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Insurance bad faith bill moved by House subcommittee

Senior Editor News in Photos

HB 751, as introduced, would have allowed those pursuing a bad faith claim to file a claim with the Department of Financial Services, which regulates the insurance industry, to determine whether the insurance company had acted properly. Beyond that, a claim would have to be filed with the Department of Administrative Hearings instead of the civil justice system.

Rep. Michael GrantIt was amended in committee to say claims may be filed with DFS but the requirement that further action be pursued through DOAH was deleted, preserving the ability to continue through the civil court system. The DFS option also would apply to both first- and third-party bad faith claims.

The bill passed 11-5 and next goes to the Government Operations & Technology Appropriations Subcommittee and then on to the Judiciary Committee.

Further changes may be coming. Rep. Michael Grant, R-Port Charlotte, the House majority whip and sitting in as a special member of the committee, said the bill is only at the beginning of the process.

“This bill will change from one committee stop to the next. I would urge you all to vote for this bill, work with the sponsor.. . . We’re going to get to a reasonable spot,” Grant said. “This bill is a seed that’s going to grow and hopefully it will grow and turn into a flower on the floor. If it turns out to be a weed, kill it.”

Rep. Alex Andrade, R-Pensacola, the bill sponsor, said payouts in bad faith litigation by insurance companies add $106 to every Florida auto insurance policy, cost insurance companies, and hence policyholders, $1.25 billion every year, and cause Florida to have the second highest auto insurance rates in the country. He also said only four other states besides Florida allow third parties to sue insurance companies for bad faith.

Rep. Tommy Gregory, R-Bradenton, sponsored the amendment to continue allowing bad faith claims to be heard in civil courts rather than by an administrative judge. He said it was important to ensure cases went through the civil court system and that first- and third-party complainants were treated the same.

Other committee members expressed skepticism, even as they said they would support the measure in the subcommittee and hope for improvements.

Rep. Melony Bell, R-Ft. Meade, said bad faith laws protect businesses if their insurers wrongly fail to settle claims that result in a lawsuit judgment above policy limits which might be imposed on the policyholder. She said she would support the bill now, but looked for improvements.

“We [she and her husband] are a small business owner,” she said, “I can only see this hurting small businesses.”

“I expect my insurance company to protect me and act in good faith. Why take this away?” said committee Vice Chair Rep. Jackie Toledo, R-Tampa, who also voted for the bill. “You need to keep bad faith in place so we have insurance companies acting in good faith.”

Several business-related organizations spoke in favor of the bill, while the Florida Justice Association and Taxpayers Against Insurance Bad Faith, among others, opposed it. Dale Swope, representing the latter organization, argued there are legitimate reasons for treating first- and third-parties differently, including that an insurance company dealing in bad faith could leave the policyholder subject to a large judgment.

“This is a get-out-of-jail free card that benefits no business in Florida, except for insurance companies,” Swope said.

He also said that plaintiffs may now bring a bad faith case either under a state law – under F.S. §624.155 – or under common law and the proposed bill would eliminate the common law cause of action.

“I don’t want those businesses exposed to large judgments if their carrier did something wrong,” said Rep. Ben Diamond. D-St. Petersburg.

“That’s my concern.”

No Senate companion has been introduced.