It has been a long time coming, and the devastation of Hurricane Ian was likely the proverbial straw that broke the insurance industry’s back. Reports have circulated for years about the “insurance crisis” facing Florida. Insurance rates continued to climb while carriers pulled out of the market. In December, the Florida Senate finally acted. Florida Senate Bill 2-A was signed into law on December 16, 2022, and made some significant changes in Florida property law. Here’s a summary of some of the high points.
Assignments of Benefits
One of the changes that is going to have an enormous impact on what has become the property claims industry is the elimination of post-claim assignment of benefits. Florida contractors and mitigation companies have created a niche industry in the insurance claims area. Generally, contractors would repair damage caused by ostensibly covered causes of loss and obtain an assignment of benefits to pursue repayment against the carrier directly thus standing in the place of the insured. The amended statute now states:
Except as provided in subsection (11), a policyholder may not assign, in whole or in part, any post-loss insurance benefit under any residential property insurance policy or under any commercial property insurance policy as that term is defined in s. 627.0625(1), issued on or after January 1, 2023. An attempt to assign post-loss property insurance benefits under such a policy is void, invalid, and unenforceable.
This prohibition will apply to admitted carriers only.
The effect that this might have on the surplus lines market remains to be seen. However, this is likely to spark a critical evaluation of the business practices of many Florida contractors.
Attorney Fees
This change likely has the greatest impact on how litigation will proceed in Florida for property claims. Previously, insureds were entitled to an award of attorneys’ fees. Florida Statute 626.9373 and Florida Statute 627.428 eliminate the right to attorney fees for residential and commercial property lawsuits for both admitted and surplus lines carriers. (However, attorney fees may still be awarded under FS 57.105, the frivolous lawsuit statute, and 768.79 the statute that outlines the Offer of Judgements and Demand for Judgement in property claims.)
This will not affect pending litigation or the upcoming Hurricane Ian litigation, but future litigation is going to change.Time frames Related to Adjustment of Claims effective March 1, 2023
Of immediate import for carriers is the change to certain time frames set out during the adjustment process. Florida Statute 626.9541(1)(i)4 has amended the time for residential carriers to issue payments for undisputed amounts. The prior statute required undisputed payments to be issued within 90 days. This amendment decreases it to 60 days unless payment of the undisputed amount is prevented by factors “beyond the control of the insurer” as defined in Section 627.70131(5).
Such factors are defined as follows:
- The Office of Insurance Regulation issued an order finding that all or certain residential property insurers are reasonably unable to meet the time requirements of the statute in specified locations and ordering that such insurer or insurers may have additional time as specified by the Office.
- Actions by the policyholder or the policyholder’s representative which constitute fraud, lack of cooperation, or intentional misrepresentation regarding the claim for which benefits are owed when such actions reasonably prevent the insurer from complying with any requirement of this section.
This definition is also used in the section requiring timely payment of claims (within 60 days). The new statute mandates that:
(7)(a) Within 60 days after an insurer receives notice of an initial, reopened, or supplemental property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay is caused by factors beyond the control of the insurer… Any payment of an initial or supplemental claim or portion of such claim made 60 days after the insurer receives notice of the claim, or made after the expiration of any additional timeframe provided to pay or deny a claim or a portion of a claim made pursuant to an order of the office finding factors beyond the control of the insurer, whichever is later, bears interest ….
Section 627.70131 has been changed to specify the following:
(1)(a) Insurers now have 7 calendar days to review and acknowledge receipt of communications.
(3)(a) Insurers now have 7 days after the insurer received proof of loss statements to begin an investigation as is reasonably necessary.
(3)(b) If an inspection is required, an insurer has 30 days (reduced from 45 days) after receiving proof of loss statements for the insurer to conduct that inspection of the property.
(3)(e) If an estimate is prepared, the insurer must send the policyholder a copy of the estimate within 7 days after the estimate is generated by the adjuster.
Section 627.70131(4) has been amended to require insurers to maintain records and document the dates of the activities as follows:
- Any claim-related communication made between the insurer and the policyholder or the policyholder’s representative.
- The insurer’s receipt of the policyholder’s proof of loss statement.
- Any claim-related request for information made by the insurer to the policyholder or the policyholder’s representative.
- Any claim-related inspections of the property made by the insurer, including physical inspections and inspections made by electronic means.
- Any detailed estimate of the amount of the loss generated by the insurer’s adjuster. (This is a change from the summer session where this requirement was only necessary after the insured requested the estimate.)
- The beginning and end of any tolling period are provided for in subsection (8) of Section 627.70131.
- The insurer’s payment or denial of the claim.
Notice of Claims
Section 627.70132 reduces the time to report a claim or reopened claim from 2 years after the date of loss to 1 year. The time to report a supplemental claim is reduced from 3 years after the date of loss to 18 months. This change affects both admitted and surplus lines carriers doing business in Florida.
Breach of Contract Necessary for Bad Faith
Florida Statutes Section 624.155 permits bad faith claims under first-party property insurance policies. This section has been replaced with the following:
Notwithstanding any provision of s. 624.155 to the contrary, in any claim for extracontractual damages under s. 624.155(1)(b), no action shall lie until a named or omnibus insured, or a named beneficiary has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract, and a final judgment or decree has been rendered against the insurer. Acceptance of an offer of judgment under s. 768.79 or the payment of an appraisal award does not constitute an adverse adjudication under this section. The difference between an insurer’s appraiser’s final estimate and the appraisal award may be evidence of bad faith under s. 624.155(1)(b) but is not deemed an adverse adjudication under this section and does not, on its own, give rise to a cause of action.
Mandatory Binding Arbitration
Is this the end of the appraisal process? The Florida Legislature created Section 627.70154, which allows insurers to issue optional mandatory binding arbitration endorsements. The sections require the policyholder to sign a form to elect binding arbitration in exchange for a reduction in premium.
Appraisal is its own industry in Florida. More so than in a lot of other states. We have been privileged to work with some of the finest appraisers and umpires in the country. A switch to binding arbitration is likely to move from umpires to arbitrators, i.e., from non-lawyer industry professions to licensed attorneys and certified arbitrators. It will be interesting to see how this evolves over the next five years or so.
If you have any questions about the changes (some of which are not listed here), please reach out to us. We are happy to assist in claims and litigation in the Florida Panhandle. Additionally, Christina May Bolin, along with Lori Flenniken, Vice President – Claims of Florida Intracoastal Underwriters, Ltd., will be presenting a Florida legislative update at the 2023 Windstorm Insurance Network Annual Meeting. Information on that conference can be found here: https://windnetwork.com/.
Christina May Bolin has practiced in the property insurance field for more than 20 years. She practices in Alabama, Mississippi, and the Florida Panhandle. Christina currently serves as the President of the Windstorm Insurance Network and is located in our Mobile office.
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