Florida Insurance Commissioner Altmaier Recommends Litigation Reform
Apr 14, 2021
On April 2, 2021, Florida Insurance Commissioner David Altmaier sent a letter to Florida House Commerce Committee Chair Blaise Ingoglia recommending changes to Florida’s property insurance litigation system. Altmaier told the Chair that according to data from NAIC analyzed by the Office of Insurance Regulation (OIR), Florida accounted for 8% of all homeowners’ claims opened by insurance companies. However, Florida accounted for 76% of all homeowners’ lawsuits opened against insurance companies. The Commissioner recommended reforming Florida’s “one-way” attorney fee statute, adopting a “rare and exceptional” framework for the award of contingency fee multipliers, and adopting legislation that specifically excludes “wear and tear” from concurrent causation.
In February, Commissioner Altmaier sent a letter to Chair Ingoglia warning that Florida consumers are seeing reduced availability of property insurance. They have fewer choices of coverage and pay increased premiums for coverage. At the same time, insurers are facing reinsurance availability and affordability issues. At that time, the Commissioner recommended:
- Implementing a 60-day presuit notice requirement.
- Establishing a limitation on attorney’s fees in first-party claims like the limitations in the recently enacted AOB legislation.
- Establishing a statutory framework for when concurrent causation is appropriate.
- Providing the OIR with clear authority to review financial transactions of managing general agents.
- Requiring insurers to collect and report litigation trends to OIR.
- Reducing the time for filing property insurance claims.
In the April letter, the Commissioner told the Chair that the OIR obtained information from the NAIC Market Conduct Annual Statement Data Call to provide information on litigation trends in the Florida insurance market. Based on the most recent data, the OIR found that Florida accounted for 8.16% of all homeowners’ claims opened by insurance companies in the United States but accounted for 76.45% of all homeowners’ suits opened against insurance companies. The OIR found that litigation trends in Florida have been consistently higher than any other state over the past four years. Further, Florida’s ratio of suits opened to claims closed without payment is eight times higher than the next highest state. The OIR did not detect a pattern of claims handling issues that could explain the disparity. The Commissioner said that the OIR “does not have a readily available explanation for Florida’s outlier status other than to simply state that Florida is experiencing far more claims-related litigation than the 47 other reporting states.”
To address the problems, Altmaier suggested the following reforms:
Reform Florida’s One-Way Attorney’s Fees Statute
- Altmaier said that the current one-way attorney’s fees statute provides an incentive for litigation that “may not always be legitimate.” The primary driver is that plaintiffs need only win “one penny more than the insurer’s initial offer” to recover attorney’s fees. Adopting attorney fee reforms like those enacted in the AOB legislation would preserve consumer protections while providing a framework to ensure that litigation brought against insurance companies is legitimate. However, he further stated that any legislation must not require claimants to pay attorney’s fees in cases where they do not prevail.
Provide that Contingency Fee Multipliers be Award Only in Rare and Exceptional Cases
- The Commissioner said the awarding of contingency fee multipliers could create incentives to file meritless cases to receive attorney fees payout. Legislation that allows contingency fee multipliers in “rare and exceptional” cases could reduce these incentives.
Address a Florida Supreme Court Decision on Concurrent Causation
- The OIR letter said that the Florida Supreme Court’s holding, in Sebo v. Am. Home Assurance Co., Inc., 208 So. 3d 694 (Fla. 2016), that insurance coverage may exist when there are concurrent causes of loss and at least one cause is covered under the policy has created an incentive for roof claim solicitations. Altmaier acknowledged that allowing insurers to require actual cash value coverage for roofs could address this incentive but suggested statutory language that specifically excludes “wear and tear” from concurrent causation could also provide a disincentive and allow consumers to keep replacement cost coverage for legitimate roof losses.
Adopt Provisions Like Those Recently Enacted in Texas
- The Commissioner said adopting provisions like those in a recently enacted law in Texas could help the Florida situation. The Texas law provides for presuit notice before the filing of lawsuits, gave insurers additional opportunity to inspect the loss, linked recovery of attorney fees to the amount recovered in the litigation, and prohibited the recovery of attorney fees unless specific notice is given.