Lawsuits against insurers declined again this year. Will this year’s hurricanes reverse the trend?

Lawsuits against insurers in Florida have continued to decline in 2024 following reforms enacted two years ago.

Insurers say the declines have reduced costs and helped them to reduce or stabilize rates charged to policyholders.

Attorneys who represent insurance customers counter that the reforms made it more costly for policyholders to challenge insurers and left many with no recourse when their insurer denies or underpays claims.

For the second straight year, the number of lawsuits filed against insurers during the first three quarters declined by 23.8% — from 36,639 to 27,923 — compared to the same period last year, according to data compiled from public records by Guy Carpenter & Company, a global reinsurance brokerage, and released to insurers in late October.

That followed a 23.9% decline between the first three quarters of 2022 and 2023 and a 23.4% decline over the same time span in 2021 and 2022, the data shows. Since 2021, the number of lawsuits filed over the first three quarters declined from 67,788 to 27,923 — a 58.8% decline.

The trend accelerated during the third quarter of 2024: The number of lawsuits filed declined by 30% compared to the third quarter of 2023.

Notices of Intent to Litigate, a pre-suit notification that attorneys have been required to file since 2021, dropped from 57,000 during the first three quarters of 2023 to 37,003 over the same period of 2024, potentially signaling a further drop in litigation next year.

Locke Burt, chairman and CEO of Security First Insurance, said the 2022 reforms directly contributed to rates that either decreased or held steady in 2024. In October, the Florida Office of Insurance Regulation issued a news release stating that 15 insurers requested rate decreases and 29 insurers requested no rate increases for policies taking effect in 2024.

Several insurance experts said that the absence of a major hurricane striking a highly populated part of Florida in 2023 might have contributed to the latest decline in litigation.

“Yeah, it’s a combination,” said Ernie Garatiex, CEO of Heritage Property & Casualty Corp. “In 2023, we had (Hurricane) Idalia, which hit a less populous area, and we didn’t have other storms that compared to Debbie, Helene and Milton in 2024.”

Disputes over claims from those three hurricanes could push the number of lawsuits back up next year, experts said.

But they attribute the steady decline in lawsuits over several years to the reforms of 2022, which, among other changes, repealed a longstanding law that entitled policyholders to recover attorneys fees if successful in a lawsuit.

Attorneys: Reforms hurt policyholder recourse

Mark Friedlander, director of corporate communications for the industry funded Insurance Information Institute, called 27,900 lawsuits “a vast improvement” over pre-reform years but noted that Florida insurers continue to see disproportionate litigation levels compared to other states that see fewer than 1,000 lawsuits each year.

In pushing for the 2022 reforms, insurers argued that the so-called “one-way attorney fee” provisions encouraged attorneys for policyholders to file excessive lawsuits over small claims. They had little to lose, insurers said, because attorneys knew they could collect fees that far exceeded the value of the disputed claim if the insurer agreed to resolve the case by paying any amount over its initial settlement offer.

Plaintiffs attorneys who were asked about the reasons for the decline in litigation said that the repeal hurt policyholders by requiring them to either pay for legal representation out of their own pocket or agree to pay a percentage, often 30% to 40%, of whatever they recover for their claim.

As a result, North Miami-based attorney Kenneth Duboff said, “It is difficult to find an attorney willing to take on a case unless there is significant monies involved from which the attorney can recover the percentage of attorneys fees.”

Anthony Lopez, CEO of the Miami-based firm Your Insurance Attorney, says the reform made “virtually impossible for lawyers to represent people that have insurance disputes (over) less than $100,000.”

Because insurers know this, they are more likely to deny or underpay valid claims, he said, “leaving policyholders with no recourse.”

Duboff added, “Policyholders are afraid, because attorneys forewarn them that not only must they pay their own attorneys fees, but in some circumstances where there is a statutory ‘Proposal for Settlement’ they may be responsible to pay the insurance company’s attorneys fees.”

Insurers: You can fight us in other ways

Insurers say that litigation isn’t the only way that policyholders can dispute claims decisions.

Some companies require policyholders to submit disputes to the Department of Administrative Hearings instead of filing a lawsuit. Duboff said that state-owned Citizens Property Insurance Corp. has invoked the requirement in policies “to avoid litigation in a number of (cases) that I have handled.”

Other insurers require disputes over claim amounts to be resolved through an appraiser process. This involves insurers and policyholders hiring their own appraisers who each develop their own estimates of the claim cost. Duboff says policyholders are required to hire their own appraiser and pay half of the cost of an umpire if the two sides disagree.

Some insurers offer rate discounts to policyholders who agree to forego their right to sue and instead enter a quasi-judicial process called arbitration. While appraisal focuses on the value of the claim, arbitration aims to settle all matters in dispute, including whether a loss is covered.

But arbitration offers policyholders little advantage over a lawsuit if they decide they need to hire an attorney to represent them in the process.

The Florida Justice Association, a trade group representing plaintiffs attorneys, disputes the contention that the 2022 reforms caused litigation to decline: Litigation fell sharply between 2021 and 2022, “well before the December 2022 property insurance special session,” said Louis Gonzalez, chairman of the association’s property insurance committee.

Since the reforms were enacted, “insurance rates have continued to skyrocket while insurance companies have been emboldened to unfairly deny claims,” Gonzalez said.

Friedlander points out that despite the decline in lawsuits, plenty of attorneys remain eager to help policyholders take on their insurance companies. “Billboard attorneys have not slowed down their aggressive marketing tactics to prompt consumers to ‘call us first’ before trying to settle a claim with their carrier,” he said.

A ‘true test’ ahead

Premiums will decrease, hold steady or increase depending on what reinsurers — companies that provide insurance to insurers — charge next year after looking at claims and litigation from this year’s storms, Garatiex said.

A few years ago, reinsurers hiked rates and offered less coverage after litigation drove losses from 2017’s Hurricane Irma and 2022’s Hurricane Ian higher than their catastrophe loss models had predicted, he said.

He said the industry will learn whether the reforms “will hold” as lawsuits roll in over this year’s storms.

Hurricane Milton, in particular, has the potential to generate disputes over whether damage was caused by storm surge, which property insurance does not cover, or wind-driven rain, which it does cover.

“Milton will be the true test, in my opinion, of the reform and whether it really makes a difference when it comes to frivolous lawsuits and litigation in general,” he said.

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 [email protected].

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