Third round of property insurance reform in Florida brings big changes

For the third time since 2019, the Florida legislature has undertaken extensive property insurance reforms aimed at stabilizing the insurance market and curbing lawsuits from unscrupulous contractors. Bill SB 2D, establishes a reinsurance program, modifies certain prohibited advertising practices for contractors, permits issuance of personal line policies with separate cap deductions, and prevails in bad faith litigation and litigation by assignees of property insurance. In this article, we will focus on the legal changes that affect the handling and litigation of property insurance claims.

No attorney fees for taxpayers

The legislature amended Sections 627.428 and 626.9373 of the Florida statutes (surplus lines), which provide for one-way attorney fees that shift to insureds that prevail in coverage lawsuits. The possibility of recovering attorneys’ fees prompted lawyers and contractors to litigate cases as a matter of course. In the first round of property insurance reforms in 2019, the legislature established a two-way transfer of attorney’s fees in benefit litigation (AOB) against approved carriers, based on the amount recovered in connection with pre-suit settlement offers.

In the latest reform package, the legislature prohibited the waiver of any right to attorneys’ fees, adding the following language to Sections 627.428 and 626.9373:

In a proceeding under a residential or commercial property insurance policy, the right to attorneys’ fees under this section may not be transferred, assigned, or otherwise obtained by any other uninsured, insured, or specified beneficiary.

By removing the possibility of remitting statutory attorney fees, the legislature removed a significant incentive for attorneys and contractors to bring unnecessary lawsuits, to litigate, or to litigate in a manner disproportionate to the value of the dispute. After all, these contractors and attorneys are not realtors whose property has been damaged, but instead professionals who target insurance claims for business development.

In conjunction with the amendment of Sections 627.428 and 626.9373, the Act also amends Section 627.7152, the AOB’s Advance Notice of Litigation System. The law still requires assigns to give recognized insurers 10 business days’ notice before filing a lawsuit, but it no longer provides a mechanism for remitting attorney fees.

Edit Claims

Under Section 627.70131 of Florida laws, which also applies to insurance companies on overflow lines, unless the policy or law provides otherwise, the insurer must begin investigation of the claim within 14 days after receiving evidence of loss statements, unless The failure to initiate this investigation is caused by factors outside the insurance company’s control. Section 627.70131 (3) (b) now includes additional requirements that “[f]or claims other than those subject to the hurricane deductible, the insurer must make any physical inspection within 45 days after receipt for proof of loss data.”

With respect to estimates established by the insurer, Section 627.70131 now provides:

(d) Within 7 days after the insurer has appointed a claim adjuster, the insurer must notify the policyholder that it may request a copy of any detailed estimate of the amount of loss caused by the insured adjuster. After receiving such a request from the policyholder, the insurance company must send any such detailed estimate to the policyholder within 7 days after the insurer receives the request or after 7 days after the detailed estimate of the amount of the loss has been completed. This paragraph does not require the insurer to make a detailed estimate of the amount of the loss if such estimation is not reasonably necessary as part of the investigation of the claim.

Thus, if the policyholder requests a copy of the insurer’s estimate, the insurance company must send a copy of the estimate within 7 days, or, if the estimate has not yet been contested, within 7 days after it has been completed. But, the insurance company does not need to create an estimate to respond to a request.

When paying or denying claims, insurers must specify the basis in the insurance policy, with respect to the facts, for any payments, refusals or partial denials:

The insurer shall provide to the policyholder a reasonable written explanation of the basis in the insurance policy, with respect to the facts or applicable law, of the payment, denial or partial denial of the claim. If the insurer’s claim payments are less than specified in any insurer’s detailed estimate of the amount of the loss, the insurer must provide a reasonable written explanation of the difference to the policyholder.

Lawyer’s fees to insurance companies for lawsuits filed for lack of prior notice

In the second round of property insurance reforms, the legislature created a procedure that required advance notice of a lawsuit before a policyholder could file a lawsuit under a residential or commercial property insurance policy. Section 627.70152 (5) provides that without prejudice to a claim by the plaintiff in respect of which the required advance notice has not been given, the court shall dismiss. The legislature has now amended Section 627.70152 to allow courts to award an insurance company reasonable attorneys’ fees and costs associated with severance insurance.

Presumption against multiples of attorney’s fees

There is no shortage of property insurance attorneys in Florida. Anyone who has gone through the state, turned on their television or radio, or opened their email has likely seen an ad for a property insurance attorney offering to work on a contingent fee basis—”no refund, no fee.” However, Florida courts have routinely awarded multiples of attorney fees to mainstream policyholders represented on the basis of conditional fees. in Joyce v. Federal National Insurance Corporation, 228 then. 3d 1122 (Fla. 2017), the Florida Supreme Court has found the 2.0 contingency fee multiplier to be reasonable in a lawsuit arising from a homeowner’s insurance claim. As a result of unit fee multipliers, attorneys representing policyholders in minor disputes, such as residential water leak lawsuits, were awarded attorneys’ fees in the amount of $800-1,000 per hour.

The Legislature has now amended Section 627.70152 (8), Attorney’s Fees, to include:

(c) When awarding attorneys’ fees under this subsection, a strong presumption is made that attorneys’ fees are sufficient and reasonable. This presumption may only be refuted in rare and exceptional circumstances and there is evidence that reasonable competent counsel cannot be used.

Accordingly, there is still the potential for a court to rule the contingent fee multiplier, and there is still some level of arbitrariness in setting a reasonable hourly rate for an attorney working primarily, if not exclusively, on the basis of contingent fee. It is not yet clear what circumstances the courts will find to warrant multiples, but there is now at least a clear presumption against the multiple, and the burden of refuting that presumption will be borne by the policy holder.

Necessity of breach of contract due to bad faith

Section 624.155 of Florida laws allows plaintiffs to file bad faith claims under first-party property insurance policies. Before a plaintiff can file a bad faith claim, the existence of coverage, the extent of the damages, and the amount of the loss must be determined. Over the past decade, several Florida courts have held that an assessment award is a sufficient determination of coverage and amount of loss to allow a bad faith lawsuit to be brought. Therefore, even if the insurance company issues a payment correctly according to the terms of the policy, and no breach of any part of the policy is found, you can still face a bad faith claim if the assessment decision results in any additional payments to the insured. Thus, evaluations have become a common tool for bad faith organizations.

The legislature has now created Section 624.1551 to address this problem by requiring the conclusion that the insurance company violated the policy:

624.1551 Civil compensation claims against property insurance companies. –

Despite any requirement of s. Under Resolution 624.155, the claimant must prove that the property insurer has breached the insurance contract in order to prevail in a claim for non-contractual damages under s. 624.155 (1) (b).

As a result of Section 624.1551, claimants can no longer file bad faith claims based on only a favorable assessment award. Instead, the plaintiff will have to prove that the insurance company violated the policy.

Effective Date

Except as otherwise provided, statutory changes become effective when signed into law on May 26, 2022. The changes to Section 627.70131 discussed above will take effect on January 1, 2023. We expect that there will be challenges as to whether Changes to attorney fees laws affect policies that were issued prior to the law’s entry into force.

concluding thoughts

The first two rounds of property insurance reforms seemed well-intentioned, but they didn’t go far enough in addressing the real issues – professional plaintiffs and laws that encourage litigation over a reasonable solution. The Florida legislature encourages prompt and open adjustment of claims, while discouraging attorneys and contractors from abusing the insurance claim process. These reforms should have a positive impact on the property insurance market in Florida and should begin to reduce the amount of frivolous lawsuits that have been blocking the courts for many years. We will all have to wait and see if another round of reforms is necessary.

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