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.
February 6, 2021 at 1:04 pm
You have to be kidding — except this is Florida. These guys (Matiyow and Carlson,) representing insurance companies get right to it. In the first line they say rising insurance costs are driven by litigation and reinsurance. Have they not heard of global warming, increasing flood hazards, and mismanagement by insurance companies? These are some of the other big reasons for any increases in homeowner rates.
Not all companies are raising rates. The largest insurer (usually) Citizens, with the worst customers, rejects from the for-profit companies, only asked for a 3.6% increase. They could have done without that and waited until next year, but they are political at Citizens and fear the Legislature. So, they go along to get along.
How can these writers suggest Florida is a litigious state when just last year, Florida was removed from the list of “Judicial Hellholes” – a web site listing the worst states? The very conservative Legislature has passed restrictions on access to courts almost every year, and pretty well wrapped up the AOB issue last year. In the past, the trial lawyers often asked the Florida Supreme Court to overturn the Legislature’s most generous gifts to insurance, but very conservative Governor Ron DeSantis just appointed new justices approved by the very conservative Federalist Society and nothing will get by them. That’s a reason given for removing Florida from the “Hellholes” list.
This year the Legislature wants to deprive consumers of any access to courts at all, as these authors say, “An ideal solution would remove the incentive for attorneys to sue insurance companies.” They are forgetting that it is consumers and businesses that sue insurance companies, not lawyers. They just hire lawyers.
The same bill would also prevent homeowners, mostly, from repairing their roofs, something that troubles the insurers. They would do that by depreciating the roof so your policy only pays whatever percentage of your roof they say is left. Many homeowners simply would not be able to afford the replacement or repair cost. The concept is ridiculous anyway. How much water is 25% of a roof going to keep out?
That Progressive ad on TV about sums it up when you see the insurer reps laughing about offering a $10,000 settlement because it is so low. They know the homeowner probably has to take it anyway. They won’t even have to offer that much if the Legislature passes these bills. That’s the way it really works: insurers don’t want to pay claims at all and have very expensive teams of lawyers to fight hapless probably now unemployed consumers. Consumers need good attorneys to fight back, and when you’re up against a giant insurance company, you don’t care how much your attorney gets paid just as long as they can win for you.
Oh, and the authors fail to mention that attorney fees must be approved by the judge in the case, and the insurer can appeal the fees and even seek sanctions against attorneys if they feel put upon. They won a case like that just recently.
Don’t listen to these stories about greedy lawyers, because what they really mean is angry customers who hire lawyers. The top complaint against insurers is stalling and lowballing claims payments. They could fix that, and the problem would go away.
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