In this 3rd part of a 4-part mini-series, I will be discussing litigation reform.
Last week, a special session of the Florida legislature passed 2 bills that were promptly signed into law by Governor DeSantis to address the homeowners' insurance crisis in Florida.
One of the longstanding issues addressed in the new laws is court costs and over-litigation. Florida's Office of Insurance Regulation reports that Florida accounts for only 8% of property insurance policies in the United States, but a whopping 76% of litigation. This is primarily due to laws that promote lawsuits with a low legal standard for recouping legal fees. If you have a damaged roof, door-to-door sales representatives will descend on your home like vultures to try to cash in. An April 2022 story from Spectrum News 13 discusses a Seminole County homeowner whose roof collapsed in a recent storm. Asher Wildman writes, "since the storm hit on Thursday [the article was from the following Monday], the homeowner says she has already had seven different roofing companies come to the home unsolicited to try to sell her a new roof."
The new laws that were hastily passed by the Florida legislature and signed by the governor in a special session in May 2022 may or may not actually lower homeowners' insurance premiums. In a June 1, 2022 opinion piece in The Miami Herald, Fabiola Santiago writes that "the special session was just a quick hit to give the appearance that legislators and the governor were doing something about what really matters to Floridians." She criticizes the legislature and governor for being in the pocket of insurance companies who fund their campaigns, and laments: "Legislators protected the insurance companies — from us. Now we can’t hire claim adjusters or legal help to sue them. Because, you know, the Republican theory of economics is that we’ll magically reap the benefits from those generous insurance firms now that they don’t have to face costly lawsuits."
Although too much litigation is a serious issue in Florida, it should surprise no one that our political leaders would pretend to address this while actually giving a big break to the insurance industry, while disenfranchising policyholders from the ability to hold their insurance providers accountable. The new legislation may even have constitutional issues. A common practice in the contractor industry is "assignment of benefits" (AOB), where contractors take over the claims process for the homeowner. The new laws treat these contractors worse than if the homeowner had taken legal action against their insurance provider directly. "Prevailing party fees" allow plaintiffs to recover attorney fees if they win the lawsuit, but now, contractors are excluded from receiving them. In a circuit court in Tallahassee, Restoration Association of Florida and Air Quality Assessors, LLC has sued, alleging this violates contractors' constitutional rights. They contend that most lawsuits are only for $3,000 or less, and without prevailing party fees, contractors have far less leverage to hold insurance companies accountable, because the attorney fees are not worthwhile for such small claims.
The opportunity to collect prevailing party fees hits insurance companies in their pocketbooks—and now they won't have to worry about that, which may give them an incentive to be more heavy-handed in denying legitimate claims. It remains to be seen whether they will pass along the savings to customers by reducing their policy premiums.
There really are no magic bullets for state government intervention to reduce insurance prices. The federal government, through the quasi-independent Federal Reserve System, has the power to be an unlimited "lender of last resort" to backstop markets. They set interest rates, and during COVID-19, for the first time, even purchased corporate debt through extraordinary measures. This, of course, involves picking winners and losers and has befitted the rich to the detriment of the middle class and below. Regardless, there is no equivalent of this "magic wand" on the state level.
Regulation that is actually enforced and holds insurance companies and other parties accountable can help, but the incentives are not there for that. Instead, a vital product that every homeowner needs to qualify for a mortgage and/or protect themselves from catastrophic loss ... gets treated as a political pawn and becomes less and less affordable or even completely unavailable, even as development forges ahead in areas that are foolish to build on.
I've decided to split off my discussion of the impacts of the climate crisis and predatory over-development into a 4th part, coming next week. Have a great weekend! This is also the last day of school for many Florida students. 🙂
I intend to publish letters over the weekend, but briefer than usual. Stay tuned.
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Notes:
https://www.radeylaw.com/2021/04/14/florida-leads-nation-in-homeowners-litigation/
https://www.miamiherald.com/news/local/news-columns-blogs/fabiola-santiago/article261971850.html
https://amp.bradenton.com/news/politics-government/state-politics/article261998415.html
The Dictator of DeSantistand DeadSantis will never help the consumer NEVER. The headline bump DeSantis FIXES the Florida Property Insurance problem for Florida Citizens is another smoke & mirrors ploy. This self absorbed TYRANT has no empathy for the ordinary Floridian. Great article Richard, it once again cements the true fact DeadSantis is stuffed in big corporations pockets like a used hanky. Today an article appeared in the Click Orlando reports how Big Florida Corporations don't even pay taxes. Don't forget to pay your "Flood Insurance Premiums" especially those who clearly do not live in the "Flood Zones" !!