For the fourth time since 2019, the Florida Legislature has enacted property insurance coverage reforms aimed in direction of stabilizing a beleaguered insurance coverage market. The invoice, S.B. 2-A, creates a reinsurance help program, establishes extra oversight for insurers with excessive volumes of hurricane claims, and reforms many points of the claims course of, together with the timing for paying and adjusting claims. The reforms additional eradicate one-way lawyer payment awards to policyholders and ban assignment-of-benefits agreements. On this article, we’ll give attention to the modifications to the declare adjustment course of and protection and unhealthy religion litigation.
Within the first spherical of property insurance coverage reforms in 2019, the Legislature established a pre-suit discover course of and two-way lawyer’s payment shifting in project of advantages (AOB) litigation towards admitted carriers. Within the second spherical of property insurance coverage reforms, the Legislature established a process requiring pre-suit discover for policyholders. The second spherical of reforms additionally set stricter time limitations for giving discover of claims. Within the third spherical of property insurance coverage reforms, the Florida Legislature took a extra direct shot on the downside and eradicated statutory lawyer payment shifting in fits introduced by assignees, created a statutory presumption towards lawyer’s payment multipliers, and established a requirement that claimants show a breach of contract to be able to prevail on a declare for statutory unhealthy religion towards a property insurer. The brand new fourth spherical of reforms is mentioned intimately beneath.
No Statutory Lawyer’s Charge Shifting in Property Insurance coverage Litigation
The prior reforms tried to curb frivolous and extreme litigation by establishing a pre-suit discover course of and a sliding scale for lawyer’s payment awards based mostly on success within the lawsuit. However even with a diminished prospect for an award of lawyer’s charges, policyholders nonetheless had the leverage of uneven litigation. Giving a litigation benefit to at least one social gathering encourages extra litigation.
The Florida Legislature has now eradicated the statutory lawyer’s payment shifting in residential and business property lawsuits for each admitted and surplus strains carriers, including the next language to each Sections 627.428 and 626.9373: “In a go well with arising below a residential or business property insurance coverage coverage, there isn’t any proper to lawyer charges below this part.” The fee-shifting statutes stay in impact for different varieties of insurance coverage, and there’s nonetheless potential that policyholders get better lawyer’s charges by sanctions motions or proposals for settlement.
Adjustment of Claims
The brand new reforms scale back the time for insurers to concern undisputed funds. Part 626.9541, unfair strategies of competitors and unfair or misleading acts or practices, has been amended to cut back the time for which undisputed funds ought to be made. Undisputed funds should now be paid inside 60 days, down from 90 days, except fee of the undisputed advantages is prevented by elements past the management of the insurer as outlined in Part 627.70131(5).
The Florida Legislature additionally made additional amendments to Part 627.70131, which is able to take impact on March 1, 2023. Adjustments embrace:
- Lowering the time from 14 calendar days to 7 calendar days for insurers to overview and acknowledge receipt of communications, except fee is made inside that point or except the failure to acknowledge is brought on by elements past the management of the insurer.
- Lowering the time from 14 days to 7 days after the insurer acquired proof-of-loss statements for the insurer to start such investigation as is fairly mandatory, except in any other case offered by the coverage or by regulation, or except the failure to start such investigation is brought on by elements past the management of the insurer.
- Lowering the time from 45 days to 30 days after receiving proof-of-loss statements for the insurer to conduct a bodily inspection of the property.
- Allowing insurers to make use of digital strategies to analyze losses. Such digital strategies might embrace any methodology that gives the insurer with clear, shade photos or video documenting the loss, together with, however not restricted to, digital pictures or video recordings of the loss, video conferencing between the adjuster and the policyholder which incorporates video recording of the loss, and video recordings or pictures of the loss utilizing a drone, driverless car, or different machine that may transfer independently or by distant management. The insurer additionally might enable the policyholder to make use of such strategies to help within the investigation of the loss. An insurer might void the insurance coverage coverage if the policyholder or another individual on the course of the policyholder, with intent to injure, defraud, or deceive any insurer, commits insurance coverage fraud by offering false, incomplete, or deceptive data regarding any reality or factor materials to a declare utilizing digital strategies. Using digital strategies to analyze the loss doesn’t prohibit an insurer from assigning a licensed adjuster to bodily examine the property.
- Requiring the insurer to ship the policyholder a replica of any detailed estimate of loss inside 7 days after the estimate is written by the insurer’s adjuster, eradicating the requirement that the policyholder first request a replica of the estimate.
Part 627.70131(4) has been amended to require insurers to keep up sure data, together with dates of:
- Any claim-related communication made between the insurer and the policyholder or the policyholder’s consultant;
- The insurer’s receipt of the policyholder’s proof of loss assertion;
- Any claim-related request for data made by the insurer to the policyholder or the policyholder’s consultant;
- Any claim-related inspections of the property made by the insurer, together with bodily inspections and inspections made by digital means;
- Any detailed estimate of the quantity of the loss generated by the insurer’s adjuster;
- The start and finish of any tolling interval offered for in subsection (8) of Part 627.70131; and
- The insurer’s fee or denial of the declare.
“Components past the management of the insurer” means:
- The Workplace of Insurance coverage Regulation issued an order discovering that every one or sure residential property insurers are moderately unable to fulfill the time necessities of the statute in specified areas and ordering that such insurer or insurers might have extra time as specified by the Workplace.
- Actions by the policyholder or the policyholder’s consultant which represent fraud, lack of cooperation, or intentional misrepresentation relating to the declare for which advantages are owed when such actions moderately forestall the insurer from complying with any requirement of this part.
This definition of “elements past the management of the insurer” is essential as a result of it’s also used within the part requiring well timed fee of claims. The reformed statute now requires protection determinations inside 60 days:
(7)(a) Inside 60 days after an insurer receives discover of an preliminary, reopened, or supplemental property insurance coverage declare from a policyholder, the insurer shall pay or deny such declare or a portion of the declare except the failure to pay is brought on by elements past the management of the insurer…. Any fee of an preliminary or supplemental declare or portion of such declare made 60 days after the insurer receives discover of the declare, or made after the expiration of any extra timeframe offered to pay or deny a declare or a portion of a declare made pursuant to an order of the workplace discovering elements past the management of the insurer, whichever is later, bears curiosity ….
Accordingly, the exception to the curiosity fee requirement has been restricted to cases the place the Workplace of Insurance coverage Regulation decided that there are elements past the management of the insurer. An insurer can now not make that dedication. Nevertheless, the time necessities of Part 627.70131 are tolled if a policyholder or a policyholder’s consultant fail to offer materials claims data requested by the insurer inside 10 days after the request, if the request is made not less than 15 days earlier than the insurer is required to pay or deny the declare.
The time necessities are additionally tolled throughout any statutory mediation continuing of any various dispute decision continuing offered for below the coverage.
Deadlines for Discover of Claims
The Florida Legislature has once more amended Part 627.70132, which is relevant to each admitted insurers and surplus strains insurers and applies to claims arising from any peril. The amended statute reduces the time to report a declare or reopened declare from 2 years after the date of loss to 1 12 months. The time to report a supplemental declare is decreased from 3 years after the date of loss to 18 months.
Pre-Swimsuit Discover Course of
The components of Part 627.70152 pertaining to lawyer’s charges have been eliminated. The pre-suit discover and backbone course of have in any other case been left intact.
Assignments of Advantages
On the finish of 2022, assignments of advantages to service suppliers will probably be prohibited:
Besides as offered in subsection (11), a policyholder might not assign, in entire or partially, any post-loss insurance coverage profit below any residential property insurance coverage coverage or below any business property insurance coverage coverage as that time period is outlined in s. 627.0625(1), issued on or after January 1, 2023. An try and assign post-loss property insurance coverage advantages below such a coverage is void, invalid, and unenforceable.
This prohibition will apply to admitted carriers solely.
Breach of Contract Needed for Dangerous Religion
Florida Statutes Part 624.155 permits claimants to file unhealthy religion claims below first-party property insurance coverage insurance policies. Earlier than a claimant can file a foul religion go well with, the existence of protection and the extent of damages, the quantity of loss, have to be decided. Over the previous decade, quite a few Florida courts have held that an appraisal award is a enough dedication of protection and quantity of loss to allow a foul religion go well with. Due to this fact, even when an insurer correctly issued fee below the phrases of the coverage, and had not been discovered to have breached any a part of the coverage, it may nonetheless face a foul religion go well with if an appraisal award resulted in any extra fee to the insured. Consequently, value determinations have turn into a well-liked device for unhealthy religion setups.
The Florida Legislature tried to repair this concern in its third spherical of reforms, however the language within the new Part 624.1551 was too imprecise as to what it means to determine a breach of contract. The Legislature has now changed Part 624.1551 with extra exact circumstances for asserting a foul religion declare towards a property insurer:
624.1551 Civil treatment actions towards property insurers.—
However any provision of s. 624.155 on the contrary, in any declare for extracontractual damages below s. 624.155(1)(b), no motion shall lie till a named or omnibus insured or a named beneficiary has established by an hostile adjudication by a court docket of regulation that the property insurer breached the insurance coverage contract and a ultimate judgment or decree has been rendered towards the insurer. Acceptance of a proposal of judgment below s. 768.79 or the fee of an appraisal award doesn’t represent an hostile adjudication below this part. The distinction between an insurer’s appraiser’s ultimate estimate and the appraisal award could also be proof of unhealthy religion below s. 624.155(1)(b), however isn’t deemed an hostile adjudication below this part and doesn’t, by itself, give rise to a reason behind motion.
With this modification, the Legislature has ended the “appraisal to unhealthy religion” setup, and made clear a easy, cheap proposition—an insurer that has abided by the phrases of the insurance coverage coverage shouldn’t need to defend a foul religion go well with.
Affords of Judgment
The Florida Legislature amended Part 768.79, the provide of judgment statute, to allow the making of joint presents which are conditioned on mutual acceptance. This modification eliminates the “spousal loophole,” which permits spousal co-plaintiffs, and different intently associated policyholders, to keep away from presents of judgment conditioned on their joint acceptance.
Submission of Claims to Appraisal as a Normal Enterprise Follow
The invoice amends Part 624.418, which gives grounds for the suspension or revocation of an insurer’s certification of authority, to incorporate cases the place an insurer, as a part of a basic enterprise follow, with out trigger, compels insureds to take part in appraisal to be able to safe full fee of their claims. Appraisal is a mechanism for resolving real disputes over the quantity of loss for a given declare, and the choice to invoke appraisal ought to be made based mostly upon the information and circumstances of a selected declare. This modification to Part 624.418 ought to alleviate issues about appraisal getting used as a method for avoiding unhealthy religion legal responsibility on account of the breach of contract requirement added to Part 624.1551.
Flood Insurance coverage is Inspired
The Legislature amended the warning language required in house owner’s insurance coverage insurance policies that don’t present flood protection. As an alternative of advising householders that they “can also want to contemplate” flood protection, the brand new disclaimer will advise policyholders that they “ought to think about” flood protection.
Necessary Binding Arbitration Endorsements Approved
The brand new regulation creates Part 627.70154, which codifies that insurers can concern non-obligatory necessary binding arbitration endorsements. The policyholder should signal a type electing binding arbitration, and the premium for the coverage should embrace an actuarially sound low cost for the necessary binding arbitration endorsement. However, insurers should additionally provide the policyholder a coverage that doesn’t require participation in necessary binding arbitration.
These statutory reforms turned efficient upon being signed into regulation by Governor DeSantis on December 16, 2022, which implies the modifications apply to insurance policies issued after that point. The amendments to Part 627.70131 take impact on March 1, 2023. As a result of the outdated legal guidelines will apply to insurance policies which have already been issued, we anticipate a excessive quantity of litigation on older claims, and of claims for injury from Hurricane Ian and Hurricane Nicole. Following the third spherical of reforms, we noticed an uptick of litigation from assignees hoping to litigate below the older, extra favorable legal guidelines.
Assignments of advantages will probably be prohibited on January 1, 2023, however this prohibition will probably solely apply to admitted carriers.
These reforms signify probably the most vital modifications to Florida’s present Insurance coverage Code since its inception in 1982. Particularly, the elimination of lawyer’s payment awards has been on the radar of the Workplace of Insurance coverage Regulation for numerous years now. These insurance coverage reforms profit each policyholders and insurers. Policyholders will obtain faster declare choices and funds, and insurers ought to finally see fewer abusive lawsuits. The Florida Legislature is encouraging immediate and open adjustment of claims, whereas discouraging attorneys and contractors from abusing the insurance coverage declare course of. We consider these reforms may have a constructive influence on the insurance coverage market in Florida, however it’ll take not less than just a few years earlier than we see the true influence of this laws on the amount of property insurance coverage litigation.
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