After Six-Year Stalemate, Property Insurance Reform Heads To Florida Governor

A bill aimed at stemming costly lawsuits between repair contractors and property insurers has finally passed both the Florida House and Senate after six years of stalemate and steep rate increases for homeowners.

The bill passed the Senate 25-14 on Wednesday and now heads to Gov. Ron DeSantis, who said he plans to sign it.

Only time will tell if the changes, slated to take effect July 1, will roll back rate hikes that insurers have blamed on abuses by contractors and plaintiffs' attorneys.

But Sen. Gary Farmer, D-Fort Lauderdale, who voted against the bill, said it does not ensure that policyholders will be treated fairly by insurers. He also said supporters failed to prove whether the rise in lawsuits resulted from abuses by contractors or poor claims handling by insurers.

Sen. Keith Perry, a Republican from Alachua and Putnam County and part of Marian County, said the bill will fix a "predatory practice" allowing a few attorneys to make millions of dollars "off the backs of ratepayers."

When enacted, the bill, which passed in the House on April 11, will prevent plaintiffs' attorneys from automatically collecting legal fees when property insurers agree to settle lawsuits over claims disputes for any amount -- even $1 -- over their original offers.

The so-called one-way attorney's fee law, in place for more than a century in Florida, was originally written so insurance customers could sue their carriers and recover their legal costs if they won but would not be obligated to pay their insurers' legal fees if they lost.

Well-meaning as that law was, it resulted in excessive lawsuits, which increased from 27,416 in 2013 to 82,663 in 2018, according to advocates for reform, including the state's insurance commissioner and chief financial officer.

Repair contractors directed customers to sign over benefits of their insurance claims as a condition of commencing repairs, usually for water damage caused by broken pipes and appliances, insurers said. Standing in the policyholders' shoes, the contractors routinely overbilled insurers and filed suit when insurers balked at paying the inflated invoices, reform supporters claimed.

Bombarded with hundreds of lawsuits, insurers said they had little choice but to settle, opening the door for attorneys to collect the one-way fees.

A small number of law firms, mostly from South Florida, were responsible for the majority of abuses, insurers said. While most of the suits were once confined to South Florida, the problem recently began spreading across the state.

Yet over six years of debate, lawmakers remained divided between insurers and repair contractors with plaintiffs' attorneys on their side, arguing that insurers routinely underpaid or refused to pay legitimate bills, leaving them with no choice but to sue.

The bill passed by the Legislature preserves policyholders' rights to collect one-way attorney's fees when they sue their insurers and win. Third-party assignees, however, must adjust to reforms intended to remove incentives to sue, including:

-- Requiring assignees to notify insurers of assignments within three days, and submit itemized work estimates.

-- Allowing policyholders to rescind assignment agreements with no penalty within 14 days. It gives them even more time to rescind assignments if substantial work has not commenced.

-- Requiring assignees to indemnify and hold harmless the policyholder from all liabilities if the insurance policy prohibits the assignment.

-- Capping emergency repairs performed under assignments at $3,000 or 1 percent of the dwelling coverage limit of the policy.

The law also will require assignees to work more closely with insurers by providing records and documents as requested, participate in alternative dispute resolution, and answer questions under oath.

Assignees must also notify policyholders prior to filing suit against insurers.

The law will impose a formula for awarding attorneys' fees in any lawsuit involving a claims assignment, with fees being distributed based on the difference of a final award and the insurers' initial offer.

Still, the new law will also require insurers to assume more responsibilities. They would have 10 days to respond to assignees' presuit notification with a settlement offer or requirement that the assignee participate in appraisal or other method of third-party dispute resolution.

State-run Citizens Property Insurance Corp., the insurer of last resort, will be required to lower 2019 all perils rates by the amount of revenue saved by passage of the legislation.

Citing claims abuses, Citizens last year proposed an average 8.2 percent increase on its customers statewide. Under that proposal, 97 percent of the company's policyholders face an increase.

Citizens spokesman Michael Peltier said proposed rates would be recalculated and resubmitted for approval by the state Office of Insurance Regulation. While he said that he couldn't project specific numbers, "more folks will see their rates go down."

In December, Citizens had 427,397 policies statewide. Of them, 216,832 were in Broward, Palm Beach and Miami-Dade counties.

Information from the News Service of Florida was used in this report.

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