Florida Legislature Passes Major Changes on Homeowners’ Insurance
May 17, 2021
By John Bond Atkinson, Tiffany A. Bustamante, and Amanda Forti
This update is to advise that Governor DeSantis is presently or soon will be considering two bills that were passed by Florida’s legislature on the last day of the 2021 Legislative Session: Senate Bill 76 (“SB 76”) and Senate Bill 54 (“SB 54”). We wish to provide an advance notice of the impacts SB 54 and SB 76 will have should the Governor sign them into law. SB 76 relates to homeowners’ insurance and particularly roof damage claims. SB 54 relates to motor vehicle insurance and particularly the elimination of PIP in favor of mandatory bodily injury coverage, changes to MedPay, and a new framework for motor vehicle third-party bad faith claims. If passed, the changes enacted in these bills will become effective July 1, 2021.
The purpose of this bill is to assuage some of the difficulties in the homeowners’ insurance market, attempt to reduce or eliminate some cost-drivers, and reduce the recently-increased incidence of roofing claims and litigation. The bill will enact the following changes in an attempt to achieve these aims:
- SB 76 will create Florida Statute 627.70152, which institutes a new pre-suit notice and demand requirement scheme,in which:
- Insureds must provide pre-suit notice to the department at least 10 business daysbefore filing suit against a property insurance carrier, but not before the insurer makes a coverage determination. The department then provides notice to the insurer via designated email;
- The pre-suit notice must include certain information, including: (1) the alleged acts or omissions by the insurer fiving rise to the suit; (2) if notice follows a denial of coverage, an estimate of the damages, if known; (3) if notice does not follow a denial of coverage, the amount in dispute as well as a presuit settlement demand which sets out itemized damages, attorneys’ fees, and costs;
- Failure to provide the required notice subjects the claimant’s suit to dismissal without prejudice, so long as the applicable statute of limitations did not expire before suit commenced.
- Failure to provide the required notice will result in waiverof the insured’s ability to recover certain fees.
The insurer has certain right and duties under the new presuit notice and demand scheme including:
- The insurer musthave a procedure for prompt investigation, review, and evaluation of the dispute stated in the notice and must investigate each claim;
- The insurer must respond in writing within 10 business days of receipt of the notice, and the response must be by e-mail if the insured has designated an email address in the notice;
- If the notice followed a denial of coverage, the insurer’s response must (a) accept coverage, (b) continue to deny coverage, or (c) assert the right to reinspect the property.(If the latter, the insurer has 14 business days post-response to reinspect and accept or continue to deny coverage).
- If the notice did not follow a denial of coverage, the insurer’s response must (a) make a settlement offer, or else (b) require the claimant to participate in appraisal or other alternative dispute resolution.
The presuit notice and demand scheme also replaces the existing one-way attorney fee statute with a scheme in which, instead, an insured’s entitlement to recover attorneys’ fees and costs is contingent upon obtaining a judgment for indemnity that exceeds the insurer’s pre-suit offer. In all suits arising under a property insurance policy not brought by an assignee, the amount of attorneys’ fees and costs is calculated as follows:
- If the judgment is for the claimant, and the difference between the amount obtained by the claimant and the presuit settlement offer made by the carrier (exclusive of fees and costs) is less than 20% of the disputed amount, then each party pays its own fees and costs, and the claimant may not be awarded fees.
- If the judgment is for the claimant, and the difference between the amount obtained by the claimant and the presuit settlement offer made by the carrier (exclusive of fees and costs) is equal to or greater than 20% but less than 50% of the disputed amount, then the insurer pays aportion of the claimant’s attorneys’ fees and coststhat is equal to the percentage of the disputed amount obtained times the total of attorneys’ fees and costs.
- If the judgment is for the claimant, and the difference between the amount obtained by the claimant and the presuit settlement offer made by the carrier (exclusive of fees and costs) is equal to or greater than 50% of the disputed amount, then the insurer pays the claimants’ full attorneys’ fees and costs.
- If the suit is dismissed for failure to comply with the presuit notice requirement, the claimant may not recover any fees incurred before the suit was dismissed.
The presuit notice and demand statute also sets out when and how limitations periods and other time requirements are tolled in certain circumstances under the new scheme.
- SB 76 will reduce of the claims deadline for all property insurance claims and reopened claims such that theinsured must give notice of the loss within to two (2) years from the date of loss, or else the claim or reopened claim is barred; except that insured must give notice within three (3) years of the date of loss for supplemental claims.
- SB 76 will create Florida Statute 489.47 which prohibits certain practices by roofing contractors,both directly (by the contractor) or indirectly (by one working on behalf of the contractor). The following are prohibited, and contractors are subject to disciplinary proceedings and may be fined up to $10,000.00 for each violation:
- Soliciting a residential property owner with a “prohibited advertisement,” i.e., any communication that “encourages, instructs, or induces a consumer to contact a contractor or public adjuster” to make a claim for roof damage. This includes writings and documents as well as electronic communications and phone calls.
- Offering a residential property owner anything of value (e.g., cash, a rebate, a coupon, a gift card) in exchange for (a) allowing the contractor to perform a roof inspection, or (b) making an insurance claimon the roof;
- Delivering, receiving, or accepting any compensation for referral of any services for which property insurance proceeds are payable (except that a property owner’s payment to a contractor for roofing services rendered does not constitute compensation for a referral).
- Unless the roofing contractor also holds a public adjuster license, the contractor isprohibited from (a) interpreting insurance provisions, (b) advising an insured regarding coverages or duties, or (c) adjusting a property insurance claim on the insured’s behalf.
- Providing an insured with an agreement authorizing repairs without providing a good faith estimate of the itemized and detailed costs of labor and materials required to complete the repairs (although if the actual cost of repairs differs from the initial estimate because of the process of the injurer adjusting the claim, there is no violation).
- Executing a roofing contract with a residential property owner without including a notice that the contactor may not engage in the above activities; and if the contract fails to include the required notice, the property owner may void the contract within 10 days of execution.
- SB 76 will amend Florida Statute 626.854, governing prohibited activities by public adjusters, to also prohibit public adjusters(as well as apprentices and persons working on behalf of public adjusters) from offering residential property owners anything of value in exchange for allowing a contractor or public adjuster to perform a roofing inspection or making an insurance claim on the roof. Public adjusters are also prohibited from delivering, receiving, or accepting any compensation for referral of any services for which property insurance proceeds would be used for roofing repairs or replacements. Each violation is punishable by a fine of up to $10,000.00.
- SB 76 changes the eligibility, rate guide path, and actuarily sound rate indication for Citizens Property Insurance Corp.
- SB 76 expands the duties of production and cooperation that registered insurers have when under examination pursuant to Florida Statutes Chapter 624.
- SB 76 will amend Florida Statute 624.424, governing insurers’ annual statements, to include a requirement that as of January 1, 2022, all authorized insurers or insurer groups issuing personal lines or commercial lines residential property insurance in Florida must file a supplemental report on an individual and group basis for closed claims. The amended statute delineates each item of information that must be included in the supplemental report.
SB 76 appears favorable to the industry and necessary to prevent some of the more frequent and prolific abuses associated with first party claims. We anticipate a high likelihood that this bill will be signed.
Senate Bill 54, if passed, will substantially affect motor vehicle insurance carriers (as well as drivers) in Florida. Most significantly, it will eliminate Florida’s PIP system, impose new mandatory car insurance requirements, and create a new framework for motor vehicle claims handling and civil actions against motor vehicle insurers for third-party bad faith actions.
- SB 54 will repeal Florida’s no-fault personal injury protection (“PIP”) system, replacing it with a requirement that all drivers in the state mut maintain bodily injury coverage of at least $25,000.00 per person and $50,000.00 per occurrence.
- SB 54 changes Insurers’ MedPay coverage requirements such that insurers must offer MedPay coverage of $5,000.00 and $10,000.00. MedPay coverage must also provide an additional $5,000.0 MedPay death benefit. Insures must offer MedPay coverage with no deductible, and maty also offer MedPay coverage with a deductible of at most $500.00. Upon receiving notice of an accident potentially covered by MedPay, the insurer must reserve $5,000.00 of MedPay coverage benefits for payment of claims by certain heath care providers, to b e held until 30 days after the date of notice. After that 30 days, any amount held in reserve for which the insurer has not received notice of heath care provider claims may be used to pay other claims.
- SB 54 would amend Florida Statute 624.155 to allow for a civil remedy where the insurer’s failure to attempt in good faith to settle a first-party claim under a motor vehicle insurance policy when such failure is caused by failure to communicate certain information to an insured,specifically: the adjuster’s contact information, any issues that may impair the insured’s coverage, information that might resolve the coverage issue in a prompt manner, any basis for the insurer’s rejection of a settlement demand or offer, or any needed extensions to respond to a time-limited settlement offer.
- SB 54 would create Florida Statute 624.156, which institutes a new framework to govern actions against motor vehicle insurers for bad baith failure to settle third-party claimsand institutes a new framework to govern motor vehicle claims handling.
The statute sets out in detail the “best practices standards” with which the insurer must comply under its duty of good faith as soon as it receives actual notice of a motor vehicle loss, continuing until the claim is resolved. The phrasing of “best practices” appears to be something of a euphemism, as the statute defines the insurer’s duty of good faith to mean that the insurer must handle claims in compliance with the “best practices standards” set out in the statute. In other words, the statue does not set out best practices so much as it sets out what insureds must do if they want to be protected from bad faith claims.
The statute also addresses the insured’s duty to cooperate with their insurer in the defense of the claim and in making settlements, requiring insureds to “take any reasonable action requested by the injured claimant or provided in the policy which is necessary to assist the insurer in settling a covered claim.” The insurer must notify the insured of its duty to cooperate under the statute with 14 days of actual notice of the loss, and may terminate the defense of any insured who unreasonably fails to meet its duties of cooperation under the statute, if certain conditions and notice requirements are complied with.
The statute provides that a third-party claimant obtaining a final judgment against the insured in excess of the policy limits is a condition precedent to brining a bad faith action under the statute, and sets out the applicable burden of proof and damages available in such an action.
The statute also sets out certain “safe harbor” provisions allowing for the insurer’s reasonable investigation and evaluation of a claim after notice, with the time required varying depending on the circumstances. (For example, where multiple claims arise out of a single occurrence and the value of all claims exceeds the policy limits, and the insurer globally tenders policy limits in exchange for a general release of the insured within 45 days of receiving actual notice of the loss, failure to tender earlier does not constitute bad faith. As another example, an insurer is not liable for failure to accept a settlement offer with 45 days of receiving actual notice of a loss if the settlement offer provides less than 30 days for acceptance and contains conditions for acceptance other than disclosure of the policy limits.) These safe harbor provisions are only available to an insurer that complies with the “best practices standards” set out in the statutes. The safe harbor provisions also specify that they do not mean that the insured must automatically tender policy limits within 45 days in every case.
SB 54 also includes a statement that the statute governing such bad faith actions is not intended to expand or diminish any cause of action presently available against insurance agents who sell motor vehicle liability insurance policies in Florida.
Obviously, SB 54 makes major changes to automobile insurance policies in discontinuing PIP coverage, making bodily injury coverage mandatory, and requiring MedPay to be made available to insureds. Additionally, it makes significant changes to Florida’s third-party substantive bad faith law. Lastly, there be other ramifications (e.g., UM coverage and regulatory approval issues related to policies) such that it is questionable whether the bill in its current form will be signed. It may be impractical to expect implantation by July 1.
Atkinson, P.A. is committed to providing you with sound guidance and representation in your company’s first- and third-party coverage and bad faith matters and will continue to monitor noteworthy changes to Florida legislation. Should you have any questions with respect to the contents of this letter, we welcome your call.
John Bond Atkinson Tiffany A. Bustamante John B. Atkinson
561.212.4089 305.431.7497 561.289.2331