Florida Governor’s Tort Reform Valentine’s Day Gift
On February 14, Floridians received a Valentine’s Day surprise worth much more than a bouquet of rare orchids or a box of Belgian chocolates. Florida Gov. Ron DeSantis (R) and state legislative leadership announced a bill with sweeping reforms to address an out-of-control legal abuse epidemic. House Bill 837, if signed into law, will put an end to practices that have made Florida the poster child for frivolous lawsuits run amok.
Excessive litigation in Florida is a major contributor to the state’s extremely costly homeowners’ insurance, and for Florida being at the bottom of the class when measured by number of mega court awards. Not surprisingly, the Florida Justice Association (FJA), representing plaintiff attorneys, struck back. The FJA proclaimed its opposition to the bill on the day of the governor’s announcement. The FJA’s call to arms February 14 press release sounded the tocsin, characterizing HB 837 as favoring “corporate elites” and insurance companies taking away Florida’s precious freedoms—“if the corporate elites are empowered to grab away our right to trial by jury, which right will they feel entitled to take next? Will they grab our guns? Our right to free speech?”
The FJA’s release fails to recognize the facts surrounding Florida’s litigation sinkhole. Here are two the FJA did not mention:
- An analysis of the Florida homeowners’ insurance market found that close to 20 percent of Florida’s homeowners premium is eaten up by defense costs. This is shockingly high when compared to a proportion of defense costs to premium range of 2 percent to 5 percent in other catastrophe-prone states—such as Louisiana, Texas, Mississippi and Georgia.
- The January 2023 study by the Florida Office of Insurance Regulation reports that Florida has 6.9 percent of the country’s homeowners’ insurance claims, but 76 percent of the nation’s homeowners’ insurance litigation.
What’s in the bill?
HB 837 takes direct aim at the legal abuses not addressed in reform measures passed in 2022. In 2022, SB 2A and SB 2D and SB 4D addressed assignment of benefits and one-way attorney fees. HB 837 seeks to nail the legal abuse coffin shut by tackling the remaining abusive practices:
- Beyond homeowners. The reforms passed in 2022 specifically targeted homeowners’ property insurance. HB 837 applies to liability insurance as well. Whereas property claims, such as for roof replacements, are in the $20,000 – $40,000 neighborhood, liability claims can be in the millions or tens of millions of dollars. A recent report from the Institute for Legal Reform found that Florida has the highest percentage of any state of “nuclear” (over $10 million) verdicts per capita.
- Fee multipliers. A fee multiplier allows a plaintiff attorney to charge double or triple the normal reasonable (lodestar) fee. HB 837 requires application of lodestar fees, which are fair and reasonable. Multipliers are allowed only under rare and exceptional circumstances when a plaintiff is unable to retain competent counsel to represent them.
- Bad faith. A bad faith claim alleges that an insurer did not meet its contractual obligations. HB 837 affirms insurers have a duty of good faith to policyholders as specified in the policy wording, and must act fairly and honestly toward insureds.
- Letters of protection. A letter of protection allows a health insurer to be paid for medical costs by an injured plaintiff’s attorney after the claim is settled. HB 837 requires disclosure of a letter of protection in court showing the billing and itemized amounts paid for reasonable and necessary costs. This provision of HB 837 addresses an exploitative practice where the amount billed exceeds the amount actually paid to the health provider. Profiting from the difference, a practice known as phantom damages, is an abuse that inflates awards and enriches plaintiff attorneys.
- Contributory negligence. If a plaintiff is more than 50 percent at fault for their own harm in an accident out of which a claim arises, they may not claim for damages.
Contrary to the FJA’s conspiratorial warning that corporate elites may next “grab our guns,” the fact is that HB 837 does not erode Floridians from having their day in court. Insurers’ contractual obligations are not weakened. Liability insurance policies continue to require insurers to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” Further, insurers still “have the right and duty to defend the insured against any ‘suit’ seeking those damages.” However, they “will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.”
In its current form, the tort reforms of HB 837 are refreshingly sweeping. They represent a bold and excellent broadside to, once and for all, slay Florida’s lawsuit abuse dragon. If signed into law as is, the bill will, as the governor’s announcement indicates, put a lid on unmerited litigation in Florida, and that will be a good thing for all Floridians.