model as contingent exposure, and usually shows up nowhere.
Flood is the second hole. Standard commercial property forms exclude flood, and storm surge is flood, not wind — the fight over which peril destroyed the building is a Florida litigation genre of its own. Flood coverage rides on separate policies, federal program limits are modest relative to commercial values, and excess flood placements are priced accordingly. A waterfront target with wind coverage and no flood tower is half-insured, whatever the premium invoices imply.
Third, look at who is actually writing the coverage. A meaningful slice of Florida commercial risk sits with surplus lines carriers on non-admitted paper, with Citizens Property Insurance Corporation — the state-created insurer of last resort — or with recently formed carriers that took policies out of Citizens through its depopulation program, which has moved hundreds of thousands of policies to private carriers in recent years. None of that is disqualifying, but each flavor behaves differently in diligence: surplus lines paper means fewer regulatory guardrails on form language, Citizens means statutory eligibility rules and assumption offers that can move the coverage to a carrier the target did not choose, and a young takeout carrier means the buyer should ask about financial strength ratings rather than assume them. If the target’s program has been bouncing between carriers at each renewal — a common Florida pattern — loss runs and cancellation history deserve a harder look than the current certificate.
The purchase agreement has to answer the between-signing-and-closing question
Now the deal mechanics. Between signing and closing, three contract provisions decide who owns the storm. First, the casualty or risk-of-loss provision. A well-drafted asset deal says what happens if the assets are materially damaged before closing: typically the buyer chooses between walking away and closing with an assignment of insurance proceeds plus a credit for the deductible, with a materiality threshold separating the two. If the agreement is silent, the parties are left arguing about common-law risk allocation and equitable conversion doctrines that were not built for a twelve-building operating business, in the week they least want to litigate anything. Silence here is drafting malpractice in a state where the triggering event has a season.
Second, the interim operating covenants. The seller almost always promises to maintain insurance in force through closing, and in Florida that promise needs an asterisk: carriers suspend binding authority when a named storm approaches, nonrenewals arrive on short statutory timelines, and a mid-deal lapse may not be curable at any price until the storm passes. The covenant should obligate the seller to maintain substantially equivalent coverage, to notify the buyer promptly of any cancellation or nonrenewal notice, and to cooperate on replacement placements — the same discipline I’ve written about for ordinary-course covenants between signing and closing generally, applied to the one operating input Florida can revoke on a week’s notice.
Third, the MAE definition. Most material adverse effect definitions carve out natural disasters and weather events, usually with a disproportionality qualifier — the storm doesn’t count unless it hits the target disproportionately relative to its industry. Buyers tend to treat those carve-outs as boilerplate right up until the season delivers the fact pattern. How the carve-outs and the disproportionality language interact is its own negotiation, one I’ve walked through in the post on MAE carve-outs; the Florida-specific point is that a weather carve-out plus a silent casualty provision equals a buyer who must close on a damaged company at full price and chase insurance proceeds afterward.
Insurance does not follow the business through closing
The third cluster of issues arrives at closing itself. Property and liability policies are personal contracts between the named insured and the carrier, and essentially every commercial form conditions assignment on the carrier’s written consent. In an asset deal that means the seller’s program dies at closing and the buyer stands up its own program effective the same moment — which in Florida means starting placements early, because a first-time buyer of coastal risk will not bind a full tower in a week, and will bind nothing at all with a storm on the map. In an equity deal the policies technically survive, but change-of-control notice provisions, renewal underwriting, and carrier appetite for the new ownership all deserve attention before the wire, not after.
Two adjacent points round out the picture. Open claims from prior storms are assets or liabilities depending on drafting: if the target has an unresolved claim from a prior hurricane, the agreement should say who owns the recovery, who controls the adjustment and any appraisal or litigation, and how business-interruption proceeds attributable to the pre-closing period get split. And representation and warranty insurance will not rescue anyone here — RWI underwriters see Florida catastrophe exposure coming, and known storm damage, open claims, and uninsured flood exposure are exactly the kind of items that end up on the exclusions page, a dynamic consistent with the broader tightening I covered in the post on RWI exclusions.
What a Florida buyer should actually ask for
The diligence list writes itself once the risks are named. Get the full program schedule — every policy, carrier, limit, deductible, and expiration — plus five years of loss runs and any cancellation or nonrenewal notices. Confirm wind and flood separately; never infer one from the other. Quantify the percentage deductibles in dollars against insured values, and put that number in the model. Ask whether any policy sits with Citizens or a recent takeout carrier, and what the last two renewals did to premium — in this market, premium trajectory is operating-expense diligence, not just insurance diligence. Then draft for the season: a real casualty provision with a proceeds-assignment mechanic, an insurance covenant with notice obligations, and a closing calendar that respects the fact that nobody binds coverage with a named storm inside the box. A hurricane between signing and closing is bad luck. A purchase agreement with no answer for it is a choice.
If you are buying or selling a Florida business and hurricane season overlaps your closing calendar, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
