Doug Wheeler: Rolling back legal reforms is a step backward for insurance

Florida’s property insurance market has made significant strides in recent years, thanks to thoughtful reforms designed to stabilize a system that had become increasingly untenable.

These measures, particularly the legal reforms that curbed litigation abuse, helped control skyrocketing premiums, foster competition, and lay the foundation for a healthier property insurance market.

Yet, in a potentially disastrous move, legislation introduced in the Florida House of Representatives threatens to undo much of this progress by reintroducing one-way attorney fees and disrupting the market’s fragile recovery.

Even former Florida Supreme Court Chief Justice Ricky Polston has expressed concerns over the potential repercussions of this proposed measure, highlighting that it distorts the original intent of the legal reforms.

The reforms were specifically designed to reduce the financial incentives for litigating meritless claims. However, language from House Bill 1551, which didn’t have the votes to pass, is now being amended to House Bill 947 late in the Session, and it directly undermines reforms by making it easier for policyholders to recover attorneys’ fees, regardless of the strengths or merits of the case.

Among the most concerning provisions is a proposed redefinition of what constitutes the “prevailing party” in claim disputes. The language stipulates that a policyholder can be deemed the prevailing party simply by securing a judgment higher than the insurer’s settlement offer — irrespective of the actual merits of the case. This provision, in essence, seeks to revive the one-way attorney fee structure that was eliminated just a few years ago, which was central to the state’s legal reforms and market recovery efforts.

By tethering attorneys’ fees to a case’s outcome, the Florida Legislature would effectively guarantee that policyholders will recover legal expenses in most circumstances. While this may appear to benefit consumers in the short term, the long-term consequences are far more concerning.

It will likely encourage frivolous lawsuits, as attorneys will have little incentive to filter out cases with no merit. Litigation costs will rise, which will inevitably be passed on to consumers through higher premiums, making it harder for homeowners to afford coverage.

This shift in the legal landscape could have far-reaching effects on Florida’s property insurance market, and it should not be taken lightly.

Florida’s property insurance market has shown signs of recovery, and rates have begun stabilizing due to an influx of new insurers willing to operate in the state. This provides much-needed options for homeowners who had previously been left vulnerable by skyrocketing premiums.

The progress made in the wake of these reforms should not be underestimated. Recent data from the insurance industry shows a significant decline in lawsuits filed against insurers, with insurers also reporting fewer instances of bad faith claims.

Premium rate increases have slowed, even declined in some cases, and more insurers are once again offering policies in Florida — creating a more competitive and stable market.

These positive developments, however, are now at risk due to a potential reversal of hard-won progress.

Beyond its impact on Florida’s insurance market, this effort also raises concerns about the state’s broader business climate.

By reintroducing policies that encourage litigation over resolution, the proposed measure sends a message that Florida may be willing to backtrack on the free-market principles that have made it an attractive destination for investment and entrepreneurship. This could also have broader implications for other industries, signaling to investors that Florida may be moving away from market-driven solutions and toward a system more prone to legal intervention.

Let’s be clear: Rolling back reforms that are working represents a significant step backward for Florida’s property insurance market. It undermines the very reforms that have contributed to the market’s recovery, fosters a litigious environment that benefits trial lawyers at the expense of consumers, and risks driving up premiums for homeowners across the state.

Lawmakers mustn’t lose sight of the broader goals of these reforms — goals that HB 947 threatens to unravel. The path forward should involve supporting market-based reforms that address the root causes of the insurance crisis, and lawmakers should prioritize policies that support market-based solutions, fostering a stable, fair, and competitive property insurance market for all Floridians.

 ___

Doug Wheeler is the director of the George Gibbs Center for Economic Prosperity at The James Madison Institute (JMI), a free-market public policy research organization based in Tallahassee.