Florida is facing a property insurance crisis driven by increasing litigation and reinsurance costs. These costs drive up homeowners’ insurance premiums.
Recent insurance company rate filings seeking double-digit increases have been approved by the Florida Office of Insurance Regulation in accordance with Florida statutes. Insurance Commissioner David Altmaier called the ongoing trends “unsustainable.”
Much of the problem is caused by home repair vendors, public adjusters and attorneys who seek out clients through neighborhood canvassing or other marketing techniques to convince homeowners to file insurance claims. Usually, a homeowner contacts his or her insurer to make a claim immediately after experiencing a loss. But many claims filed a year or more after damage occurs are “represented” claims, where the homeowner hires someone to handle the claim for them — these claims often end up in litigation.
And attorneys have a strong incentive to litigate.
Once a property claim lawsuit is filed, attorneys have a direct route to fees and even a “multiplier” that increases their fees by as much as two times. There are many cases where the amount of the insurance claim being disputed is dwarfed by the eventual attorney fees, making attorneys the real winners in these cases.
This is the hallmark of the litigation-for-profit business model.
Recently, a well-established Florida law firm was found to be in violation of 14 Florida Bar ethics rules. The firm was handling close to 10,000 lawsuits against insurers at any given time, filing multiple lawsuits over the same claim, and suing without homeowner permission — all to pocket claim settlements and drive up their attorney fees. Their conduct was so abhorrent that local judges notified the Florida Bar, which is now seeking disciplinary action against the firm’s founder and other attorneys.
Before a 2019 change to Florida law, some home repair vendors routinely persuaded homeowners to sign an “assignment of benefits,” which transferred the homeowner’s insurance rights to the repair vendor who could then sue the insurance company in the homeowner’s name, sometimes without their knowledge.
Even though the Legislature chipped away at incentives for vendors to abuse AOB, bad actors have been working hard to find new ways of taking advantage of homeowners.
Further legislative action is needed. An ideal solution would remove the incentive for attorneys to sue insurance companies by prohibiting the application of the attorney fee multiplier in property claims lawsuits, except in rare and exceptional cases.
This would align the use of the multiplier with federal standards and make it more likely to be used for genuine reasons rather than frivolous ones.
An even more impactful solution would be to apply the AOB law passed in 2019 to all property claims. This policy requires written notice of the intent to sue and ties attorney fees to the amount of damages awarded to a plaintiff. This “sliding scale” approach has been successfully used by other states — notably Texas — to address rampant claims abuse and frivolous litigation.
Another potential solution is a reduction in the time allowed for filing an initial insurance claim. Right now, a homeowner has up to three years to file an initial hurricane claim. If we reduce this window appropriately, we can reduce the number of solicited claims in the years after a storm.
This would still allow homeowners to file supplemental or reopened claims later, protecting the rights of those who filed their initial claim quickly and legitimately.
Florida will always face a significant risk of hurricane-related loss because of its unique geography and location, but homeowners should not have to face a hurricane of insurance premium increases driven by a cottage industry of self-interested attorneys, public adjusters and home repair vendors. There are reasonable solutions to these litigation-for-profit schemes that will protect consumers and control rising insurance costs.
We hope the Florida Legislature will take needed steps to address these and other property issues when they convene in March.
Scott Matiyow is the vice president for Legislative & Regulatory Affairs and Michael Carlson is the CEO of the Personal Insurance Federation of Florida.