On July 1, 2021, Florida Senate Bill 76 (“SB76”), which amended several provisions affecting Florida property insurance litigation, came into force. This bill was Florida’s latest attempt to stabilize rising insurance premiums and reduce the burden on the Citizens Property Insurance Corporation (“Citizens”) by encouraging private carriers to write new policies on Florida homes. . Concretely, Florida homeowners are facing double-digit insurance rate hikes, limited coverage, or being forced to turn to the state’s insurer of last resort, Citizens. The Florida Office of Insurance Regulation (“OIR”) has approved 90 rate increases from insurance companies in the past year. While many customers have benefited from rate increases of up to 45%, others have received notices of non-renewal or outright cancellation from private carriers.
Many insurers are unwilling to insure homes in Florida, where homeowners’ insurance lawsuits accounted for 76% of all litigation against insurers across the country in 2019. “When Florida only accounts for 8% of claims property insurance nationwide, but 76% of domestic property insurance litigation, you know there’s a problem, ”said Mark Wilson, president and CEO of the Florida Chamber of Commerce . Some who oppose the new legislation call it a big win for insurance companies. Others, who support its adoption, say it will save the Florida real estate market from collapse and encourage private insurers to do business in Florida. Regardless of your side, statistics show that the number of damages lawsuits filed in Florida over the past seven or eight years has quadrupled. The Florida legislature clearly hopes to limit costly litigation with SB76, which amends several laws related to insurance.
As of 2019, section 627.428 of Florida law grants attorney fees to anyone who has obtained a judgment against an insurance company for breach of an insurance policy. This meant that if an insured received a $ 1 judgment at trial, then the carrier would be liable for hundreds of thousands of dollars in attorney fees and costs. With the enactment of the revisions included in SB76, however, there is a new framework for determining whether an insured will be entitled to recover fees and costs and, if so, what percentage can be recovered. Section 627.428 of Florida law now refers to a new law, Section 627.70152, and sets out recovery percentages based on the amount of judgment versus the amount contested before the lawsuit. Specifically:
- If the difference between the amount obtained by the applicant and the prior offer is less than 20% of the contested amount, each party pays its own fees and costs;
- If the difference between the amount obtained and the prior offer is at least 20% but less than 50% of the contested amount, then the insurer pays the applicant fees and costs equal to the percentage of the contested amount obtained; and
- If the difference between the award and the prior offer is greater than 50% of the disputed amount, the insurer covers the total amount of fees and costs.
For example, if an insured’s advance claim is $ 20,000 and the carrier offers $ 10,000, the amount in dispute is $ 10,000. If a jury awarded the insured $ 1,000, then the insured would only have obtained 10% of the disputed amount and each party would pay their own costs and expenses. If a jury awarded the insured $ 3,500, then the insured would have obtained 35% of the disputed amount and would be entitled to recover 35% of legal fees and costs. Finally, if a jury awarded the insured something over $ 5,000, then the insured would have exceeded 50% of the disputed amount and the carrier would be responsible for all attorney fees and costs.
The disputed amount is itself determined by the now required Notice of Intent to Begin Litigation (NOI). This is done through a form provided online by the Department of Financial Services (“Department”) and is a prerequisite for any insured who wishes to take legal action against an insurance company on the basis of a claim for damages. and interest. Among other things, the insured must identify the alleged acts or omissions giving rise to the lawsuit, an estimate of the damages (if known) and the prior claim for settlement, detailed by the damages, attorney’s fees and costs. . These notices of intent are public documents, and although few of them appear to have been filed, it appears that at least some do not include a prior request. This is required by law, but apparently not by the ministry’s Notice of Intent form. As such, the application of the new version of the Law on Lawyers’ Fees may result in more litigation than the legislature expected.
SB76 also attempts to address the potentially predatory practices of roofers and contractors, who have solicited business by encouraging policyholders to file insurance claims, through the language of section 489.147 of Florida law. Specifically, entrepreneurs cannot engage in “prohibited ads”[ing]”, Nor can they offer a residential building owner a discount in exchange for the contractor’s roof inspection or the submission of a roof insurance claim on behalf of the owner.
Advertising prohibited under this section means “any written or electronic communication by a contractor which encourages, instructs or induces a consumer to contact a contractor or an adjuster for the purpose of making an insurance claim for damages. at the roof.” The prohibited advertising specifically includes “door hangers, business cards, magnets, flyers, brochures and e-mails”. In addition, contractors and roofers cannot engage in any interpretation of the policy or advise an insured on their obligations under the insurance policy, unless they also hold a claims adjuster license. . Fines of up to $ 10,000 can be imposed for each violation, that is, for each business card or flyer. This could add up quickly, given the prevalence of these advertising programs.
At least one roofing company, Gale Force Roofing & Restoration, LLC (“Gale Force”) has attempted to challenge this new law. On June 21, 2021, Gale Force filed a declaratory and injunctive relief complaint with the United States District Court, North District of Florida, arguing that SB76 infringed Gale Force Roofing’s right to freedom of expression. However, on June 29, 2021, U.S. Chief District Judge Mark E. Walker issued an order dismissing the complaint without prejudice, noting that he “is not satisfied that he has jurisdiction to hear [the] Case. “Gale Force filed its first amended complaint on June 30, 2021. On Sunday July 11, 2021, Judge Walker issued a preliminary injunction, ordering that no action can be taken to enforce section 489.147 (2) (a) of Florida Law (3), and (4) (b) with respect to “prohibited advertisements” until otherwise directed.
Claims notification deadline:
As of 2011, section 627.70132 of Florida law limits the time allowed for anyone to report a hurricane or storm claim to an insurer to three (3) years from the time the “hurricane made landfall” or the “windstorm caused the covered damage.” “As of July 1, 2021, this deadline for reporting a claim or reopened claim has been reduced to two (2) years and includes claims“ for losses caused by any peril. ”The deadline for reporting an“ additional claim ” remainder of three (3) years.
An additional claim is defined as “a claim for additional loss or damage of the same risk that the insurer has previously adjusted or for which costs were incurred in completing repairs or replacement under a claim. open for which timely notice has previously been provided to the insurer. “Reopened claims are defined as“ a claim that an insurer has previously closed, but which has been reopened at the request of an insured for additional charges for loss or damage previously disclosed to the insurer. ”This seems to differentiate the makes a reopened claim an additional claim for damages that were previously disclosed, while an additional claim is an additional claim for damages later discovered as a result of the same loss. that there be further disputes over the definitions of reopened and additional claims to determine which time frame applies.
Carrier reporting requirements:
SB76 also included language amending Section 626.424 of the Florida Act, which sets out the data that all carriers must report to the state. This data is plentiful, ranging from the types of policies and zip codes where the claims occurred, to the vendors used for mitigation, and the amount paid for claimants’ attorney fees. This is clearly designed to help the legislature determine whether the provisions of SB76 serve their purpose.
While SB76 does include some useful provisions, it seems unlikely that those who have benefited from so many insurance claims filed will submit to these changes with discretion. However, with the intention of the legislative changes clearly being to reduce litigation and encourage private carriers to resume purchasing home insurance policies in Florida, we hope the courts will help achieve the legislature’s goal.
(1) The authors thank legal assistants Kalie Maniglia and Steven Jeffries for their assistance in preparing this client alert.