Who's at Fault?

Without a hit from a major hurricane, annual underwriting losses from property insurers in Florida eclipsed $1 billion in 2020 and in 2021. Five companies have failed as of late summer. Those still standing are shedding policies, avoiding new ones and raising rates. The average Florida home insurance premium will hit $4,231 this year, up from $2,505 in 2020 and almost triple the national average, says the Insurance Information Institute. Citizens Property, the insurer of last resort, is expected to exceed 1 million policies by the end of 2022 - up from 463,247 in 2020. Without a viable insurance market, says insurance agent and state Sen. Jim Boyd, R-Bradenton, chair of the Senate banking and insurance committee, "Realtors can't sell houses, bankers can't make loans, people can't pay their bills. It can cripple the economy pretty quickly if we don't do something to fix that problem."

The problem, the industry and some state leaders maintain, is the state's litigation structure and some attorneys who abuse it. The answer, they say, is to rein in the lawyers. That requires a trade-off. Historically, Florida delegated to attorneys the job of safeguarding the rights of policyholders against insurers.

Those attorneys, as represented by the Florida Justice Association, say they aren't the cause of the problem. St. Petersburg-based attorney Amy Boggs, chair of the association's property insurance section, says she opposes high-volume "robo-filing" but says there's a parallel on the industry side: Carriers who en masse underpay claims.

Some carriers underpay claims knowing a significant percentage of policyholders will accept it, she says. For most claimants, "they're in litigation because the insurance company has failed them not by a little, but by a lot," Boggs says.

The two sides dispute a key statistic. According to the state's Office of Insurance Regulation, Florida accounted for 8% of homeowners' claims nationally in 2019 but 76% of suits against insurers. But the plaintiffs lawyer association says the stat is suspect. The national database involved doesn't include data from New York or the Texas windstorm association, said a consultant for the association, former Texas insurance department chief economist Birny Birnbaum. Fie also said the data indicate that Florida insurers are an aberration nationwide in being slow to pay claims, which leads to lawsuits.

Boggs says the state already had remedies it could take against bad actors. "We can't legislate for the outliers," she says. "We have the Florida Bar and the CFO's office. We have the court system, and we have insurance carriers who can fight them."

Boggs says she wonders whether the industry likes having a "poster child" because "they can pass legislation saying they have to fix that."

The Legislature in 2019 and this year restricted the awarding of attorney fees in insurance cases. It also took steps to de-incentivize the assignment of benefits market. Assignment of benefits transfers a homeowner's insurance claim and benefits to a third party, such as a roofing company or water damage repair company. The companies, without further homeowner involvement, file the claim and can sue the insurer for both the claim and attorney fees.

Boggs says the number of lawsuits filed after the 2019 restrictions are down 22% but rates have increased. "From a consumer perspective, the insurance is becoming more expensive and worth less and difficult to use."

Even among those seeking to restrict the plaintiff attorneys, opinions are mixed on whether the most recent reforms were successful. State Chief Financial Officer Jimmy Patronis says consumers remain protected - they can still sue. All sides have been "wearing the legislators out," he says. "If everybody feels pain, who usually wins is the consumer." He expects the legislative changes will bring relief over the next 18 months but more is needed. "Every single year you've got to stay on top of the environment because the bad actors stay on top of it," he says. State Sen. Jeff Brandes, R-St. Petersburg, says the Legislature did "basically too little, too late. The state needs major surgery, and we ended up treating it for flu."

In contrast, Boyd, the Senate insurance committee chair, says, "I believe we went a long way to fixing the problem." He says it will take at least a year to see results.

The changes "are going to have a positive impact on the litigation environment in Florida, but it's going to take awhile," says Paul Handerhan, president of the Federal Association for Insurance Reform in Fort Lauderdale.