New property insurance law leaves little recourse for consumers

Gov. Ron DeSantis signed legislation Dec. 16 that he stated is designed to stabilize Florida's property insurance market, increase competition and strengthen consumer protections, with a goal of reducing the cost of property insurance for consumers.

While there is no doubt that the property insurance industry needs help, my experience indicates this law will primarily hurt — not benefit — consumers like you and me.

The new law is not all bad. It removes Assignment of Benefits, which are agreements that transfer the insurance claims rights or benefits of the policy to a third party. Assigning benefits to restoration companies is one of the biggest cost escalators to insurance companies because it gives contractors an unnatural incentive to inflate estimates and scope of repairs. When insurers balk at the inflated claims, the assignees are often quick to sue. Frivolous lawsuits for insurance claims that are driving up the cost of insurance are primarily the result of Assignment of Benefits.

While removal of the Assignment of Benefits is a positive change, another provision of the new law will make it extremely difficult for consumers to get insurance companies to pay legal fees when lawsuits are necessary to fairly cover consumer losses. The law effectively means policyholders must pay all their attorney fees, even if the insurance company wrongfully denies, underpays or delays their claims.

The new insurance law negates Florida's one-way attorney fees statute, which required insurers to pay the plaintiffs' legal fees if the carrier loses in court. The law had been in effect, in one form or another, since 1893.

The ability to hold insurance companies responsible for paying claims is necessary because insurance companies, many of which are already in financial trouble, will make low-ball offers or deny coverage on many occasions, hoping a desperate homeowner or business will jump at the offer. Records from the Florida Office of Insurance Regulation show that insurance companies denied roughly 30% of the nearly 1 million claims filed after Hurricane Irma in 2017.

In other cases, insurance companies may try to claim they do not have to cover anything if damage was caused by both flooding and wind. In 45 states, including Florida, insurance policies have a clause allowing insurers to deny claims if two catastrophic events occurred simultaneously and one of those events was not covered, like wind or flooding.

These disputes can result from concurrent causation, the legal term for when damage is the result of two or more causes, but one (or more) causes are not covered by the policy. For example, if you have wind and flooding damage, but do not have flood insurance. Certain provisions state that insurance coverage is only applicable when the predominate or superior peril causing the damage is covered by the policy. Thus, the homeowner would have to show that the damage sustained was caused more by wind than flooding. Insurance adjusters may also try to indicate that some damage was due to normal wear and tear, not the storm.

The law approved in December effectively gives insurance companies, with resources and engineering experts available to deny or low-ball claims, the advantage over homeowners who face high deductibles and post-storm expenses, and may not have the financial resources to dispute insurance denials on their own. The practical impact is that it invites a Florida insurer to deny, delay and underpay on a systemic basis.

While the state's property insurance crisis did not happen overnight, it's interesting that the law touted as being necessary to help lower insurance premiums went through the approval process in just six days, with public comment limited to only one minute.

Damage from Hurricane Ian is so extensive and insurance losses so great, the chances of premiums being reduced any time soon is not likely.

Insurance companies were not prepared for the kind of damage a storm like Hurricane Ian could do to the state. However, that is not a fact that should hurt consumers' ability to be able to ensure a fair insurance claim. ¦

About the author

Richard L. Purtz is a former insurance adjustor and attorney at Goldstein, Buckley, Cechman, Rice and Purtz.