May 13, 2022
  • May 13, 2022

Florida lawmakers consider sweeping property insurance reforms

By on March 29, 2021 0
The Florida Office of Insurance Regulations (OIR) has suggested that Florida’s national property insurers would likely double their losses from 2019 to 2020. Here, residents examine debris after Hurricane Michael hit Mexico Beach, Fla. 2018. (Photo: Zack Wittman / Bloomberg)

Florida Senate Bill 76, introduced by Senator Jim Boyd (R-Bradenton), was recently adopted by the Banking and Insurance Committee and the Judiciary Committee during the current legislative session. He must now pass the Rules Committee before being taken to the Senate for a vote.

The bill provides for a radical reform of property insurance claims in the state of Florida. Specifically, it reviews laws that govern attorney fees, roof coverage provisions, notice periods for presenting claims, alternative dispute resolution, lawsuits involving insurance policies of property, consolidation of legal actions and assignment agreements.

The bill is a response to data from the Florida Office of Insurance Regulations (OIR) suggesting that Florida’s national real estate insurers are expected to double their losses from 2019 to 2020. According to IRO Commissioner David Altmaier, the increased severity of claims involving litigation is driving unfavorable reserve development, leading to high rate deposits.

Related: Florida Senate Backs Bill That Could Raise Policyholder Costs

In-game litigation costs

While SB 76 addresses a number of issues, the changes related to attorney fees are among the most important for property insurance companies. Currently, sec. 627.428, FS, allows an insured to recover attorney fees if he wins in a lawsuit against an insurer to enforce an insurance policy. Courts have interpreted this law broadly to allow cost recovery when an insurer finally settles the case before trial, which is commonly referred to as an “admission of judgment”.

Notably, SB 76 states that sec. 627.428, FS, no longer applies to judgments or orders rendered by a court against an insurer of commercial or residential property. Instead, policyholders would now be required to provide the insurer with 60 days’ notice before initiating a dispute that includes a claim and the amount of legal fees claimed. Lawyers’ fees would be awarded on the basis of a “request-judgment quotient” or a quotient calculated by dividing the judgment by the previous request.

More specifically, the fees would be awarded as follows:

  • If the demand-judgment quotient is greater than or equal to 0.8, the total amount of legal fees incurred may be attributed to the applicant.
  • If the request-judgment quotient is equal to or greater than 0.2 but less than 0.8, the attorney’s fees awarded to the plaintiff must be equal to the product of the multiplication of the attorney’s fees incurred by the request-judgment quotient.
  • If the demand-judgment quotient is less than 0.2, a claimant cannot receive attorney fees; however, the full amount of legal fees incurred can be attributed to the insurer if the claimant is an assignee.

It should be noted that this section does not prohibit attorneys’ fees awarded in accordance with section 57.105, FS, for unsupported claims, defenses or delays, or in accordance with section 768.79, FS, relating to offers of judgment.

Within 30 days of receiving the 60-day notice, an insurer may send a written request for inspection of the insured property. After the inspection, the insurer should conduct an internal review to assess the claim fairly and quickly. If the notice requirement is not met or the inspection is not authorized by the insured, an insurer may apply to reduce the action.

“Rare and exceptional” circumstances

SB 76 also deals with contingency fee multipliers, which can be assigned when calculating attorney fees.

The bill creates a strong presumption that a Lodestar rate (calculated by multiplying the number of hours reasonably spent on a case by a reasonable hourly rate) is sufficient and reasonable. The presumption can only be rebutted in rare and exceptional circumstances with proof that a competent lawyer could not be retained in a reasonable case.

Currently, when determining whether a contingency fee multiplier is warranted, courts consider:

  1. Whether the relevant legal market requires a contingency fee multiplier for a complainant to obtain competent counsel;
  2. Whether the lawyer was able in any way to mitigate the risk of non-payment; and
  3. If any of the factors Florida Comp. of the patient. Fund c. Rowe, 472 So. 2d 1145 (Fla. 1985) are applicable, in particular the amount involved, the results obtained and the type of fee arrangement between the client and the lawyer. [Joyce v. Federated National Insurance Company, 228 So. 3d 1122 (Fla. 2017)].

In Joyce, the court ruled that there is no requirement of “rare and exceptional” circumstances before a court can apply a contingency fee multiplier. SB 76 would bring this analysis into line with the federal standard. [See Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010).]

Roof damage settlements

Another major element of SB 76 concerns the settlement of certain roofing claims on the basis of actual cash surrender value. There are currently two main settlement options available when purchasing a home insurance policy: replacement cost (RC) and actual cash value (ACV).

Liability is generally defined as the cost of repairing or replacing damaged goods with materials of a similar nature and quality without any deduction for depreciation. On the other hand, LCA is defined as the cost of repairing or replacing damaged goods with materials of the same kind and quality, less the cost of depreciation due to use, wear and tear, obsolescence or age.

SB 76 allows insurers to offer a policy that uses a roof coverage repayment schedule to determine the amount of coverage for roofs ten years or older. This results in roof coverage for less than the cost of replacement. The type of roof surface material and the age of the roof are used to determine the amount of coverage. However, the reimbursement scale may not be applied in the event of total loss of a main structure in accordance with the law on insurance policies under art. 627.702, FS

Impact on the insurance sector

SB 76 also changes the sec. 627.70132, MSDS, to declare that a claim, additional claim or reopened claim is time barred unless notice of claim is given to the insurer in accordance with the terms of the policy within two years from the date of loss . Currently, claims are only time-barred with respect to windstorm or hurricane claims if notice is not given within three years of the date of loss. As all carriers and defense lawyers know, claims tend to increase towards the end of the three-year reporting period.

While a number of other topics are covered in SB 76, the above would likely have the greatest impact on the industry. The Senate Rules Committee chose not to vote on the bill and set it aside for further debate. It is expected that the bill will be voted on at the next meeting.

It should be noted that the corresponding bill, HB 305, is radically different from SB 76. It does not include any reform of attorneys’ fees, provisions for the settlement of RC / LCA losses or changes to the risk multiplier. ’emergency. As such, the likelihood of a compromise during this session is unlikely.

Rhythm Mawhinney ([email protected]) is a partner at Kelley Kronenberg, where he handles matters related to first party property insurance defense litigation.

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