The Florida Legislature passed comprehensive property insurance reform before the end of the 2021 Legislative Session, which concluded on Friday, April 30. Senate Bill 76 (“SB 76”) represents the latest attempt to curb litigation trends over first-party property claims and curtail the rise of property insurance premiums by limiting the circumstances in which attorney’s fees are awarded to prevailing insureds and imposing pre-suit requirements on plaintiffs. The new legislation hopes to improve Florida’s property insurance market just in time for another hurricane season. Assuming Governor Ron DeSantis will sign the bill, which he is expected to do, the changes will take effect on July 1, 2021.
SB 76 ultimately passed in the Senate by a vote of 35 to 5 and 75 to 41 in the House. The bill provides for a replacement of the one-way attorney fee statute and institutes a new pre-suit notice and demand requirement imposed on insureds 10 business days before filing suit against a property insurance carrier. An insured’s failure to provide the notice would serve as a waiver of its ability to recover certain fees. In addition, if the matter proceeds to trial and judgment is entered against the carrier, the insured would only be able to recover the full amount of its attorney’s fees if the difference between the amount of the judgment and the pre-suit settlement offer is at least 50% of the disputed amount. If the judgment amount is less than 50% but at least 20% of the disputed amount, the attorney’s fees would be limited to the corresponding percentage. If the difference between the judgment and the insurer’s pre-suit settlement offer is less 20% of the disputed amount, the insured will not be entitled to any fees at all. This new attorney’s fees framework will apply to surplus lines carriers.
In addition, SB 76 removes the ability to recover attorney’s fees through an offer of judgment for insurers and insureds, and reduces the claims notice deadline on all claims to two years from the date of loss, except for supplemental claims, which will be three years.
Florida’s Property Insurance Market and Litigation
Florida’s current first-party property litigation landscape includes a one-way fee-shifting statute for insureds and a liberal standard for imposition of contingency fee multipliers. Section 627.428 of the Florida Statutes authorizes an award of attorney’s fees for insureds if they prevail against their carrier. In addition, the Florida Supreme Court in Joyce v. Federated Nat'l Ins. Co., 228 So. 3d 1122 (Fla. 2017), authorized contingency fee multipliers for attorney’s fees awarded under section 627.428 without a showing of “rare and exceptional circumstances.”
These two factors have contributed to a significant rise in litigation over property insurance claims in the Sunshine State. According to the National Association of Insurance Commissioners, homeowners insurance lawsuits in Florida in 2019 accounted for more than 76% of all litigation against insurance carriers nationwide despite only accounting for a little more than 8% of the claims. As a result, Florida’s property insurance market continues the trend of financial losses, with an increasing number of residents turning to the state-backed insurer of last resort as private carriers exit the market.
The History of SB 76
SB 76 was initially introduced in the Senate in January of this year, and attempted to address some of these issues. The original version of the bill differed from the amended version in several respects. For example, the percentage needed for a full award of attorney’s fees was 80% rather than 50%, the bill included a limitation on contingency fee multipliers, and the time for the insured’s notice of intent was 60 days rather than 10 business days.
On April 7, 2021, the Senate passed the bill and sent it to the House. The House, nearly three weeks later, passed several amendments to the bill, including changing the timing of the notice of intent and the attorney’s fees percentages to those reflected in the final bill, as well as removing any limitation on contingency fee multipliers. On the last day of the 2021 Legislative Session, the Senate concurred with the House’s amendments with several last minute amendments of its own, including the removal the ability to recover attorney’s fees through an offer of judgment and the addition of language to make the new framework for attorney’s fees applicable to surplus line insurers. Later that day, the House accepted those final amendments.
The Trend Toward Insurance Reform
SB 76’s passage during the 2021 Legislative Session was the culmination of the legislature’s recent efforts to implement property insurance reform over the past several years. SB 76 represents the first time in recent years where both the Florida House and Senate overwhelmingly voted in favor of such reforms. Previous reforms, strictly focusing on limiting the application of contingency fee multipliers, died in committee in 2020 without facing a vote on the floor.
The passage of SB 76 also comes on the heels of the 2019 enactment of HB 7065, which significantly altered the landscape for assignment of benefit litigation in the state.
The Florida Legislature was able to impart significant changes to the property insurance litigation landscape during the 2021 Legislative Session. Importantly, the new legislation limits recovery of attorney’s fees for insureds and, in some cases, eliminates it altogether. While these changes will certainly affect first-party property litigation, it remains to be seen whether it will stop or reverse the litigation trends in the Sunshine State.