From 2019 to 2022, the Florida Legislature enacted 4 separate property insurance coverage reforms that sought to rein in abusive property insurance coverage litigation fueled by one-way lawyer’s payment shifting and a military {of professional} plaintiffs submitting lawsuits pursuant to assignments of advantages. In its newest reform, the Legislature has shifted its focus to the broader insurance coverage market and to tort reform. For a few years now, Florida has considerably led the nation in tort prices per family. This metric has been pushed by a excessive octane litigation setting, ever rising private harm verdicts, and a step by step sharpened give attention to organising insurers for unhealthy religion claims.
On March 24, 2023, Governor DeSantis signed into regulation H.B. 837, which eliminates lawyer’s payment shifting in insurance coverage litigation in all situations besides sure declaratory actions following a complete protection denial, and establishes sure unhealthy religion protected harbors to cut back unhealthy religion setups. Notably, the brand new regulation imposes an obligation of fine religion on policyholders. In this text, we are going to focus on the legislative adjustments affecting insurance coverage protection and bad-faith litigation.
90 Day Safe Harbor Period for Insurers to Investigate Liability Claims
Nearly twenty years in the past, a dissenting Florida Supreme Court Justice acknowledged that there are methods “to create bad faith claims against insurers when, after an objective, advised view of the insurer’s claims handling, bad faith did not occur. This is a strategy which consists of setting artificial deadlines for claims payments and the withdrawal of settlement offers when the artificial deadline is not met.”[1]
The Legislature has now amended Section 624.155 so as to add a 90 day protected harbor investigation interval for legal responsibility insurers:
(4)(a) An motion for unhealthy religion involving a legal responsibility insurance coverage declare, together with any such motion introduced beneath the widespread regulation, shall not lie if the insurer tenders the lesser of the coverage limits or the quantity demanded by the claimant inside 90 days after receiving precise discover of a declare which is accompanied by ample proof to help the quantity of the declare.
The new Section 624.155(4)(a) provides insurers some safety in opposition to unreasonably brief synthetic deadlines, but in addition places a 90 day restrict on the protected harbor interval, which begins “after receiving actual notice of a claim which is accompanied by sufficient evidence to support the amount of the claim.” While events would possibly disagree as to what proof is ample, the requirement for proof additional weakens the unhealthy religion setup, which is normally accomplished at a time when info continues to be being gathered.
Bad Faith Standards
The Legislature codified sure requirements referring to unhealthy religion. Several years in the past, the Florida Supreme Court determined Harvey v. Geico and, regardless of acknowledging that “negligence is not the standard,” decided that “negligence is relevant to the question of good faith.” The choice was broadly criticized for decreasing long-established requirements for proving unhealthy religion—from unhealthy religion to negligence. To remove any confusion, the Legislature has now codified in Section 624.155(5)(a) that “negligence alone is insufficient to constitute bad faith.”
The Legislature has additionally imposed religion customary on policyholders and claimants. Another widespread unhealthy religion setup tactic is for policyholders or claimants to make investigating claims as troublesome as potential for insurers. It appears counterintuitive—a claimant ought to need to make it simple for an insurer to resolve it ought to pay cash—however some have discovered it extra worthwhile to create conditions the place they will then declare to have been wronged and sue for more cash. The new good religion customary for claimants in Section 624.155(5)(b) is as follows:
(b)1. The insured, claimant, and consultant of the insured or claimant have an obligation to behave in good religion in furnishing info relating to the declare, in making calls for of the insurer, in setting deadlines, and in trying to settle the declare. This obligation doesn’t create a separate explanation for motion, however could solely be thought-about pursuant to subparagraph 2.
2. In any motion for unhealthy religion in opposition to an insurer, the trier of reality could think about whether or not the insured, claimant, or consultant of the insured or claimant didn’t act in good religion pursuant to this paragraph, by which case the trier of reality could moderately cut back the quantity of damages awarded in opposition to the insurer.
Multiple Claimant Bad Faith
One of essentially the most troublesome conditions for any legal responsibility insurer is figuring out how one can strategy settlement the place a number of claimants have competing claims with damages prone to exceed the accessible protection, akin to when a number of individuals are injured in a automotive accident. If the insurer is unable to safe a world settlement, it’s prone to face a foul religion swimsuit no matter its diligence and reasonableness.
The newly created Section 624.155(6) provides choices for insurers in situations the place “two or more third-party claimants have competing claims arising out of a single occurrence, which in total may exceed the available policy limits of one or more of the insured parties who may be liable to the third-party claimants.” The insurer won’t be liable past the coverage restrict if, inside 90 days after receiving discover of the competing claims in extra of the coverage restrict, the insurer both:
- Files an interpleader motion in a Florida courtroom for the coverage restrict.
- Upon settlement between the insurer and claimants, makes the coverage restrict accessible and submits the matter to binding arbitration. A 3rd-party claimant whose declare is resolved in arbitration should execute and ship a common launch to the insured social gathering whose declare is resolved by the continuing.
Attorney’s Fee Shifting
The Legislature formally repealed Section 627.428, the insurance coverage lawyer’s payment shifting statute, and its surplus strains counterpart, Section 626.9373. This vital change in Florida regulation will probably apply solely to insurance policies issued or renewed after March 24, 2023.
However, the Legislature additionally created a brand new statute, Section 86.121, which allows awards of lawyer’s charges in “an action brought for declaratory relief in state or federal court to determine insurance coverage after the insurer has made a total coverage denial of a claim.” The statute makes clear that “[a] defense offered by an insurer pursuant to a reservation of rights does not constitute a coverage denial of a claim.” Therefore, an insurer that defends beneath a reservation of rights, after which seeks a declaration as to its protection obligations wouldn’t be topic to paying lawyer’s charges.
Under this statute, lawyer’s charges may be recovered solely by a named insured, omnibus insured, or named beneficiary. The proper can’t be transferred or assigned. Section 86.121 doesn’t apply to any motion arising beneath a residential or industrial property insurance coverage coverage.
Modified Comparative Fault
The Legislature amended Section 767.81, the comparative fault statute, to restrict restoration for a celebration discovered to be larger than 50% at fault: “In a negligence action to which this section applies, any party found to be greater than 50 percent at fault for his or her own harm may not recover any damages.” However, this limitation doesn’t apply to actions for private harm or wrongful dying arising out of medical negligence introduced beneath Florida Statutes Chapter 766.
Effective Dates
H.B. 837 states that it “shall not be construed to impair any right under an insurance contract in effect on or before the effective date of this act. To the extent that this act affects a right under an insurance contract, this act applies to an insurance contract issued or renewed after the effective date of this act.” The regulation additionally states that “[e]xcept as otherwise expressly provided in this act, this act shall apply to causes of action filed after the effective date of this act.”
Based on how courts have handled the prior reforms, the elimination of Sections 627.428 and 626.9373 will probably not apply to claims beneath insurance policies that had already been issued, and can as an alternative apply to insurance policies issued or renewed after March 24, 2023.
It is much less clear how the unhealthy religion adjustments will apply. The clause making the regulation apply to causes of motion filed after the efficient date would possibly sufficiently present an intent by the Legislature to use the regulation to insurance coverage claims already in progress, and to probably even remove some accrued unhealthy religion causes of motion. We anticipate that there will probably be litigation as as to whether the unhealthy religion statutory adjustments apply to all unhealthy religion fits going ahead, or solely to unhealthy religion fits arising beneath insurance policies issued after the efficient date, or solely to unhealthy religion swimsuit arising from civil treatment notices filed after the efficient date.
Closing Thoughts
After passing a number of rounds of reforms centered on curbing abusive property insurance coverage litigation, the Legislature is now trying to broadly discourage lawyer-driven litigation and to curb bad-faith setups. With the Legislature now seguing into broader tort reform, it seems that this spherical of reforms would be the final vital insurance coverage reform for the foreseeable future.
[1] Berges v. Infinity Ins. Co., 896 So. second 665, 685 (Fla. 2004) (Wells, J., dissenting).
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