Florida Special Session sees Passage of Major Reforms

Gov. Ron DeSantis signed a bill Dec. 16 that includes the most consequential reforms to Florida’s property insurance and tort laws in more than two decades. The Florida Legislature concluded its Special Session 2022A on Dec. 14 by passing SB2A, Property Insurance, sponsored by Sen. Jim Boyd and Reps. Tom Leek and Bob Rommel, which had the support of DeSantis, Senate President Kathleen Passidomo, and Speaker Paul Renner. The votes were 27-13 in the Senate and 84-33 in the House.

The ongoing claims crisis and hurricanes Ian and Nicole have placed enormous stress on Florida’s insurance market leading to multiple insurer insolvencies, a significant increase to 1.13 million-plus policies in Citizens Property Insurance Corporation, new assessments levied on all property insurance consumers by the Florida Insurance Guaranty Association, and increased costs but fewer coverage options for consumers.

Florida consumers are ultimately paying the cost of the state’s broken insurance market, with property insurance rates three times the national average. Simultaneously, the high volume of litigation in the auto insurance market, driven by auto glass and PIP claims by third parties, is a cost-driver that negatively impacts motorists and has further exacerbated the situation.

With Florida’s property insurance market in dire straits, NAMIC helped organize a broad coalition of insurance and business groups to advocate for core reforms, including eliminating often-abused attorney fee recovery statutes, and to support SB-2A. This group worked with the Legislature and Governor’s Office to get these necessary changes to support Florida’s consumers and begin to stabilize the state’s property insurance market. Although this special session did not address the auto side of the market, it was still a major success, and NAMIC thanks and applauds the policymakers’ hard work in this monumental undertaking.

A fundamental source of the instability in the insurance market is Florida’s “one-way” attorney fee-shifting laws, which no longer serve to protect the consumer, but rather to enrich billboard lawyers. While originally intended to “discourage litigation and encourage prompt disposition of valid insurance claims without litigation,” according to a state court ruling,[1] sections 627.428 and 626.9373, F.S., now serve to harm all consumers and, in some instances, promote outright fraud. Having been twisted into a tool used by some trial lawyers and vendors to profit from insurance claims, these statutes created a hyper-aggressive, litigation-for-profit economy that encourages a segment of Florida’s legal community to file lawsuits as soon as there was any dispute over a claim. There are several dozen Florida-based lawyers who regularly file thousands of cases per year, and, as a result, while Florida accounts for only 8 percent of property insurance claims, the state accounts for an astonishing 79 percent of insurance-related lawsuits filed throughout the United States, according to the Office of Insurance Regulation. The abuse of one-way attorneys’ fees provisions has been a major factor in causing the insurance crisis in the state. Fortunately, this bill represents an important step toward a fairer litigation environment and a more competitive property insurance market for consumers.

SB2A tackles this problem by amending these statutes to eliminate their use in property insurance claims and further eliminate the associated gamesmanship. To further tame Florida’s outrageous litigious environment, the bill also changes the offer of judgment statutes allowing for a quicker settlement of claims and addresses problematic bad faith case law. Finally, prohibiting the use of post-loss assignment of benefits will likely result in less abuse by bad actors who take advantage of policyholders by using them as a mechanism to sue insurance companies.

Of note, while the bill on the whole contains many provisions to help insurers better serve their policyholders, there are some aspects of it that will make claims handling more challenging. Time to review and acknowledge claims and begin claims investigations are cut from 14 days to seven days and time to conduct physical inspections and pay or deny claims are also reduced, subject to possible extension by the Office of Insurance Regulation. Additionally, the new law may face some implementation challenges and opponents of the changes trying to block the legislation in court.

“This bill paves the way for further work down the road, with the goal of creating a marketplace for coverage in which companies can compete financially for business without fear of being overwhelmed by costly, frivolous litigation, rather than one that sees numerous insurers fail in the course of one year,” said Neil Alldredge, NAMIC president and CEO. “This cannot be achieved overnight, but a healthy, competitive market will provide long-term benefits for all Floridians.”

NAMIC applauds the Legislature for passing meaningful reform. A healthy market with available, affordable, and reliable insurance supports a strong economy, which is the ultimate consumer protection.

The Legislature also passed legislation providing property tax relief for homeowners impacted by hurricanes Ian and Nicole as well as targeted toll relief for regular commuters. When concluding Special Session A on Wednesday, Speaker Renner noted that, “We’re not done with insurance yet. We’ve solved some major problems for Floridians this week, not only shoring up our property insurance market, addressing the victims of two terrible hurricanes, and also helping the hardworking men and women who drive to work every day who are suffering from a high cost of living.” More insurance reforms are anticipated, at the very least, during the 2023 regular session.

For a full summary of the insurance legislation that passed during Special Session A, click here.

[1] Gibson v. Walker, 380 So. 2d 531 (Fla. 5th DCA 1980).