For the fourth time since 2019, the Florida Legislature has enacted property insurance coverage reforms aimed in direction of stabilizing a beleaguered insurance coverage market. The invoice, S.B. 2-A, creates a reinsurance help program, establishes extra oversight for insurers with excessive volumes of hurricane claims, and reforms many facets of the claims course of, together with the timing for paying and adjusting claims. The reforms additional remove one-way legal professional charge awards to policyholders and ban assignment-of-benefits agreements.  On this article, we are going to concentrate on the modifications to the declare adjustment course of and protection and unhealthy religion litigation.

Within the first spherical of property insurance coverage reforms in 2019, the Legislature established a pre-suit discover course of and two-way legal professional’s charge shifting in task of advantages (AOB) litigation towards admitted carriers. Within the second spherical of property insurance coverage reforms, the Legislature established a process requiring pre-suit discover for policyholders. The second spherical of reforms additionally set stricter time limitations for giving discover of claims. Within the third spherical of property insurance coverage reforms, the Florida Legislature took a extra direct shot on the drawback and eradicated statutory legal professional charge shifting in fits introduced by assignees, created a statutory presumption towards legal professional’s charge multipliers, and established a requirement that claimants show a breach of contract with a view to prevail on a declare for statutory unhealthy religion towards a property insurer.  The brand new fourth spherical of reforms is mentioned intimately beneath.

No Statutory Lawyer’s Payment Shifting in Property Insurance coverage Litigation

The prior reforms tried to curb frivolous and extreme litigation by establishing a pre-suit discover course of and a sliding scale for legal professional’s charge awards primarily based on success within the lawsuit. However even with a diminished prospect for an award of legal professional’s charges, policyholders nonetheless had the leverage of uneven litigation. Giving a litigation benefit to 1 occasion encourages extra litigation.

The Florida Legislature has now eradicated the statutory legal professional’s charge shifting in residential and business property lawsuits for each admitted and surplus strains carriers, including the next language to each Sections 627.428 and 626.9373: “In a swimsuit arising underneath a residential or business property insurance coverage coverage, there is no such thing as a proper to legal professional charges underneath this part.” The fee-shifting statutes stay in impact for different forms of insurance coverage, and there may be nonetheless potential that policyholders recuperate legal professional’s charges by means of sanctions motions or proposals for settlement.

Adjustment of Claims

The brand new reforms scale back the time for insurers to problem undisputed funds. Part 626.9541, unfair strategies of competitors and unfair or misleading acts or practices, has been amended to cut back the time for which undisputed funds must be made. Undisputed funds should now be paid inside 60 days, down from 90 days, until cost of the undisputed advantages is prevented by elements past the management of the insurer as outlined in Part 627.70131(5).

The Florida Legislature additionally made additional amendments to Part 627.70131, which can take impact on March 1, 2023. Modifications embrace:

• Decreasing the time from 14 calendar days to 7 calendar days for insurers to assessment and acknowledge receipt of communications, until cost is made inside that point or until the failure to acknowledge is attributable to elements past the management of the insurer.
• Decreasing the time from 14 days to 7 days after the insurer acquired proof-of-loss statements for the insurer to start such investigation as within reason mandatory, until in any other case offered by the coverage or by legislation, or until the failure to start such investigation is attributable to elements past the management of the insurer.
• Decreasing the time from 45 days to 30 days after receiving proof-of-loss statements for the insurer to conduct a bodily inspection of the property.
• Allowing insurers to make use of digital strategies to research losses. Such digital strategies might embrace any technique that gives the insurer with clear, coloration photos or video documenting the loss, together with, however not restricted to, digital images or video recordings of the loss, video conferencing between the adjuster and the policyholder which incorporates video recording of the loss, and video recordings or images of the loss utilizing a drone, driverless car, or different machine that may transfer independently or by means of distant management. The insurer additionally might enable the policyholder to make use of such strategies to help within the investigation of the loss. An insurer might void the insurance coverage coverage if the policyholder or every other particular person on the course of the policyholder, with intent to injure, defraud, or deceive any insurer, commits insurance coverage fraud by offering false, incomplete, or deceptive info regarding any truth or factor materials to a declare utilizing digital strategies. The usage of digital strategies to research the loss doesn’t prohibit an insurer from assigning a licensed adjuster to bodily examine the property.
• Requiring the insurer to ship the policyholder a replica of any detailed estimate of loss inside 7 days after the estimate is written by the insurer’s adjuster, eradicating the requirement that the policyholder first request a replica of the estimate.

Part 627.70131(4) has been amended to require insurers to keep up sure data, together with dates of:

• Any claim-related communication made between the insurer and the policyholder or the policyholder’s consultant;
• The insurer’s receipt of the policyholder’s proof of loss assertion;
• Any claim-related request for info made by the insurer to the policyholder or the policyholder’s consultant;
• Any claim-related inspections of the property made by the insurer, together with bodily inspections and inspections made by digital means;
• Any detailed estimate of the quantity of the loss generated by the insurer’s adjuster;
• The start and finish of any tolling interval offered for in subsection (8) of Part 627.70131; and
• The insurer’s cost or denial of the declare.

“Elements past the management of the insurer” means:

• The Workplace of Insurance coverage Regulation issued an order discovering that every one or sure residential property insurers are fairly unable to satisfy the time necessities of the statute in specified places and ordering that such insurer or insurers might have extra time as specified by the Workplace.
• Actions by the policyholder or the policyholder’s consultant which represent fraud, lack of cooperation, or intentional misrepresentation concerning the declare for which advantages are owed when such actions fairly forestall the insurer from complying with any requirement of this part.

This definition of “elements past the management of the insurer” is necessary as a result of it’s also used within the part requiring well timed cost of claims. The reformed statute now requires protection determinations inside 60 days:

 (7)(a) Inside 60 days after an insurer receives discover of an preliminary, reopened, or supplemental property insurance coverage declare from a policyholder, the insurer shall pay or deny such declare or a portion of the declare until the failure to pay is attributable to elements past the management of the insurer…. Any cost of an preliminary or supplemental declare or portion of such declare made 60 days after the insurer receives discover of the declare, or made after the expiration of any extra timeframe offered to pay or deny a declare or a portion of a declare made pursuant to an order of the workplace discovering elements past the management of the insurer, whichever is later, bears curiosity ….

Accordingly, the exception to the curiosity cost requirement has been restricted to situations the place the Workplace of Insurance coverage Regulation decided that there are elements past the management of the insurer. An insurer can now not make that willpower. Nonetheless, the time necessities of Part 627.70131 are tolled if a policyholder or a policyholder’s consultant fail to offer materials claims info requested by the insurer inside 10 days after the request, if the request is made at the very least 15 days earlier than the insurer is required to pay or deny the declare.

The time necessities are additionally tolled throughout any statutory mediation continuing of any different dispute decision continuing offered for underneath the coverage.

Deadlines for Discover of Claims

The Florida Legislature has once more amended Part 627.70132, which is relevant to each admitted insurers and surplus strains insurers and applies to claims arising from any peril. The amended statute reduces the time to report a declare or reopened declare from 2 years after the date of loss to 1 12 months. The time to report a supplemental declare is lowered from 3 years after the date of loss to 18 months.

Pre-Go well with Discover Course of

The elements of Part 627.70152 pertaining to legal professional’s charges have been eliminated. The pre-suit discover and determination course of have in any other case been left intact.

Assignments of Advantages

On the finish of 2022, assignments of advantages to service suppliers will probably be prohibited:

Besides as offered in subsection (11), a policyholder might not assign, in complete or partly, any post-loss insurance coverage profit underneath any residential property insurance coverage coverage or underneath any business property insurance coverage coverage as that time period is outlined in s. 627.0625(1), issued on or after January 1, 2023. An try and assign post-loss property insurance coverage advantages underneath such a coverage is void, invalid, and unenforceable.

This prohibition will apply to admitted carriers solely.

Breach of Contract Obligatory for Unhealthy Religion

Florida Statutes Part 624.155 permits claimants to file unhealthy religion claims underneath first-party property insurance coverage insurance policies. Earlier than a claimant can file a foul religion swimsuit, the existence of protection and the extent of damages, the quantity of loss, have to be decided. Over the previous decade, quite a few Florida courts have held that an appraisal award is a ample willpower of protection and quantity of loss to allow a foul religion swimsuit. Due to this fact, even when an insurer correctly issued cost underneath the phrases of the coverage, and had not been discovered to have breached any a part of the coverage, it may nonetheless face a foul religion swimsuit if an appraisal award resulted in any extra cost to the insured. Consequently, value determinations have turn into a preferred software for unhealthy religion setups.

The Florida Legislature tried to repair this problem in its third spherical of reforms, however the language within the new Part 624.1551 was too imprecise as to what it means to determine a breach of contract. The Legislature has now changed Part 624.1551 with extra exact situations for asserting a foul religion declare towards a property insurer:

624.1551 Civil treatment actions towards property insurers.—

However any provision of s. 624.155 on the contrary, in any declare for extracontractual damages underneath s. 624.155(1)(b), no motion shall lie till a named or omnibus insured or a named beneficiary has established by means of an antagonistic adjudication by a court docket of legislation that the property insurer breached the insurance coverage contract and a last judgment or decree has been rendered towards the insurer. Acceptance of a proposal of judgment underneath s. 768.79 or the cost of an appraisal award doesn’t represent an antagonistic adjudication underneath this part. The distinction between an insurer’s appraiser’s last estimate and the appraisal award could also be proof of unhealthy religion underneath s. 624.155(1)(b), however just isn’t deemed an antagonistic adjudication underneath this part and doesn’t, by itself, give rise to a reason for motion.

With this modification, the Legislature has ended the “appraisal to unhealthy religion” setup, and made clear a easy, cheap proposition—an insurer that has abided by the phrases of the insurance coverage coverage mustn’t must defend a foul religion swimsuit.

Affords of Judgment

The Florida Legislature amended Part 768.79, the supply of judgment statute, to allow the making of joint presents which can be conditioned on mutual acceptance. This modification eliminates the “spousal loophole,” which permits spousal co-plaintiffs, and different carefully associated policyholders, to keep away from presents of judgment conditioned on their joint acceptance.

Submission of Claims to Appraisal as a Basic Enterprise Follow

The invoice amends Part 624.418, which offers grounds for the suspension or revocation of an insurer’s certification of authority, to incorporate situations the place an insurer, as a part of a basic enterprise follow, with out trigger, compels insureds to take part in appraisal with a view to safe full cost of their claims. Appraisal is a mechanism for resolving real disputes over the quantity of loss for a given declare, and the choice to invoke appraisal must be made primarily based upon the details and circumstances of a selected declare. This modification to Part 624.418 ought to alleviate considerations about appraisal getting used as a method for avoiding unhealthy religion legal responsibility because of the breach of contract requirement added to Part 624.1551.

Flood Insurance coverage is Inspired

The Legislature amended the warning language required in house owner’s insurance coverage insurance policies that don’t present flood protection. As an alternative of advising owners that they “may want to think about” flood protection, the brand new disclaimer will advise policyholders that they “ought to contemplate” flood protection.

Necessary Binding Arbitration Endorsements Approved

The brand new legislation creates Part 627.70154, which codifies that insurers can problem non-compulsory necessary binding arbitration endorsements. The policyholder should signal a type electing binding arbitration, and the premium for the coverage should embrace an actuarially sound low cost for the necessary binding arbitration endorsement. However, insurers should additionally supply the policyholder a coverage that doesn’t require participation in necessary binding arbitration.

Efficient Dates

These statutory reforms grew to become efficient upon being signed into legislation by Governor DeSantis on December 16, 2022, which implies the modifications apply to insurance policies issued after that point. The amendments to Part 627.70131 take impact on March 1, 2023. As a result of the outdated legal guidelines will apply to insurance policies which have already been issued, we anticipate a excessive quantity of litigation on older claims, and of claims for harm from Hurricane Ian and Hurricane Nicole. Following the third spherical of reforms, we noticed an uptick of litigation from assignees hoping to litigate underneath the older, extra favorable legal guidelines.

Assignments of advantages will probably be prohibited on January 1, 2023, however this prohibition will doubtless solely apply to admitted carriers. 

Closing Ideas

These reforms symbolize essentially the most important modifications to Florida’s present Insurance coverage Code since its inception in 1982. Specifically, the elimination of legal professional’s charge awards has been on the radar of the Workplace of Insurance coverage Regulation for quite a few years now. These insurance coverage reforms profit each policyholders and insurers. Policyholders will obtain faster declare selections and funds, and insurers ought to finally see fewer abusive lawsuits. The Florida Legislature is encouraging immediate and open adjustment of claims, whereas discouraging attorneys and contractors from abusing the insurance coverage declare course of. We consider these reforms may have a constructive affect on the insurance coverage market in Florida, however it can take at the very least a couple of years earlier than we see the true affect of this laws on the amount of property insurance coverage litigation.  

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