Property insurance fraud and abusive practices have set the cost of homeowner’s insurance rates in Florida on a skyward trajectory over the past few years. This is due to an increasing number of lawyers, contractors, and unlicensed claims adjusters posing as insurance specialists and targeting homeowners who suffer damages in an effort to get them to execute an assignment of benefits. Once the assignment of benefits is executed, inflated claims are filed to the insurer. If the insurer pays the inflated claim, it contributes to higher rates for all policyholders. If the insurer does not pay, it gets caught up in costly litigation, which also contributes to higher rates. According to the Insurance Information Institute, 45,000 lawsuits were filed in Florida against insurers in 2018. That number doubled to 92,000 in 2019, more than tripled to 150,000 in 2020, and is projected to surpass 200,000 in 2021. As a result, insurers are requesting legislative intervention to avoid bankruptcy. Moreover, fewer carriers are writing new policies in Florida.
In response, the Florida Senate Banking and Insurance Committee approved bill SB 76 (2021). The bill mandates that policies adjust roof claims according to a roof surface reimbursement schedule. As per the schedule, insurers will: (1) provide reimbursement for repair, replacement, and installation based on the annual age of a roof surface type; (2) provide full replacement coverage for any roof surface type less than 10 years old; and (3) unless otherwise demonstrated to the office to be actuarially justified, provide for reimbursement amounts of no less than:
a. Seventy percent for a metal roof type.
b. Forty percent for a concrete tile and clay tile roof type.
c. Forty percent for a wood shake and wood shingle roof type.
d. Twenty-five percent for all other roof types.
This section is meant to discourage, and limit, inflated claims after hurricane damage. In addition, the bill provides that there is a strong presumption that a lodestar fee is sufficient and reasonable when awarding attorney fees for a claim arising under a property insurance policy. Under the loadstar method, attorney fees are calculated using the number of hours reasonably expended on the matter multiplied by a reasonable hourly rate. Currently, trial courts adjust the lodestar amount for property claims by applying a multiplier from 1.5 to 3.0 based on the likelihood of success at the outset of the case. The fee multiplier was meant to encourage attorneys to represent homeowners with relatively low resources on a contingency fee basis. However, the bill proposes a stark departure from the multiplier method in order to put an end to abusive practices and protracted litigation. The bill also proposes to change the amount of time policyholders have to file a claim after damages from three years to two years. Additionally, it will require policyholders to provide notice to insurers at least 60 days before filing lawsuits.
The bill is drawing support from insurance companies and strong opposition by plaintiffs’ attorneys. As a result, we expect to see a lobbying war during the legislative session that will start on March 2, 2021. Regardless of the outcome of the bill one thing is clear, insurance reform is a priority for the 2021 legislative session in Florida.
Callahan & Fusco will continue to monitor the progress of this proposed legislation.