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April 15, 2013
Insurance bad faith bill gets first House hearing

A bill protecting insurance companies from bad faith litigation if they handle claims within 45 days has cleared its first committee in the Florida House.

The Civil Justice Subcommittee approved the HB 813 by a 7-6 vote on March 27. It has two further committees in the lower chamber before going before the full House. A similar bill in the Senate has not been scheduled for any committee hearings.

Rep. Kathleen Passidomo, R-Naples, sponsor of the bill, said the effort began two years ago with a 50-page bill, but it now has been edited down to a page-and-a-half. She said when someone has a claim against an insured person, the claimant can call the insurance company, which has 72 hours to request a notice of the claim in writing.

After receiving that notice, the insurance company has 45 days to investigate and offer to settle the claim, including paying up to the limits of the policy. If the company does that, Passidomo said, it would be immune from being sued for bad faith.

“Florida is out of control with regard to these claims,” Jacksonville attorney Joseph Kissane told the committee in testifying for the bill. He said the current system has become a game where plaintiffs’ attorneys make complex and impossible demands on the insurance companies to delay a settlement, and then attempt to sue them for bad faith so the policy limits can be exceeded.

Rep. James Waldman But critics said the 45-day period would create more problems than it solved, particularly in complex cases involving multiple claimants. Rep. James Waldman, D-Coconut Creek, recounted an actual case where a single accident resulted in nine injuries and fatalities. He said the insurance company quickly reached a settlement for the policy limits with a few of the victims and ignored the needs of the remaining ones.

“It’s the insurance company’s duty to investigate,” he said. “You do not give immunity to an insurance company just because they took 45 days and they made an offer. That is just wrong.”

Tampa attorney James Mulholland agreed. He said plaintiffs’ attorneys won’t be able to advise clients in 45 days whether to accept an offered settlement because that’s insufficient time to see if the defendant has other assets, an umbrella policy exists, or there are other alternatives.

“What this bill is going to do is force me to file a lawsuit to get the information I need to look my client in the eye and advise on whether to settle,” he said.

Rep. Ross Spano, R-Riverview, voted against the bill, but called it a difficult decision. He praised the provision requiring written notice, but questioned whether the proposal tilted too much in favor of insurance companies, particularly dealing with claimants who are not represented by attorneys.

“The reason you have bad faith [laws] is you have parties with really disparate positions in being able to bargain a fair settlement. Insurance companies have a stronger burden because they have a stronger position,” Spano said. “The current system is a little bit loosey-goosey and has some folks taking advantage of it. . . . Insurance companies are making decisions based on the threat of bad faith claims.”

The bill is next scheduled for the Banking and Insurance Subcommittee and then the Judiciary Committee.

[Revised: 12-11-2014]