Florida's property insurance marketplace has been "redefined" – Demotech

The ratings agency Demotech has issued a release summarizing the major legislative reforms affecting Florida’s property insurance market, saying that the new rules have “redefined” the state’s market for the better.

According to Demotech – which has been reviewing and rating Florida’s residential property insurance market since 1996 – it personally witnessed the financial impact of the “disparate, disproportionate levels” of insurance litigation that plagued the state. But new legislation introduced and passed last year, along with additional considerations during the upcoming 2023 legislative session, will address some of these issues, the agency said.

In a release, Demotech president and co-founder Joseph Petrelli summarized the major provisions for Florida that the legislature has changed since Hurricane Irma in 2017:

• A two-year time limit on filing property insurance claims has been established.
• In 2021, the legislature mandated that any claim made under a property insurance policy issued or renewed after July 1, 2021, could not be litigated until the plaintiff attorney had filed a Notice of Intent to File Litigation listing the amount in dispute. The filing of the Notice could be followed by mandatory mediation if requested by either party to the dispute. The new law prohibited the payment of plaintiff’s attorney fees unless the plaintiff recovered more than 50% of the difference between the plaintiff’s demand and the insurance company’s offer of settlement.
• In May 2022, the legislature prohibited the holder of an Assignment of Benefit (AOB) from recovering attorney fees.
• In May 2022, the legislature changed the Florida Building Code to eliminate the requirements that a full roof replacement was required whenever insured damage exceeded 25% of a roof’s surface. This change should increase the number of roofs that are repaired rather than replaced after Hurricanes Ian and Nicole.
• Also, in May 2022, the change to bad faith claims and to the multiplier should remove two of the negotiating tactics used by plaintiff attorneys to present inflated settlement demands and serve to mitigate adverse results after a trial.
• In December 2022, the legislature eliminated statutory one-way attorney’s fee shifting in residential as well as commercial property lawsuits.
• In December 2022, the deadline for reporting claims or reopening a claim was further reduced from two years to one year and the time to report a supplemental claim was reduced from three years after date of loss to 18 months after date of loss.
• Section 627.70152 addressing attorney fees has been deleted although pre-suit notice of loss and resolution has been left in place.
• Assignments of benefits to those providing services are prohibited on all property insurance policies issued or renewed after December 31, 2022.
• Breach of contract is required for a bad faith claim against an insurer.
• A policyholder may secure mandatory binding arbitration and receive an actuarially sound discount for selecting such an endorsement.

In addition to the reforms, Demotech also took note of two very recent instances where Florida’s legislation took center stage.

On February 8, 2023, an intermediate appellate court reversed a trial court order related to compelling discovery of work product materials from an insurer’s claim file. The reversal meant that “an insurer’s claim file constitutes work product and is protected from discovery prior to a determination of coverage.”

Meanwhile, Governor Ron DeSantis, Senate President Kathleen Passidomo, and House Speaker Paul Renner on February 14, 2023, announced that they plan to eliminate one-way attorney fees and fee multipliers for all lines of insurance during the upcoming session this March.

All things considered, Demotech believes that catastrophe reinsurance coverage associated with policies covered by the June 1 and July 1, 2023, renewals will reflect and benefit from these cumulative reforms. It was projected that by September – at the height of hurricane season – about two-thirds of the residential property insurance policies in Florida will have been issued after January 1, 2023, and thus be subject to all recent reforms.

“The legislative reforms of the dual special sessions of 2022 are in place, as is the cumulative impact of previous legislative reforms,” commented Joseph Petrelli. “The Family Security decision stabilizes claims procedures, practices, and protocols.”

“Florida’s residential property insurance marketplace has been redefined,” Demotech’s president concluded in his statement.

Demotech’s release comes after the Insurance Information Institute (Triple-I) recently published an issues brief on Florida’s new insurance laws. Triple-I commented that Florida is “quite serious about fixing the fraud and legal system abuse,” if the new rules are any indication.

Is Demotech’s assessment of Florida’s property insurance market reforms correct? Let us know in the comments below.