Triple-I Blog | Some Sunshine in the Florida Property Insurance Market

By Matthew Scarfone, Esq., Triple-I blog contributor, and Colodny Fass shareholder

Florida offers insurance policies that have a variety of factors that affect the availability and affordability of insurance. The state has the third highest rate of natural disasters in America. It’s safe to say that working for a home insurance company in the Sunshine State is not for the faint of heart.

What is causing the growing problem in Florida law enforcement?

But as destructive as hurricanes can be, there is a man-made hazard that has contributed significantly to market volatility in terms of rates: regulatory abuse. On the contrary, some people misuse the tools of justice to destroy the results and get fantasy. Insurance carriers have paid higher costs in recent years due to the increase in one-way attorney’s fees, bad faith claims, and other unsettled litigation processes.

The use of one-way attorney’s fees and malpractice laws has become increasingly common. Until recently, if a police officer or third party filed an insurance claim and received any monetary award, they were entitled to recover all costs incurred by the attorney. This practice can encourage people to dispute insurance claims, regardless of whether they were correct.

The problem was further exacerbated by the contracts’ misuse of assignment of benefits (AOB), which gave contractors the opportunity to raise costs. As a result, modest home owner insurance claims may result in multiple lawsuits with different assignees, each claiming a different fee for the attorney fee. Using this method encourages more claims and unreasonable demands, forcing insurers to choose between paying a higher bill or risking a long term where the attorney’s fees alone may exceed the amount. On top of this, the courts have great discretion to use fee multipliers and can award 1.5-3 times the legal fee to a lawyer.

Bad faith lawsuits increase insurance exposure because these lawsuits can be expensive to defend and involve difficult discovery, amorphous damages, and unpredictable juries. Bad faith lawsuits are not delayed (ie, ready to go to court) until there is a final decision regarding coverage and the amount of damages. Therefore, insurers are always faced with the prospect of defending a malpractice lawsuit even after settling the dispute.

Florida courts did not help in that case by ruling that the awarding of awards—a useful tool for resolving disputes—would lay the foundation for bad faith. In other words, after settling a claim at trial, insurers may be left to defend against a lawsuit based on bad faith. Some lawyers have used the law as a playbook to pursue bad faith lawsuits by misusing the review process.

The problem looks worse when you count it. According to the Florida Office of Insurance Regulation (OIR), as of 2020, even though Florida only accounted for 9% of the homeowner’s insurance claims in the country, it accounted for 79% of all homeowner’s insurance claims nationwide. Furthermore, over the past decade, only 8% of the $51 billion in insurance payouts went to plaintiffs, yet plaintiffs’ attorneys took home 71%. Meanwhile, eleven Florida insurance companies have gone bankrupt since 2017 — five of which happened last year alone.

Lawmakers recognized the need for immediate action to reduce insurance costs.

The Florida Legislature has responded to the growing problem by passing several rounds of insurance reform, particularly addressing problems with AOBs, bad faith claims, and excessive premiums. For example, the new rules eliminate one-way attorney’s fees in property insurance cases, prohibit the use of probate awards to settle adverse claims, and prohibit sellers from taking AOBs under the new policy. Despite the opposition, this change is not “one sided.” The recently passed legislation also ensures that there is transparency and efficiency in the complaints process and promotes a more efficient and cost-effective alternative to litigation.

Although it is too early to know how the recent changes will change the state’s insurance market, there is hope that these measures will reduce the number of property insurance cases and promote a more stable and stable insurance market that helps consumers have more access. Comprehensive learning.

It may take some time for these changes to have a significant impact on the Florida property insurance market. However, insurers and policyholders should be optimistic that the market is heading in a more stable direction.

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