December 22, 2020, S&P Global – Lisa Miller, a former Florida deputy insurance commissioner who now works with consumers on property insurance issues, said there was an 80% drop in lawsuits in Texas within 30 days of the law’s enactment. Miller in an email to S&P Global Market Intelligence said the reform law “restored the guardrails” for the state’s legal system. (Original story location: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/fla-lawmakers-seeking-new-ways-to-curb-wave-of-litigation-against-p-c-insurers-61361344)
Florida − Florida state legislators are working to slow the sharp increase in claims-related litigation against insurers that has led to double-digit rate increases and a decline in new business written in the Sunshine State.
The state’s last effort to curtail excessive litigation resulted in a law, enacted in July 2019, that sought to reduce the number of third-party assignment of benefits, or AOB, lawsuits. At first, the reform law had a positive effect for insurers.
Citizens Property Insurance Corp. CEO Barry Gilway during an appearance at a Florida Chamber of Commerce Insurance Summit in November 2019 said that the number of AOB lawsuits his company received dropped steadily after the law took effect. Citizens went from receiving about 900 per month before the law took effect to 374 in October 2019.
But while AOB litigation has decreased, first-party actions have since soared, with 44,226 lawsuits filed against property insurers in the first nine months of 2020.
Michael Peltier, Citizens’ media relations manager, said in an interview that the state insurer of last resort is currently being served with between 700 and 800 lawsuits each month. Through Oct. 20, Citizens had been party to 12,000 lawsuits in 2020.
The increased litigation, coupled with higher underwriting losses from severe weather, led to many carriers asking for, and in most cases, receiving 10% rate increases in either their annual rate filings or filings specifically related to the cost of reinsurance.
FedNat Holding Co. CEO Michael Braun during a third-quarter earnings call said the company was continuing to raise rates while reducing its book in Florida “until rates more accurately reflect the increased cost of claims and higher reinsurance costs in this environment.”
Florida lawmakers have eyes on Texas
The issue has gotten the attention of Florida state legislators like Sen. Jeff Brandes, a Republican who represents part of Pinellas County. Brandes, who serves on the banking and insurance committee, said the property insurance situation in the state has become “an uncontained nuclear disaster” and only the legislature “can reinsert the control rods to get … the reaction to stop.”
“The situation has gotten radically worse in the absence of the legislature’s action,” Brandes said in an interview. “I believe that that you could see rates double in the next two to three years in the state, so it’s all hands on deck to get the situation under control and we’re looking for the best ideas across the country.”
Florida legislators have been looking at reforms put into place in similarly afflicted states, Brandes said, and hope to “completely overhaul” the property insurance model in their state.
Texas enacted litigation reform in 2017 that included provisions requiring claimants to give insurers pre-suit notice, along with the amount of attorney fees incurred. The reform also allows insurers to inspect damage after receiving those notices.
Lisa Miller, a former Florida deputy insurance commissioner who now works with consumers on property insurance issues, said there was an 80% drop in lawsuits in Texas within 30 days of the law’s enactment. Miller in an email to S&P Global Market Intelligence said the reform law “restored the guardrails” for the state’s legal system,.
Brandes said Florida legislators also will examine how the state handles fraud connected with a portion of the lawsuits.
“We’ll be doing a deep dive into the way fraud is reported, the way that it is handled and the way that it’s investigated and … prosecuted,” Brandes said.
Miller said the litigation problem in Florida is not likely to end anytime soon. Even if the Florida legislature passes a meaningful property insurance reform bill in the 2021 session, such a measure would likely not go into effect until July of that year. It would then take another 12 to 24 months to be incorporated into carriers’ rates and forms, she added.
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