News & Events

Florida has been known as one of the most difficult states for insurance companies to do business in. However, recently, Governor Ron DeSantis signed two important bills, Senate Bills 2D and 4D, into law that will change how insurance companies do business in Florida and the legal climate they may face. Given that the new laws take aim at some of the worst abuses propagated by plaintiffs’ lawyers, they can be thought of as consumer-friendly.

One of the key anticipated effects of the new bills is that they may drive down sky-high insurance costs for Florida residents. Insurance companies that remain in the state have had little choice but to hike premiums because of the exorbitant cost of doing business in Florida. An overly permissive litigation environment allowed plaintiffs’ attorneys to take aim squarely at the state’s insurance companies.

Litigation Expenses and Questionable Claims Were Threatening the Insurance Industry

There is no way around the fact that Florida’s insurance industry is in crisis. Many companies have left the state because they have suffered high underwriting losses. Further, the insurance defense litigation costs in the state are five times higher than the national average. Citizens Property Insurance Corp., a state-created insurer, is on pace to spend over $100 million in litigation defense costs this year alone. For a state with only nine percent of the homeowners' insurance policies in the country, Florida has 79 percent of the nation’s related lawsuits.

A key measure of Senate Bill 2D is a pledge of $2 billion in state money for a catastrophe reinsurance fund. Insurance companies were having trouble managing their own risk, and they were facing dwindling options. The benefit of the reinsurance fund is that Florida is not requiring insurance companies to pay premiums. Instead, the law requires that they devote the money they would have paid in premiums to providing cost relief for strapped consumers who are struggling under the weight of insurance costs.

New Limits on Attorneys' Fees

One of the major aspects of the new legislation is that plaintiffs’ attorneys now have some limits on the fees they can collect from homeowners’ insurance lawsuits. These lawyers were profiting off the backs of insurance companies and their customers.

Senate Bill 2D limits when attorneys can get fee multipliers in homeowners’ insurance cases. Previously, lawyers were finding justifications for fee multipliers, and insurance companies were stuck paying the bill. Attorneys were claiming that the amount of time that they put into a case and the uncertain chances of success merited a multiplier. Under the new law, there is a presumption that the Lodestar method (i.e., a reasonable hourly rate multiplied by a reasonable number of hours spent on a case) will be the means for calculating attorneys’ fees, and multipliers may only be awarded in rare and exceptional circumstances.

In addition, only policy beneficiaries will be able to collect attorneys’ fees from insurance companies. If the case is filed by a contractor or roofer under an assignment of right, they cannot collect attorneys’ fees from the insurance company. This provision of the law was immediately challenged in a lawsuit several days after the bill was signed into law.

There are other provisions that will change the way insurance companies process and handle claims in Florida. While Senate Bill 2D comes to insurance companies’ aid, it also imposes additional requirements on them to give more detailed information about why claims have been denied in whole or in part. The increased transparency could actually help reduce lawsuits by making it clearer to claimants at the outset why a claim was denied.

Roofing Companies Have Now Been Reined In

In addition, the Florida Legislature also provided insurance companies with additional relief in Senate Bills 2D and 4D that addressed roof replacement. The prior law required insurance companies to pay for a full roof replacement when a roof was as little as 25 percent damaged. With Florida storms and the high costs of full roof replacement, the law threatened insurance companies’ existence.

Roofing companies, which have been the bane of insurance companies’ business, also now have restrictions on their activities. Recognizing financial opportunity, roofing companies had solicited customers in order to persuade them to file an insurance claim to repair or replace their roof. Now, the roofing companies must make certain disclosures, and they can be prosecuted for insurance fraud if they persuade customers to make false or misleading claims.

However, the tradeoff is that insurance companies are now restricted from denying coverage based on the age of a roof. They cannot deny coverage if a roof is less than 15 years old and has five years of life left. Insurance companies can still deny coverage if the roof is older. Under previous laws, unscrupulous attorneys and roofing companies were teaming up to run insurance companies out of Florida.

However, insurance companies are still not out of the woods, as the benefits of the bills may not be realized for 12-18 months. In the meantime, the state faces another potentially violent hurricane season, leaving many insurance companies in the midst of a short-term crisis.

The Plaintiffs’ Bar and Contractors Are Not Going Down Without a Fight

These two bills were passed over spirited opposition from the plaintiffs’ bar, which benefited financially from the old rules. There is an entire industry in the state that centers on aggressively suing insurance companies, and consumers ultimately suffer because the costs are passed along to them. Trial lawyers and roof restoration companies profited, while insurance companies and consumers paid the price. Unnecessary roof replacements did little for the public good.