Insurance Claims Reform Bill Advances In Florida House

April 20--An effort to stem claims abuses blamed for driving up homeowner insurance rates isn't dead yet in the state Legislature.

But even a key proponent says the outlook for reform this year is poor.

On Wednesday, the Florida House Commerce Committee voted 14-7 to advance a bill that would sharply restrict the ability of trial attorneys to recover fees from insurance companies after settling lawsuits tied to assignments of benefits.

The bill now heads to the House floor, where it will likely pass, says Michael Carlson, president of the Personal Insurance Federation of Florida. But some "clever planning" would be needed in the Senate to get a companion bill ready before committees meet for the last time on April 25, Carlson said.

The House bill is intended to encourage settlements and dissuade attorneys from filing lawsuits when representing repair contractors working under post-claim assignments. If enacted, contractors and their attorneys would be entitled to attorneys fees only if they win a judgment that exceeds an insurer's initial offer by a wide margin.

A judgment that exceeds an insurer's initial claim settlement offer by a narrower margin would result in neither side receiving attorneys fees or, if the margin is narrow enough, the insurer being entitled to attorneys fees.

Insurers and their supporters mostly spoke in support of the bill, while contractors and trial attorneys mostly opposed it.

The bill "goes a long way toward mitigating a cost driver for Florida insurers," said David Altmaier, the state insurance commissioner.

But Rep. Joesph Geller, D-Dania Beach, unsuccessfully tried to strip the proposed fee formula from the bill, warning it was "untested and unvetted" and likely to be challenged in court.

Insurers and their supporters say they've been hit with escalating costs from South Florida attorneys who have figured out how to exploit a longtime consumer-protection law that shields policyholders from paying insurers' legal fees if they sue over a claim and lose.

The insurers say a dozen South Florida law firms discovered that the same law shields contractors from the risk of paying insurers' attorney fees -- if they have been assigned by policyholders to pursue benefits of their claims.

As a result, insurers say, attorneys started filing hundreds of lawsuits to coerce insurers into settling so the attorneys could collect so-called one-way attorneys fees. Lawsuits stemming from assignments increased from 400 in 2006 to more than 28,000 last year, while water claims increased 42 percent between 2010 and 2015.

Attorneys counter that lawsuits would not be necessary if insurers paid claims fairly and quickly. Contractors complain that insurers routinely delay the claims-adjustment process by showing up late to inspect damages, refusing to communicate with contractors working under assignments, and ignoring invoices for services performed to established industry standards.

The bill's sponsor, Rep. James Grant, R-Tampa, said his goal is to help reduce insurance rates while not disenfranchising "a legitimate premium paying policyholder who has an actual loss and needs to be made whole."

If enacted:

* A policyholder's right to assign post-law benefits would be codified. Last year, insurers helped defeat an assignment of benefits bill because it codified this right, and no bill was enacted.

* Water restoration work would have to be performed under a nationally recognized standard.

* Assignments would have to include written, itemized, per unit cost estimates.

* Policyholders would have seven days to rescind a signed agreement.

* An assignment could relate only to the work to be performed.

* An assignee would have three days to provide the insurer with a copy of the assignment.

* Assignees would have to provide insurers 10 days notice of an intent to sue. Insurers would have to respond with a settlement offer or call for dispute resolution.

Carlson said few options exist to get a Senate companion bill ready this year. "There is no ideal Senate companion available to pair up on the Senate floor," he said by email Wednesday.

Either of two bills sponsored by Sen. Gary Farmer, D-Fort Lauderdale, could be amended, but Farmer is a trial attorney and his involvement could be "detrimental to real reform," Carlson said.

The bill's language could be tacked on to another insurance-related bill in the Senate, but such "training" isn't well received in the House, he said.

"I think the outlook is poor unless the Senate leadership takes active steps to get something passed," Carlson said.

rhurtibise@sun-sentinel.com, 954-356-4071, twitter: twitter.com/ron_hurtibise

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