Turning Down the Heat

In the past several years, Florida homeowners have accounted for somewhere between 65% to 80% of all property lawsuits filed nationwide. In just this calendar year, insurers in the Florida market have either stopped writing business or have gone under. For instance, since February 2022, at least three insurers—Lighthouse Property Insurance, Avatar Property & Casualty, and St. John’s Insurance Co.—have been declared insolvent. 

In an attempt to stabilize the marketplace, in a special session called by Gov. Ron DeSantis, the Florida Legislature passed a slew of new reforms. One of these new laws, SB 2-D, is now in effect after it was signed by Gov. DeSantis on May 26, 2022.

This article focuses on the law’s three most impactful changes to the litigation landscape, specifically on the mechanics of how the legislature tried to make those changes. Those three key areas are: attorneys’ fee recovery in assignment of benefits lawsuits; plaintiff’s fee multiplier recovery; and elements underpinning statutory bad-faith recovery.

No Fees for AOBs

The legislature amended two statutes, intended to ensure this new law applies equally to admitted and surplus carriers. Two years ago, the legislature enacted what became Florida Statutes §627.7152, which made an attempt at reducing attorneys’ fee recovery in assignments of benefits (AOB) cases by creating a sliding scale approach to fee recovery.

This sliding scale requires a plaintiff to make a pre-suit settlement demand as part of a notice of intent to initiate litigation. In response, the insurer can accept that offer, make a counteroffer, or do nothing. At trial, a plaintiff’s fee recovery is based upon the difference between the amount of plaintiff’s judgment and the pre-suit settlement offer. If that difference is less than 25% of the disputed amount (the difference between the pre-suit demand and the insurer’s offer), the insurer recovers fees. If that difference is between at least 25% and less than 50%, each party bears their own fees and costs. If that difference is at least 50%, then the plaintiff is entitled to an award of reasonable attorney fees.

SB 2-D eliminated this sliding scale and amends §627.7152(10) to say that fee recovery in AOB cases is only allowed under Florida Statutes §57.105, or Florida’s sanctions statute.

SB 2-D also amended Florida Statutes §627.428 (the fee recovery statute against admitted carriers) by adding subsection (4), which provides that the right to fees under this statute “may not be transferred to, assigned to, or acquired in any other manner by anyone other than a named or omnibus insured or a named beneficiary.”

Going further, the law amends the statutory right to fee recovery against surplus/non-admitted carriers: Florida Statutes §626.9373. SB 2-D does the same thing to §626.9373 that it did to §627.428. It adds subsection (3), which provides that the right to fees under this statute “may not be transferred to, assigned to, or acquired in any other manner by anyone other than a named or omnibus insured or a named beneficiary.”

Presumption Against Fee Multipliers

The Florida Legislature also attempted to limit the cases in which plaintiffs’ attorneys recover two or three times more than their Lodestar fee (the attorney’s hours worked multiplied by the attorney’s hourly rate). To do this, the legislature amended the statute created last year to lower exorbitant plaintiff fee recovery, §627.70152.

Section 627.70152(8) authorizes fee recovery under either §626.9373 (against surplus carriers) or §627.428 (against admitted carriers), both mentioned above, by creating that same sliding scale method that used to be in place solely for AOB lawsuits. SB 2-D created subsection 8(c) which says that, when awarding fees, there is a strong presumption that a lodestar fee is sufficient and reasonable: “Such presumption may be rebutted only in a rare and exceptional circumstance with evidence that competent counsel could not be retained in a reasonable manner.”

Requiring plaintiff’s attorneys to prove their case is “rare and exceptional” should make it more difficult for them to prove entitlement to a fee multiplier, especially in Florida where there is absolutely no shortage of attorneys willing to represent insureds in their lawsuits against their insurers.

New Standard for Statutory Bad Faith

The new law also takes Florida back to the future by amending Florida’s statutory vehicle for bad-faith recovery, section 624.155. The amendment appears to have been in response to the Cammarata v. State Farm Florida Ins. Co., 152 So. 3d 606 (Fla. 3d DCA 2015) case and its progeny.

Cammarata held that an appraisal award above and beyond what was initially adjusted is a “favorable resolution,” akin to a jury verdict in favor of a plaintiff. So armed with a favorable appraisal award and an expired Civil Remedy Notice, plaintiffs/insureds in Florida could initiate a bad-faith action against their insurer. This has caused insurers to not invoke appraisal as often, as the process now carries an added risk of allowing an insured to fast track a bad-faith case.

So with SB 2-D, the legislature created a brand new statute, §624.1551, which arguably returns Florida to pre-Cammarata days. This section on civil remedy actions against property insurers now reads: “Notwithstanding any provision of s. 624.155, a claimant must establish that the property insurer breached the insurance contract to prevail in a claim for extracontractual damages under s. 624.155(1)(b).”

While it remains to be seen how this new law will apply, it is anticipated that insurers will now use this new statute to argue that a plaintiff is not entitled to bring a bad-faith action where a plaintiff has only secured an appraisal award above the amount adjusted. Such a recovery would not flow from a breach of the contract. In fact, it would be exactly the opposite; a recovery allowed for and authorized under the policy’s appraisal clause.

Thus, this new statute may allow courts to recede from Cammarata. In turn, this would likely cause insurers to invoke appraisal more often, which, generally speaking, allows for faster and less expensive insurance claim dispute resolutions.