FLORIDA: An Introduction to Insurance: Dispute Resolution

Insurance Disputes in Florida 

The rules regulating insurance disputes in Florida have changed dramatically due to recent and significant revisions to Florida’s Insurance Code. These changes, prompted by Florida’s current insurance market, have been highly divisive across the industry. Insurance companies lobbied for legislative reform citing increased rates, insolvencies, lack of adequate reinsurance, and excessive costs of litigation. Policyholder advocates believe these revisions strip policyholders of their rights to secure prompt and fair payment of insurance claims as well as judicial access to resolve disputes.

Statutory change 

The most significant statutory change was the repeal of Florida’s insurance attorney fee shifting provision which had been codified for over a hundred years prior to its 2022 elimination. The purpose of the provision, previously codified in Florida Statutes Sections 627.428 and 626.9373, was to discourage insurance companies from improperly denying, delaying, or underpaying claims. It was intended to level the playing field between policyholders and insurance companies when resolving insurance disputes. With the abolishment of these attorneys’ fees statutes, many argue insureds will be disadvantaged when facing an insurance company with the ability to fund protracted litigation. Attorneys’ fees, however, may be recovered by insureds pursuant to an offer of judgment made under Florida Statutes Section 768.79. This same statute was also amended in 2022 to allow a property insurer in a breach of contract action to make a joint offer of judgment or settlement that is conditioned upon the mutual acceptance of all the joint offerees. Fla. Stat. Section 768.79(6).

The statutory attorney fee shifting repeal, enacted in December 2022, is applicable to surplus lines carriers for claims brought under policies executed on or after the effective date. For domestic insurance companies previously bound by Florida Statute Section 627.428, it is presently unclear whether the repeal of the fee shifting statute will be applied retroactively. Insurers are pushing for retroactive application, however, there has not been a significant final ruling on the issue to date.

Recent legislation 

Recent legislation has also impacted the timeframe for an insured to report a property insurance claim. The revisions to Florida Statutes Section 627.70132 require a claim or reopened claim to be reported within one year following the date of loss. A reopened claim is defined as a claim that an insurer has previously closed, but that has been reopened upon an insured’s request, for additional costs for loss or damage previously disclosed to the insurer. Fla. Stat. §627.70312(1)(a). A supplemental claim is barred unless notice of the supplemental claim was given to the insurer within 18 months after the date of loss. The term "supplemental claim” means a claim for additional loss or damage from the same peril which the insurer has previously adjusted or for which costs have been incurred while completing repairs or replacement pursuant to an open claim for which timely notice was previously provided to the insurer. Fla. Stat. Section 627.70312(1)(b). For claims resulting from hurricanes, tornadoes, windstorms, severe rain, or other weather-related events, the date of loss is the date that the hurricane made landfall, or the date on which the tornado, windstorm, severe rain, or other weather-related event is verified by the National Oceanic and Atmospheric Administration. Fla. Stat. §627.70312(3). The notice provisions outlined in §627.70312 do not impact the statute of limitations provided for in Florida Statute 95.11(2)(e), which allows for five years on an action to enforce a property insurance contract with the period running from the date of loss.

Catalysts for reform 

One catalyst for the significant insurance reform is the number of domestic insolvencies in recent years resulting in the involvement of Florida’s Insurance Guaranty Association. The Florida Insurance Guaranty Association (“FIGA”), created by legislation and governed by Chapter 31 of Florida’s Insurance Code, handles the claims of insolvent domestic property and casualty insurance companies. Pursuant to the Florida Insurance Guaranty Association Act, FIGA has a duty to settle claims in accordance with the Act, the policy, and Florida insurance laws, in a timely manner. FIGA follows the requirements of Florida insurance law in its handling of covered claims from insolvent property and casualty insurance companies ordered liquidated by a court. In the event an insurance company becomes insolvent during litigation and FIGA takes over the claim, all proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court or before any quasi-judicial body or administrative board in this state shall be stayed for six months. Fla. Stat. §631.67. Additionally, an action against any guaranty association and its insured, with the period running from the date of the deadline for filing claims in the order of liquidation, must be filed within one year. Fla. Stat. §95.11(5)(d).

Another clear trend has emerged in Florida’s insurance industry with the increase in arbitration provisions. While this trend was initially more prevalent in surplus carriers, the domestic market has latched onto potential cost savings involved in arbitrating disputes. The legislature, responding to concerns regarding prohibiting an insured’s access to court, recently enacted Florida Statute Section 627.70154 regarding mandatory binding arbitration provisions. Under the statute, a property insurance policy issued in this state may not require that a policyholder participate in mandatory binding arbitration unless all of the following apply: (1) The mandatory binding arbitration requirements are contained in a separate endorsement attached to the property insurance policy; (2) The premium that a policyholder is charged for the policy includes an actuarially sound credit or premium discount for the mandatory binding arbitration endorsement; (3) The policyholder signs a form electing to accept mandatory binding arbitration. The form must notify the policyholder of the rights given up in exchange for the credit or premium discount, including, but not limited to, the right to a trial by jury; (4) The endorsement establishes that an insurer will comply with the mediation provisions set forth in Florida Statute Section 627.7015 before the initiation of arbitration; and (5) The insurer also offers the policyholder a policy that does not require that the policyholder participate in mandatory binding arbitration. Fla. Stat. §627.70154.

Florida’s insurance landscape continues to evolve drastically. The interpretation and enforcement of recent legislative actions will be challenged as upcoming deadlines will require answers regarding the application and retroactivity of the revisions to Florida’s Insurance Code. The rulings on these issues will significantly impact Florida’s insurance dispute resolution process for the foreseeable future.