Bill revamps attorney’s fees in property damage insurance claims
A bill that changes how attorneys are paid when they represent policy holders in property damage claims and shortens the time property owners have to file insurance claims has cleared its second Senate committee.
SB 76 also would limit when multipliers can be applied to lodestar attorney fee awards and ask the Supreme Court to amend Florida Bar rules to require attorneys in the claims cases to file a copy of their client closing statements with the state Department of Financial Services.
The measure passed the Senate Judiciary Committee on March 9.
The bill would cut time property owners would have to file claims from three to two years and allow insurance companies to offer discounted roof replacement policies that would base the reimbursement on the age of the roof, if over 10 years old, rather than the cost of replacing the roof.
Sen. Jim Boyd, R-Bradenton, said changes are needed because insurance companies are losing more than $1 billion a year in Florida, even though rates for homeowners are rising from 20% to more than 50%. He also said companies have been losing money since 2015.
“In Florida these days, domestic insurance carriers, the larger insurance carriers, basically aren’t writing any new property coverage in the state of Florida…because of losses and that’s what’s driving the rates up,” Boyd said.
Under the bill, attorney’s fees would be awarded by comparing the final judgment with the demand in the case. Attorneys would get full fees if the judgment were 80% or greater of the demand. In cases in which the award is 20% up to 80% of the award, the fees would equal the percentage awarded — a 50% award would yield a 50% fee. If the award were less than 20%, the attorney would get no fees.
Currently, attorney’s fees in insurance litigation are governed by F.S. §627.428, which allows recovering of fees from the insurance company if the insured prevails in a lawsuit — a practice the Supreme Court in Johnson v. Omega Ins. Co., 200 So. 3d 1207 (Fla. 2016) said was a legislative attempt to level the playing field between powerful insurance companies and individual policy holders.
The bill creates “a strong presumption” that multipliers to lodestar awards will be used only in “rare and exceptional” instances.
On providing the Department of Financial Services with a copy of attorney closing statements, Boyd said, those would “include an itemization of the amount of attorney’s fees received by each lawyer or law firm, costs, and expenses.” In response to a question, he said both plaintiff and defense attorneys would be required to submit the statements.
Other changes in the law would require that claims, supplemental claims, and reopened claims be filed within two years of the incident causing damage instead of the present three years.
Policy holders would also have to inform insurance companies 60 days before filing suit with a presuit demand. On roofs more than 10 years old, insurers would be able to offer policies that instead of picking up the cost of replacing the roof would allow companies to pay a lesser amount based on the remaining life expectancy of that roof.
Boyd said the changes would apply to both residential and commercial property damage policies.
Asked about the lodestar multiplier, Boyd said, “If it’s rarely ever used and there’s a mechanism in our bill to award the [lodestar] fees if necessary. I think that covers it…. The threat of the multiplier out there often drives claims to be settled, maybe for the right amount, maybe for an amount that would not be awarded in a suit.”
The committee defeated an amendment from Sen. Darryl Rouson, D-St. Petersburg, to remove the language on lodestar multipliers, an amendment from Sen. Tina Polsky, D-Boca Raton, to require a notice in policies about the roof replacement changes to be in larger type, another amendment from Rouson to retain the three-year claim window, and an amendment from Sen. Perry Thurston, D-Ft. Lauderdale, to eliminate the 60-day notice requirement.
The committee did approve an amendment from Polsky to give the Department of Financial Services oversight and enforcement on unlicensed and unlawful claims adjusters.
Critics of the bill said it can take more than two years for all damage from a natural disaster or other incident to become evident, such as mold from an unrepaired leaking roof, and that delays in paying claims create additional reimbursable expenses. They also said the presuit notice requirement will force policy holders to hire attorneys since they won’t be able to do that notice on their own.
“This is the most drastic change to this law in 128 years,” said Jacksonville attorney Matthew Collett, who represents property owners with damage clams. “This law completely guts the current reimbursement of attorneys’ fees…. It will effectively shut down those who cannot afford to pay an attorney out of pocket.”
He also said the bill had no guarantee that companies will reduce rates and speed up the handling of claims.
“This bill does nothing to help resolve disputes in a timely and cost-effective fashion,” said David Murray of the Florida Justice Association. “It adds more lawyers to the insurance adjustment process and the litigation process.”
Polsky said if property owners under the proposed law opted to keep a full roof replacement coverage in their policy, the law could actually raise their rates for the same coverage.
But supporters said it could bring costs under control. Sen. Dennis Baxley, R-Lady Lake, cited a case where an attorney received more than $42,000 in fees for a claim that paid $432.
“How is that reasonable?” he asked.
“There’s more than one example of that,” Boyd said. “That’s part of what we’re trying to get at in the guts of this bill.”
He added, “Most insurance companies pay claims fairly, promptly, and efficiently. That’s what they’re in business for. If they do not, there are a variety of provisions in our bill that allow a consumer to engage an attorney and for that attorney to be paid fairly….
“Doing nothing today would make next year disastrous. We know for a fact rates have been going up and they will continue to.”
SB 76 passed 7-3, with Polsky, Thurston, and Rouson voting no. It earlier passed the Banking and Insurance Committee 9-3. It next goes to the Rules Committee.
The House counterpart, HB 305, by Rep. Bob Rommel, R-Naples, has been referred to the Insurance and Banking Subcommittee, the Civil Justice and Property Rights Subcommittee, and the Commerce Committee. It has not been heard in committee.
