How Republicans’ latest insurance reform proposals could restrict your ability to sue

Insurance reforms are back on the front burner heading into the spring session of the Florida Legislature.

Republicans are again targeting plaintiffs attorneys with a wish list of pro-insurance industry reforms that attorneys warn will erode consumers’ ability to fight back when claims are denied or underpaid.

After enacting two packages of property insurance reforms last year, legislative leaders are pushing to extend those reforms to most remaining types of insurance, including auto, liability, business interruption, health and life.

As the spring session of the Florida Legislature approaches its March 7 opening, a multifaceted reform bill filed in the state House by Rep. Tommy Gregory, who represents parts of Sarasota and Manatee counties, has already advanced from a House subcommittee while a Senate version was filed on Thursday and is scheduled for debate by the Senate Banking and Insurance Committee on Tuesday.

Supporters say the newest round of reforms are needed to reduce “frivolous” lawsuits they say are driving up insurance costs for individuals and businesses.

“This bill is designed to bring our justice system back to equilibrium,” Gregory said in introducing the bill during its first committee hearing on Feb. 24. “The bill is drafted to correct three problems: First, excessive litigation; second, asymmetrical fees; and third, inflated damages.”

Critics, including the Florida Justice Association, a trade organization for plaintiffs attorneys, and vocal Democrats in the Legislature, caution that the reforms reduce liability exposure for insurers and large businesses while making it difficult for accident and negligence victims to find an attorney when insurers covering the at-fault party denies or underpays a claim.

Steve Cain, president-elect of the Florida Justice Association, called the proposals “a gift” to insurance companies and large industries because they would reduce prospects of being held liable for negligence.

“This was a bill written in the dark,” he said Friday. “No one was consulted other than insurance companies and big business.”

Janet Varnell, a Tampa-area consumer product liability attorney, said the package is designed to erode the ability of insurance policyholders to hire attorneys to represent them in small claims cases. “The hurdles might seem innocuous but it’s going to cause lawyers to rejected cases,” she said in an interview.

The Florida Justice Association is coordinating opposition to the bills as they wind through committee hearings.

Numerous people who have sued over major injuries stepped up to the podium at a Feb 24 hearing of the House Civil Justice Subcommittee and argued that the proposals, if they had been in place, would have stymied their ability to recover damages.

It remains to be seen whether the plaintiffs attorneys organization or any other interest group can dissuade the Legislature from enacting the proposals favored by the Florida Chamber, the Florida Justice Reform Institute, several large insurers and others.

The association and members of the Democratic minority in the Legislature hosted a steady stream of opponents who testified during two special sessions in May and June to consider property insurance reforms intended to reduce litigation and eventually bring down property insurance rates. In both cases, reforms crafted by Republican House and Senate leaders were enacted largely on party line votes with no major changes.

In addition, proposals in the current bill are laden with complicated legal terminology and concepts unfamiliar to typical consumers who might not be able to grasp their implications.

Here are the major provisions of the bills:

Elimination of so-called “one-way attorneys fees.” Part of Florida law since 1893, one-way attorney fees allow insurance customers to file suit against carriers without the threat of having to pay insurers’ legal fees if the lawsuits fail. Reform proponents argue that this law incentivizes attorneys to file lawsuits that they would not otherwise file, essentially because they have nothing to lose.

The one-way attorney fee provision, which was eliminated from property insurance litigation during the December special session, also incentivizes unnecessary litigation against carriers of other forms of insurance, bill proponents argue. Attorneys argue that eliminating it will force consumers to pay attorneys upfront to represent them or agree to pay their attorneys 30% to 35% of whatever money they recover.

Lee Gunn, a Tampa-area attorney and board member for the consumer-focused watchdog group Federal Association for Insurance Reform, said eliminating the one-way fee provision would leave many policyholders with no effective way to challenge insurance claim denials. “If it’s a $10,000 claim that’s denied, a policyholder is not going to spend $15,000 to fight it,” Gunn said in an interview.

Wiliam Large, president of the Florida Justice Reform Institute, said policyholders will have other ways to challenge their insurers, including filing what’s known as a “first party bad faith claim” that begins with filing a Civil Remedy Notice with the Department of Financial Services.

Reducing the statute of limitations for filing negligence lawsuits from four years to two years. Insurers say shortening the eligibility period will discourage plaintiffs from finding reasons to sue long after suffering alleged harm.

Large says insurers find it difficult to defend claims filed after two years because too many witnesses might have forgotten details or be hard to find. Cain, however, says reducing the window to sue will force attorneys to sue more parties at the onset because they won’t have as much time to investigate culpability.

Varnell concurred. “It is so difficult to bring a claim already and uncover facts necessary to meet the standards of law,” she said. “Anything you do to require lawyers to do it faster will decrease the potential of filing claims.”

Elimination of fee multipliers. Courts have allowed attorneys to “multiply” their fees in cases that are difficult or when representing clients who wouldn’t otherwise be able to find competent representation. Instead of calculating their fees by multiplying their hourly rate by the number of hours involved in the case, judges in some situations allow multiples of that calculation.

Attorneys say that insurers exaggerate the percentage of cases that result in fee multipliers.

But Large said that even if fee multipliers are awarded in a small minority of cases, attorneys have an unfair advantage of using them as a threat to induce a defendant to settle the case.

If the proposal is enacted, Florida would revert to a national standard that awards multipliers only in rare circumstances.

Varnell counters that eliminating fee multipliers would cause attorneys to reject difficult cases. “I’ll only take the dead-sure winners,” she said

Eliminating attorney-client privilege regarding medical referrals. In court cases right now, insurers cannot ask for evidence that would reveal any financial relationship between attorneys and physicians to whom they refer injured clients for treatment. In some cases, insurers say, physicians have incentives to inflate their treatment costs.

Large says an attorney might tell a client, “Don’t use your doctor or bill your insurer. My doctors is going to treat you under an agreement we call a Letter of Protection.” Then the doctor submits an invoice that’s five to eight times more than the market price for that treatment.” The invoice is submitted during the litigation, and the doctor can recover a windfall, reform proponents say.

The arrangements can be kept secret from insurance companies, but plaintiffs are allowed to find out what insurers are paying their own medical experts to estimate what treatments should cost. That imbalance is unfair, insurers say.

The proposed reform would allow juries to find out whether such an agreement was in place between the doctor and the attorney when the client was referred, Large says.

Revamping how at-fault responsibility is calculated. Currently, juries determine each party’s percentage of fault in negligence lawsuits and award damages based on those percentages. For example, if a plaintiff is determined to be 60% at fault and a defendant is 40% at fault, the defendant would be required to pay 40% of the damages amount. Under the proposed reform, a defendant would have to be at least 51% at fault before they could be forced to pay damages.

A plaintiff, meanwhile, would receive nothing if found to be 51% or more at fault.

The proposal would returns Florida to a standard that was replaced decades ago, Gunn said, in favor of a more equitable standard agreed to after years of debate.

Damages could not exceed policy limits. Claims made by two or more plaintiffs over a single incident could not result in damages exceeding the policy limit. Each plaintiff would receive only a prorated share of that limit.

This would also benefit insurers by reducing potential damage awards, plaintiffs attorneys say.

Making it harder to file “bad faith” lawsuits against insurers. Typically, bad faith lawsuits involve allegations that an insurer did not fulfill its responsibility to settle claims. Critics say bad faith laws are abused by attorneys looking to recover money in excess of a policy’s limit.

The proposal would bar bad faith lawsuits if insurers correct violations or pay damages within 60 days of being notified. It some instances, a finding of negligence would not be enough to sustain a claim against an insurer if intentional wrongdoing, or malfeasance, was also not established.

Gunn says limiting bad faith lawsuits would leave insurance clients on the hook for claims by third-party accident victims if insurers decline to pay them.

Insurance contracts require insurers to take over the affairs of its clients when third parties file claims against them, he said.

“Florida courts have said insurers must act as a fiduciary would. Why shouldn’t the insurance company be held to the same standard of reasonable care and due diligence as doctors, attorneys, brokers and accountants?” he asked.

Proponents of the reforms say they do not substantially change plaintiffs’ rights to seek damages from negligent parties.

Rep. Gregory noted in the Feb. 24 hearing that many of the Florida residents who came to the podium with stories of suffering horrible health problems would not have been barred from filing lawsuits if the proposals were in place.

“And the reason is many of these stories dealt with medical malpractice, pain and suffering damages, and non-economic damages. None of those issues are covered in this bill. Pain and suffering is not capped in this bill.

But Varnell noted that previous reforms to medical malpractice laws have made it difficult for injured people to find lawyers willing to take their case.

“If you can’t find a lawyer, it doesn’t matter what your rights are,” she said.

News Service of Florida contributed to this report.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.

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