Proposed Florida Insurance Reform (HB 837)

The Florida legislature is thinking of tinkering with PIP and other auto insurance laws again. This time I think it will be a good change!

A version of the bill can be seen here:

One-way attorney fees

Florida has had a law that states that if a plaintiff sues the insurance company and wins, then the insurance company must pay the attorney fees. On the other hand, if the insurance company prevails, there are no attorney fees that must be paid. This created a situation where lawyers filed thousands of lawsuits, in the hope that one would ripen into a case in their favor. The lawyers used templates and generated these lawsuits in mass, each lawsuit acting somewhat like a lottery ticket for the attorney. It was a numbers game, the more lawsuits filed, the greater the likelihood of a payout for the attorney, with no real negative consequence for plaintiff’s attorney for filing so many suits. This resulted in some lawyers having more than 10,000 ongoing lawsuits at a time. This has substantially increased the cost of insurance in Florida making auto insurance more and more expensive. It also has substantially favored fraudsters who do not hesitate to file lawsuits on the thousands of fake cases created by their fraud rings.

Amazingly on page 30 of the PDF of the proposed law, it says: “Section 627.428, Florida Statutes, is repealed.” The entire statute is taken out!

In general, now attorney fees will be carried by each party. However, there remains the possibility of attorney fees in a declaratory judgment for coverage, found in chapter 86 of Florida statutes. It will be interesting to see how courts evolve. I believe this will substantially reduce attorney fees in Florida, but there may rulings that allow attorney fees in unexpected situations.

Bad Faith

My experience with Bad Faith in Florida is as follows. A plaintiff’s firm churns out numerous time-limited demands, especially on cases with weird circumstances. The time limited demands usually only provide 30 days’ notice. If the demand is not paid and the insurer goes on to lose, then a  jury can end up assessing huge “bad faith” amounts. Lawyers can particularly pounce when an honest mistake is made with regards to timing. I have seen multi-million-dollar settlements because a response is a day late or because an email was mistakenly deleted. This time the legislature amazingly seems to have realized this issue and has added provisions that specify that an action for bad faith must be submitted under a standardized form and give 90 days for response. This is a game changer for insurance companies who are subject to “bad faith” when honest timing mistakes are made.

The bill also provides that mere negligence is not enough for bad faith (remember my accidental email deletion example) and that bad faith on the part of the claimant is also a factor. Requiring “good faith” on the part of the plaintiff’s attorney’s was one of the main things I was demanding last time the legislature took up this issue, as I have seen attorneys intentionally be confusing in their demands in an effort to confuse the insurance company to make it appear that the insurance company is acting in “bad faith”.

In general I think this bill will substantially improve the legal situation in Florida with regards to bad faith. Here are references in relation to the PDF cited above:

On page 14, it says: “An action for bad faith involving a 336 insurance claim, including any such action brought under the common law, shall not lie if the insurer tenders the lesser of  the policy limits or the amount demanded by the claimant within 90 days after receiving actual notice of a claim which is accompanied by sufficient evidence to support the amount of the claim.”

On page 15, it says: “In any bad faith action, whether such action is brought under this section or is based on the common-law remedy for bad faith: (a) Mere negligence alone is insufficient to constitute  bad faith.  (b)1. The insured, claimant, and representative of the insured or claimant have a duty to act in good faith in furnishing information regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim.”

Fraud Prevention

As someone engaged in fraud prevention, I strongly favor this bill. In my experience in Florida, when an insurance company reaches a point that it believes a claim is fraudulent, it often still will not take action to deny the claim because it is afraid of the legal pitfalls of the Florida code. With these new changes to the code, insurance companies will be less afraid to call fraud what it is. This should make it less profitable for fraud rings in Florida. Over time, this should substantially reduce the premium paid by auto insurance policyholders in Florida.