USA – FLORIDA Trends and Developments Contributed by: Melissa Sims and Patrick Betar, Berk, Merchant & Sims
What has Florida’s legislature done? To address the problem, Florida’s legislature began working on a series of reforms in 2022. Among those reforms were the following: • requiring new insurance claims to be reported within a year of the loss; • shortening the time in which a carrier has to acknowledge, investigate and pay a claim; • requiring a policyholder to provide a carrier with ten days’ notice before filing suit, as well as requiring the carrier to respond in pro- scribed ways before suit; • repealing Florida’s “fee statute” that previous- ly allowed an insured to recover its attorney’s fees if it successfully prosecuted a claim for denied benefits; • tightening prerequisites to a statutory claim for unfair claims practices (“bad faith”); • prohibiting assignments of insurance benefits; and • establishing stricter regulatory measures for insurers with regard to accepting risks, handling claims, and making financial disclo- sures. As regards the litigation world, the elimination of the one-way fee statute and the implementation of the Notice of Intent to Initiate Litigation statute have arguably had the strongest impact. Florida requires a policyholder to serve its car- rier with a Notice of Intent to Initiate Litigation prior to filing a lawsuit. The notice must provide the carrier with certain information. That includes advising the carrier of the amount in dispute and, in certain circumstances, providing an estimate for the cost of repairs being claimed. Although seemingly rudimentary, often in the past suits would be filed without notice of a dispute and the parties would need to conduct exhaustive discovery to ascertain the scope of the dispute.
between USD5,000 and USD15,000 a week for violating court rules and orders. Ultimately, the firm dissolved and its principal was disbarred from the practice of law. Although not indicative of the majority of Florida’s attorneys represent- ing policyholders, this became a poster child of the insurance crisis. Adding to the litigation cost per claim were Assignment of Benefits (AOB) agreements, whereby a vendor agreed to perform repairs after a loss in exchange for a policyholder assigning the vendor its rights to insurance proceeds for the work. For a simple water loss from a pipe break, the claim could be divided between the insured, a water mitigation company, a mold remediation company, and another company who would repair the damaged property. Each stakeholder in the claim would file its own law- suit, entitling each stakeholder to seek recov- ery of attorney’s fees separately. This created an exponential increase in the cost of the claim, the industry argued ‒ making it difficult for insur- ers and reinsurers to estimate the risk they were underwriting. On the other hand, many of those who represent policyholders state other reasons for the insur- ance crisis. These include: • increased risk of hurricanes and floods due to climate change; • poor regulation of the industry; • high-risk insurers without diversity of risk; and • executive compensation packages as causes of Florida’s sky-rocketing premiums. Indeed, throughout the past few years the National Hurricane Service has forecast unusu- ally active hurricane seasons. This is figured in when underwriting and evaluating risk.
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