Suing insurers would become easier under bill that passes first legislative hurdle

Ron Hurtibise, South Florida Sun-SentinelSouth Florida Sun Sentinel

Policyholders would find it easier to sue their insurance companies under a bill that passed its first hurdle in the Florida Legislature on Thursday.

But insurers warned that the bill would trigger the return of excessive lawsuits driven by so-called “one-way attorney fees” and undo progress that the insurance marketplace has achieved since reforms were enacted in 2022 and 2023.

Rep. Hillary Cassel, a Broward County-based attorney who represents policyholders in insurance disputes, sponsored the bill that she said would “strike a balanced approach” by awarding attorney fees to the prevailing party in lawsuits.

The bill would not lead to excessive litigation, she said, because unlike before the reforms, policyholders would no longer be held harmless if they sue their insurer and lose, she said.

The bill, Cassel said, “creates a prevailing party standard, otherwise known as ‘loser pays,’ for awarding reasonable attorney’s fees by a judge after a judgment is obtained in an insurance contract dispute.”

The bill cleared the House Civil Justice & Claims Subcommittee by a 16-1 vote. Only Rep. Susan Plasencia, a Central Florida Republican, voted against it.

An analysis posted on the House website explained that the bill would create a “two-way” attorney fee structure by awarding legal fees to the prevailing party in disputes. Insurers would be required to pay policyholders’ fees if a policyholder obtains a judgment exceeding an insurer’s “highest written good faith settlement offer.” The insurer would collect if a policyholder challenges that offer but is denied a greater sum, according to the analysis.

Prior to the reforms of 2022 and 2023, Florida law required insurers to pay policyholders if insurers ended up paying any amount over their original offer. Policyholders, meanwhile, were not required to pay insurers’ fees if they challenged and lost.

The arrangement morphed into a cottage industry for a small number of law firms that solicited plaintiffs door to door and bombarded insurers with litigation, insurers have long contended.

Plaintiffs attorneys argue that repeal of the one-way attorney fee statute required dissatisfied policyholders to pay attorneys out of their own pockets or agree to forfeit a quarter of any award. It also discouraged attorneys from representing policyholders in low-dollar claims that would not pay enough to justify the required effort, attorneys have said.

Supporters of the bill who attended the hearing included the Florida Medical Association, which represents physicians, the Merlin Law Group, a plaintiffs firm, and the Florida Justice Association, a trade and lobbying group for plaintiffs attorneys.

Opponents of the bill at the hearing included insurance industry lobbying groups, including the Association of Professional Insurance Agents, the National Association of Mutual Insurance Companies and the Florida Justice Reform Institute.

Katelyn Ferry, an insurance defense attorney and lobbyist for the Florida Justice Reform Institute, argued that the reforms are working and should be given more time. A provision of the reforms requiring plaintiffs to file notices that they intend to sue is leading insurers to settle claims before they proceed to litigation, Ferry said.

“Make no mistake: If this bill passes, it’ll eradicate Florida’s insurance market and devastate the citizens,” she said. “The positive changes brought about from the 2022 legislation will be erased. Carriers will begin leaving the state of Florida and we’ll face carrier insolvency. Homeowners will see spikes in their insurance premiums, which they cannot afford.”

Even if the bill is enacted, it remains to be seen whether it will survive a veto by Gov. Ron DeSantis.

During his State of the State address last week, DeSantis praised the Legislature for enacting “historic reforms” that have reduced the rate of increase of insurance premiums and encouraged 11 new insurance companies to enter the Florida market.

A few of the House members who supported Cassel’s bill said they were motivated in part by a Tampa Bay Times news article in February that stated insurers in a study reported losing $432 million between 2017 and 2019. Meanwhile, the study indicated that with more than 50 companies included, affiliates made about $14 billion in net income, said the Times report, which also was published by the South Florida Sun Sentinel.

Lori Augustyniak, president of the Professional Insurance Agents of Florida and a partner at the Bradenton-based Horizon Insurance agency, said in an essay published this week that the report was “misleading, incorrect and flawed.”

“Insurers don’t ‘hide’ money — they allocate capital to affiliates for reinsurance, operational efficiency, and regulatory compliance,” Augustyniak wrote. “This is an industry-standard practice monitored by state regulators to ensure financial stability and protect policyholders.”

But Rep. Ashley Gantt, a Miami-Dade County Democrat, likened the report to a “Scooby-Doo” episode that reveals that insurance companies, and not plaintiffs attorneys, were the actual villains of Florida’s insurance crisis.

“It’s insulting,” Gantt said. “This bill provides the justice that our constituents actually need.”

An investigation into claims in the Times story was scheduled Friday before the House Insurance and Banking Subcommittee in Tallahassee.

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