PROPERTY MARKET IN "CRITICAL CONDITION"
PROPERTY MARKET IN "CRITICAL CONDITION"
Reining in Runaway Lawsuits and Repairing Solicitations to Protect Florida Consumers
Florida’s insurance regulator has warned state legislators the state’s property insurance market is in a “dire” position that could persist through 2022. Consumers should be alarmed and let their elected state leaders know they want further steps taken to address this crisis.
The Sunshine State currently has the third highest property insurance rates in the nation, due largely to a litany of man-made problems, fueled by the greed of some trial lawyers and home repair vendors. These bad actors are a primary cause of double-digit rate hikes for homeowners, fewer options for coverage, and the potential for more insurer insolvencies due to losses from the flood of lawsuits.
Billboard trial attorneys, driven by the lure of big attorney fee payouts, continue to work in cahoots with some roofing and water remediation vendors to side-step the most recent legislative reform efforts.
In some areas of Florida, consumers are struggling to find affordable property insurance coverage because private insurers have been forced to scale back or stop writing new policies due to litigation they are facing.
More and more consumers are finding their only coverage option is with the state’s insurer of last resort, Citizens Property Insurance Corp., which is on pace to exceed one million policies in 2022. Fortunately, legislators are looking at ways to stifle Citizens’ alarming growth, but in the meantime, all Florida insurance policyholders face the potential of paying assessments to cover Citizens’ debt if it suffers catastrophic losses that it cannot pay with its current financial resources.
Florida Chief Financial Officer Jimmy Patronis has created two new fraud-fighting squads that will be based in Tampa and Orlando to investigate property insurance fraud statewide. Detectives will be directed “to focus on significant cases involving organized schemes to defraud, multiple suspects or jurisdictions, contractor fraud, fictitious damage claims, inflated damage claims, and fraudulent water and roof damage claims.”
Legislators Passed Reforms in 2021, but a Key Provision was Blocked
During the Spring 2021 legislative session, Florida lawmakers laudably passed Senate Bill 76, a reform effort which contained several meaningful provisions intended to rein in questionable lawsuits and home repair vendor solicitations. The bill was signed into law by Governor Ron DeSantis but was almost immediately challenged in court.
What bad behavior did the bill intend to address? Take a South Florida trial lawyer who in 2020 was suspended from practice after court documents and testimony found his law firm had repeatedly abused consumers and systematically violated court orders. Evidence showed that at any given time, this lawyer and his firm’s approximately 25 lawyers statewide had about 10,000 lawsuits underway in Florida courts – some attorneys were handling 750 lawsuits each!
Florida’s top insurance regulator also informed Florida legislators about questionable roofing company solicitations that often lead to lawsuits. One solicitation lured homeowners with a promise that: “1 Broken Shingle or Tile = 1 New Roof – Here’s How!” Another promised consumers a $500 Amazon gift card if they signed up for representation for a new roof. Claims related to these types of solicitations are often rightfully contested by insurers and ultimately drive up costs for consumers.
While Senate Bill 76 addressed these types of questionable roofing solicitations head-on, the bill was almost immediately challenged in federal court, which issued an injunction blocking the strong anti-solicitation provisions from taking effect. Florida lawmakers are right back where they started in their efforts to end questionable solicitations and must try again in 2022.
Let’s Put an End to Litigation-for-Profit Schemes
Litigation-for-profit schemes and the lure of big attorney fee payouts is the fuel that drives Florida’s property insurance lawsuit abuse. But there are common-sense solutions to this problem.
Reining in the out-of-control use of contingency fee multipliers is one area that elected leaders can focus on to reform the litigation problem. Typically, courts calculate attorney fees by simply multiplying the number of hours reasonably spent by an attorney on a case by a reasonable hourly rate. However, in certain circumstances, the court may adjust that amount based on a “contingency risk” factor, which can result in a doubling or even tripling of the attorney fee awards.
The contingency fee multiplier was originally created in early civil rights litigation and intended to correct a shortage in the market for competent representation in complex legal cases. Thus, it was used only in rare and exceptional circumstances. However, a 2017 Florida Supreme Court ruling rejected that notion and authorized the use of multipliers in even run-of-the-mill insurance cases. As a result, attorney fees can now be increased substantially in routine cases, regardless of whether the attorney was already reasonably compensated for their work through their base fee or whether the case was a relatively simple one in which legal counsel was easy to find.
Another area for lawmakers to address is the fact that under state law, insurers are on the hook for plaintiff’s attorney fees if they settle a case before trial. That has led to trial attorneys filing a lawsuit simply to get to the point of settlement, so they can extract a fee.
The CPC's Call to Action
The CPC is urging Florida legislators to continue addressing Florida’s runaway attorney fees, excessive litigation, and questionable solicitations that prey on consumers. Sound public policy reforms in these areas will help to stabilize the state’s currently struggling property insurance marketplace and lead to more insurance choices and greater affordability for Floridians.
Florida’s Outsized Insurance Litigation Problem
Compared to the Rest of the U.S.
In 2021, the Florida Office of Insurance Regulation conducted an analysis of the state’s insurance litigation environment in comparison to other states, using data from the National Association of Insurance Commissioners. It found:
Florida has by far the worst homeowners’ insurance litigation environment in the country.
According to the most recent national data, Florida accounted for just 8 percent of all the homeowners’ insurance claims in the U.S., but 76 percent of all homeowners’ insurance lawsuits in the country.
While claims handling by insurers in Florida appears no different than other states, Florida’s ratio of homeowners’ lawsuits filed to claims closed by insurers without payment was eight times higher than the second-highest state in the country, Connecticut.
OIR concluded that it “does not have a readily available explanation for Florida’s outlier status other than to simply state that Florida is experiencing far more claims-related litigation than the 47 other reporting states.”