As Florida lawmakers prepare for a special session on property insurance reforms next week, the James Madison Institute has released a study outlining a path to reform that includes the end of the state’s one-way attorney fee law.
There are some cost drivers – such as Florida’s rapid rate of population growth, the state’s storm-prone geography and reinsurance costs – that have put upward pressures on property insurance costs in recent years, according to the report. But those issues don’t explain the double-digit property insurance rate hikes consumers have faced and jaw-dropping insurance losses that plague the industry, the institute reports.
Tort-reform supporters remain optimistic that lawmakers will reject half-measures and pass solutions to what they say is truly plaguing the property insurance market: excessive and abusive civil litigation.
“Given the level of concern among policyholders all over Florida on property insurance premiums, the fact that the governor and legislative leaders called a special session immediately after the election shows they get it,” Sal Nuzzo, vice president of policy for the institute, told the Florida Record in an email. “We are hopeful that concentrating on this important issue on its own, versus in the regular session when lawmakers are having to juggle so many more issues, will allow the Legislature to provide the governor with a robust and comprehensive policy reform to enact, rather than something that puts a Band-Aid on a gaping wound facing Florida homeowners.”
The state’s one-way attorney-fee law allows homeowners – and third parties who have been assigned homeowners’ policy rights in repair contracts – to have their attorney fees covered by the insurer if they prevail in their litigated claims. This process tends to ratchet up repair costs, tort-reform supporters say.
“Crooked contractors would oftentimes inflate their bills, and/or charge for repairs that were unnecessary or unrelated to the loss in question,” the institute’s report says. “In more and more cases, contractors partnered with trial lawyers as a matter of practice, availing themselves of the aforementioned one-way attorney fee benefit in state law. …”
The institute also calls for reining in state-run Citizens Property Insurance Corp. by reducing its policy count and tightening procedures for when “bad faith” claims can be filed against property insurers.
“The root cause of Florida’s property insurance crisis is litigation run amok,” the study states. “All the other insurance-related issues facing the state – hurricane losses, reinsurance rate increases, the growth of Citizens, rating downgrades and insolvencies – are either exacerbated or caused by the state’s litigation problem.”