Florida Eliminates One-Way Attorney’s Fees Statute in Bid to Stabilize Insurance Market
By Michael J. Raudebaugh
In December, the Florida Legislature held another special session – the second one of 2022 – in an attempt to further stabilize the beleaguered insurance market. The result was Senate Bill 2A, which most notably repealed the one-way attorney’s fee provision that has long governed property insurance lawsuits within the state. Other provisions in the bill, while not as eye-catching as the attorney’s fee repeal, will undoubtedly change the way carriers adjust claims and litigate disputes. There will also be a profound effect on homeowners, as many who have been forced into policies from Citizens Property Insurance Corporation, the state-backed insurer of last resort, will be required to reenter the private market at a higher cost. It is, therefore, important for both carriers and their counsel to understand the changes and develop strategies for dealing with the altered landscape.
The End of One-Way Attorney’s Fees in Florida
Perhaps the most significant change found in Senate Bill 2A is the repeal of Florida’s one-way attorney’s fee provision, which entitled an insured to reasonable attorney’s fees in any lawsuit in which any amount of recovery was awarded. While policyholder advocates and members of the plaintiffs bar argue that this provision gave insureds the necessary leverage to fairly engage in disputes with their insurers, the consequence of that leverage has been an explosion in litigation and the development of a cottage industry of contractors, mitigation companies, and law firms formed to exploit the statutory scheme for profit.
The bill revised Florida Statute Sections 627.428 and 626.9373, which govern suits brought against admitted and surplus carriers, respectively, to plainly state that “there is no right to attorney fees under” these sections. Further, while the bill did not abandon the recently-enacted pre-suit notice provision found in Section 627.70152, it removed any reference in that section to the award and/or calculation of attorney’s fees. This eliminates any use of the pre-suit notice as a fee-shifting mechanism, but retains the carrier’s rights to force an insured to allow a reinspection of the property or participate in alternative dispute resolution before suit is filed.
Interestingly, the bill also addressed lingering problems with the function of proposals for settlement and bad faith claims. It amended the existing proposal for settlement statute, Section 768.79, to unambiguously allow insurers to make a joint offer of settlement that is conditioned on the mutual acceptance of all joint offerees. It also added language to Section 624.1551 to make clear that acceptance of an offer of judgment or payment of an appraisal award does not constitute an adverse adjudication that would allow a policyholder to claim extra-contractual damages under Section 624.155. These fixes may signal the Legislature’s intent to force parties to utilize traditional methods of fee-shifting and eliminate back-door means of obtaining a ripe cause of action for bad faith. Moving forward, a policyholder must obtain an adverse adjudication by a court establishing that the carrier breached the insurance contract, followed by a final judgment or decree, before pursuing a bad faith action against their carrier.
The plaintiffs bar will undoubtedly look for creative ways to recoup its fees in light of the statutory change. However, by deleting almost all reference to attorney’s fees, the Florida Legislature and Governor DeSantis have made their intent clear. As stated in the press release issued upon signing the bill, eliminating the one-way attorney’s fees provision was meant to “disincentivize frivolous lawsuits” and reduce “the burden of excessive and predatory litigation” in Florida.
The End of the Assignment of Benefits as We Know It
While legislation in the last several years has eroded the effectiveness of assignments of insurance benefits, Senate Bill 2A puts the final dagger into the heart of assignments of benefits in Florida – with just a few possible caveats. The bill revised Section 627.7152 to include an outright prohibition on policyholders assigning any post-loss insurance benefits under either residential or commercial property insurance policies issued on or after January 1, 2023. Any attempt to do so will be “void, invalid, and unenforceable.” The only carve-outs are for assignments conveyed to a subsequent purchaser of the property, powers of attorney, and for liability coverage under a property insurance policy.
Despite this forceful language of prohibition, there may still be an open question as to how the change affects surplus carriers. When Section 627.7152 was first enacted in 2019, the Legislature did not draft any companion section to include in the Surplus Lines Law (Sections 626.913 – 626.937). The result was that surplus carriers could not force compliance with the requirements, restrictions and pre-suit conditions found in Section 627.7152 that applied to assignees. Senate Bill 2A similarly fails to address surplus carriers with respect to Section 627.7152. In fact, the revised language can be read to cement the separate treatment of admitted and surplus carriers, since it adds language to Section 627.7152 defining assignments for commercial property insurance policies as those relating to policies governed by Section 627.0625(1). Mercifully, this distinction may have limited use, since the same revision limits its own applicability to assignment agreements executed under policies issued after July 1, 2019, and before January 1, 2023. Regardless, this might inevitably lead to additional litigation as courts are forced to sort out these remaining ambiguities.
Changes to Claims Handling Guidelines
Senate Bill 2A also makes several changes to the way insurers and policyholders report and adjust claims, primarily with the aim to speed up the overall claims process. The new law entitles policyholders to receive acknowledgment of a reported claim within 7 days rather than 14, receive loss estimates within 7 days after the estimate is generated by the insurance adjuster, and receive a coverage determination for their claim within 60 days rather than 90 days. It also reduces the amount of time for policyholders to report a claim from 2 years to 1 year for a new or reopened claim, and from 3 years to 18 months for a supplemental claim.
Citizens Property Insurance Corporation
The final major change made by Senate Bill 2A is in how Florida residents interact with – or are forced off of – the state’s carrier of last resort, Citizens Property Insurance Corporation. In an effort to reduce the number of policies carried by Citizens, the new law requires Citizens policyholders to accept any renewal or take-out offer from an authorized insurance company that is within 20% of the policyholder’s Citizens premium. It also requires Citizens policyholders to obtain flood insurance as a condition of coverage for residential policies. This requirement is set to be phased-in over the next several years based on the value of insured properties and their location within flood zones. Finally, the bill also mandates that policies for non-primary residences written on or after November 1, 2023, must be charged rates that are at least equal to the previous year’s Citizens rate, but not more than 50% above the prior rate.
Learning Point: While the repeal of Florida’s one-way attorney’s fees provision will undoubtedly garner the most headlines, the new law passed in the Legislature’s special session contains several provisions that will change the way insurance litigation is conducted in the state. The bottom line is that Florida carriers should be less fearful about litigating legitimate coverage disputes, paying appraisal awards, and offering proposals for settlement now that the threat of shocking fee awards has been significantly diminished, if not entirely eliminated. The price for this new framework is the need to adjust and resolve claims at a more rapid pace. The long-term effect of this law on Florida’s broader insurance market is yet to be seen. However, it is certain that carriers must carefully review these changes internally and with counsel so that they can anticipate the inevitable disruptions in property insurance litigation moving forward.