Florida governor vetoes Senate Bill 54, aimed at overhauling Florida’s auto insurance framework

On April 30, 2021, the Florida legislature passed Senate Bill 54 (“SB-54”), which proposed sweeping changes to Florida’s auto insurance system, including repealing Florida’s no-fault personal injury protection (“PIP”) system and banning punitive damages on plaintiffs’ bad faith claims.  However, Florida Governor Ron DeSantis vetoed the Bill on June 30, 2021, following a hotly contested debate over the Bill.  The Florida legislature would therefore need a two-thirds vote to override the governor’s veto, something a majority of commentators view as unlikely.  This article highlights some of the most significant changes that would have taken effect had SB-54 passed into law.

Senate Bill 54’s Proposed Repeal of PIP:

Had SB-54 become law, it would have repealed the state’s PIP system.  Currently, Florida motorists are required to maintain auto insurance with at least $10,000 in PIP with no requirement for maintaining bodily injury coverage.  The Bill would have repealed PIP and mandated bodily injury coverage at a minimum of $25,000 (for a single injured person) and $50,000 (for two or more injured people).  The Bill would have maintained the current requirement of $10,000 for property damage coverage.

Senate Bill 54’s Proposed Changes Relating to Third-Party Bad Faith Failure to Settle:

In addition to eliminating PIP, SB-54 set standards for bringing third-party bad faith claims against auto insurance carriers. Under the Bill, claimants would no longer have pursued common law bad faith claims against auto insurers. Instead, the causes of action would have been governed by a new statute, section 624.156, Florida Statutes.

As part of the new proposed legislation vetoed by the governor, Section 624.156 set the statutory framework for third-party bad faith failure to settle claims against auto insurance carriers.  Had the statute gone into effect, Section 624.156 would have set forth the duty of good faith, as well as the definition of bad faith failure to settle under Subsections (2) and (3) respectively.  The statute also would have codified the best practices under Subsection (4).  

In addition, when handling third-party claims, the new statute would have provided that insurers must communicate to the insureds several things, including the identify of any other person or entity the insurer has reason to believe may be liable, the insurer’s evaluation of the claim, and the likelihood and possible extent of an excess judgment.

Section 624.156(7) would also have established several conditions precedent in order to bring a third-party action for bad faith failure to settle against auto insurers. First, the claimant would have had to show that he/she obtained a final judgment in excess of the policy limits against the insured, the insured’s estate, bankruptcy trustee, or successor in interest, unless the insurer expressly waived the requirement of an excess judgment or wrongfully breached its duty to defend the insurer. Next, the claimant would have to establish that the insurer or an agent of the insurer received actual notice under 624.156(4), which provides that an insurer’s duty begins upon receiving actual notice of an incident or a loss that could give rise to a covered liability claim and continues until the claim is resolved.  

The new statute would also have provided safe harbor to the insurer from third-party bad faith failure to settle claims under certain circumstances as provided in section 624.156(8).  Under the safe harbor provisions, an insurer would not be liable for bad faith if it tendered its policy limits in exchange for the release of its insured from further liability within 45 days after receiving actual notice of the loss from a single claimant.  Where there are multiple claimants, the insurer would not be liable for bad faith if it globally tendered the applicable policy limits in exchange for a general release of the insured within 45 days of receiving the notice of loss. 

The statute also imposed specific cooperation requirements on the insured. Moreover, a party bringing a bad faith claim would have had to prove every element of the claim by the greater weight of the evidence, taking into account the totality of the circumstances.

One of the most drastic changes proposed under the statute was that punitive damages would not be permitted. Per the vetoed statute, an insurer would only be found liable for bad faith failure to settle a third-party claim if the insurer’s failure to meet its duty of good faith was the proximate cause of the insurer not settling the claim “when, under all the circumstances, the insurer could and should have done so, had it acted fairly and honestly toward its insured and with due regard for the insured’s interests.”

Senate Bill 54’s Proposed Changes Relating to First-Party Bad Faith Failure to Settle:

SB-54 would also have amended section 624.155 with respect to first-party automobile claims.  Had the governor signed the bill into law, Section 624.155 would have been amended to provide a first-party bad faith cause of action for failure to settle when such failure was caused by not communicating with the insured in accordance with specified best practices.  Specifically, under the proposed amended section, an insured would be able to bring a first-party bad faith claim against their auto insurer for failing to provide the insured: the contact information for the adjuster handling the claim; information about coverage issues and how the coverage issue can be resolved; the basis for the insurer’s rejection of a settlement offer or demand; and, “any needed extensions to respond to a time-limited settlement offer,” if these failures were the cause of the claim not settling.  

Senate Bill 54’s Proposed Changes to the Insurance Disclosure Statute:

In addition to the changes regarding Florida’s auto insurance system, SB-54 would have also provided a significant addition to Florida’s Insurance Disclosure Statute (section 627.4137).  Florida Statute section 627.4137 currently requires liability insurers to provide, within 30 days after receiving a written request from a claimant, a sworn statement setting forth the name of the insurer, name of the insured, limits of liability coverage, a statement of any policy or coverage defense the insurer currently believes is reasonably available to it, and a copy of the insurance policy.

Under the Bill, Florida Statute section 627.4137 would have been amended to provide that if an insurer fails to timely comply with the requirements of the section, the claimant may file an action to enforce the section and is entitled to an award of reasonable attorney fees and costs to be paid by the insurer.  This would have represented a significant development that would have incentivized claimants to pursue litigation against insurers who have not complied with the requirements of section 627.4137. 

Comment as to Overall Implications of Senate Bill 54:

As explained above, had SB-54 passed into law, it would have had significant impacts on Florida’s auto insurance system.  Specifically, with respect to bad faith claims for failure to settle against auto insurance carriers, those claims would no longer have been governed by common law.  Rather, the above statutes would control. However, because the governor vetoed the Bill, and barring a two-thirds override, the new statutory framework will not come into play, and carriers should continue to be guided by the current common law standards in order to protect themselves from bad faith litigation involving auto claims. It is anticipated that the the Florida legislature will continue to attempt to reform Florida’s auto insurance system and that a revised version of SB-54 will be presented in the future.