Property insurance lawsuits decreasing, funding growing
FEMA strikes Fort Myers Beach flood discounts, Florida’s litigated insurance claims are down rather dramatically so far this year, third-party litigation funding emerges as a multi-billion-dollar industry, and Florida’s insurance commissioner orders a 1% reduction in workers’ comp insurance rates. It’s all in this week’s Property Insurance News.
Lost Flood Discounts: Months after FEMA’s initial decision to axe the discounts on nearly 127,000 federal flood insurance policies in Lee County and four of its cities in Southwest Florida, the agency granted a reprieve this summer due to the communities’ effort to fix violations FEMA found under its so-called 50% Rule on rebuilding after Hurricane Ian. FEMA gave them until November 18, 2024 to come into full compliance with its National Flood Insurance Program (NFIP) Community Rating System rules. Lee County, Bonita Springs, Estero, and Cape Coral were successful – but Fort Myers Beach was not. While acknowledging its progress, FEMA last week put the beachfront community on probation and eliminated its Class 5 rating, which had earned its residents a 25% discount on NFIP policies. The decision impacts 7,063 NFIP policies there.
FEMA cited a “large amount of unpermitted work, lack of documentation, and failure to properly monitor activity in special flood hazard areas” in its assessment – and the town didn’t remove noncompliant structures that were incorrectly permitted post-Ian. Fort Myers Beach officials have voiced their concern with raising policy costs, especially after the impacts from Hurricanes Helene and Milton this year, but in a release Friday said it will work to regain the discount.
Credit: Vladislav Chorniy
Reduced Property Insurance Litigation: Florida has been in an ongoing battle with property insurance litigation abuse for years now, culminating in legal reforms across the Sunshine State – and it looks like they might be working. Lawsuits filed against Florida property insurers have gone down nearly 24%, from 36,639 lawsuits in 2023 to 27,923 in the first three quarters of 2024. The numbers come from reinsurance brokerage Guy Carpenter, whose data was published by the Sun Sentinel recently. The decline is even more dramatic – nearly 59% – compared to 2022 levels of litigation. At the end of 2022, the Florida legislature passed major litigation reform, including the end of one-way attorney fees. Back then, insurance regulators reported Florida had 7% of the nation’s homeowners insurance claims yet 76% of the nation’s homeowners insurance lawsuits. Tom Gaitens of Florida Citizens Against Lawsuit Abuse told the Florida Record, “We should not rest on our laurels, but Florida has, through reforms like fixing the one-way attorney fees loophole (and) fixing the Assignment of Benefit (AOB) provisions, created a more balanced playing field for the civil justice system.”
What’s Funding Lawsuits? Third-party litigation funding (TPLF) is a relatively new industry, running quietly behind the scenes for years and now toting a multi-billion-dollar market value that may come at your expense. As TPLF companies, like Fortress, pump cash into law firms involved in high-profile tort suits – often in exchange for a percentage of the award – their influence contradicts their insistence upon being “passive investors” and can cause a real conflict of interest – prolonging litigation to maximize profit even when settlement might be the best option for the plaintiff. Concerns raised about these investors do not stop there but may even threaten national security interests as foreign powers using TPLF to undermine the U.S. have eyes on sensitive information and can even use this knowledge to evade sanctions. Advocacy for TPLF safeguards, like we spoke of in a recent LMA Newsletter, has led to important legislation being introduced in Congress. Look for another bill to be filed in the Florida Legislature’s upcoming 2025 session to regulate TPLF.
Worker’s Comp Reduction: The Florida Office of Insurance Regulation has ordered a 1% reduction in workers’ compensation insurance rates effective January 1, 2025. This will be the eighth consecutive year that workers’ comp rates have dropped in Florida, showcasing cost savings in a robust market. “Following historic legislative reforms in this space, it is abundantly clear that the workers’ compensation market in Florida is stable and competitive,” said Florida Insurance Commissioner Michael Yaworsky in a press release.
LMA Newsletter of 11-25-24
