‘Contingency risk multipliers’ in property insurance disputes scrutinized
Florida lawmakers want to limit “contingency risk multipliers” that are used to determine attorney fees in property insurance disputes.
In a recent interview with the News, Brandes named insurance reform a priority for the 2021 legislative session that convenes March 2.
“I think it will be insurance reform on what they can offer in their policies, I think it will be reform as it relates to the time individuals have to file a claim, and reform as to the alternative dispute resolution process” as well as other issues, Brandes said.
SB 212 would establish a “strong presumption” that the “lodestar fee is sufficient and reasonable” in cases arising from property insurance disputes. The bill states that the presumption could only be rebutted in “rare and exceptional circumstances.”
The lodestar method considers the number of hours reasonably spent by an attorney at a reasonable hourly rate.
“We’re simply trying to reflect the jurisprudence of federal law and what most other states are doing,” Brandes said when he introduced the legislation last year.
Florida courts have awarded attorneys’ fees to homeowners who sue their insurers to enforce policies since 1893 under the theory that they have fewer resources to pay for attorneys than large companies.
The law allows fee multipliers for the same reason.
Supporters say fee multipliers are sometimes the only way homeowners, especially those living in rural and underserved areas, or with comparatively low-value cases, can recruit an attorney to take on a large insurance company.
In a case upholding them, the Supreme Court said fee multipliers “level the playing field between parties with unequal abilities to secure legal representation” in Bell v. U.S.B. Acquisition Co. Inc., 734 So. 2d 403, 411 (Fla. 1999).
But critics, including Floridians for Lawsuit Reform, contend that attorneys take advantage of multipliers to drive up fees. The costs are eventually passed on to the consumer through higher premiums, critics say.
“With Florida’s legislative session underway, the organization has identified one of its priorities in its overall mission to create a better, more fair, legal climate: reducing the financial incentives for trial attorneys to take advantage of Florida homeowners,” the group said in a January 21 statement.
The group cites Florida Department of Financial Services records that show property insurance disputes generated 50,000 lawsuits last year.
“Due to frivolous lawsuits and excessive attorney’s fees, homeowners’ property insurance rates could climb [tenfold] over the next 10 years,” the group contends. “Higher rates contribute to the rising cost of homeownership in Florida.”
Brandes said the legislation was inspired, in part, by a challenge Chief Justice Charles Canady issued in a dissent in William Joyce et. al v. Federated National Insurance Company, No. SC16-103 (Fla. Oct. 19, 2017).
“The majority’s decision underscores the need here for a full re-examination in a future case of our multiplier jurisprudence…,” Canady wrote.
Brandes withdrew the bill last year as it was about to reach the Senate floor after a House companion died in committee. In addition to the contingency fee multiplier bill, Brandes is also sponsoring a high-profile bill that would give businesses, schools, and religious institutions immunity from COVID-19-related lawsuits.
Brandes’ SB 12 has been referred to the Senate Banking and Insurance, Judiciary and Rules committees. SB 76 by Boyd is on the Senate Banking and Insurance Committee’s February 2 agenda. HB 305 by Rommel has yet to receive a committee reference.