Florida's New Insurance Law and Potential Bad Faith Litigation

It has been five months since the Florida Legislature took a metaphorical blowtorch to the Florida first-party property insurance litigation landscape. When signing Florida Senate Bill 2A, Governor DeSantis specifically stated that “this bill reins in the incentive to litigate.” While the full impact of Florida Senate Bill 2A is still unknown as it could take years to reshape and/or reduce the volume of property insurance litigation, its elimination of one-way attorneys’ fees will likely change whether and how property insurance cases are litigated. Specifically, it may open the door for plaintiffs to pursue different types of litigation more actively against insurers, including bad faith litigation.

Florida Senate Bill 2A significantly changed the timelines for insurers to adjust and handle claims.¹ An insurer does not have to strictly comply with the new time limits if the failure to comply is due to “factors beyond the control of the insurer.”²  § 627.70131(5)(a). Additionally, the insurers’ timing requirements are tolled “upon the failure of a policyholder or a representative of the policyholder to provide material claims information requested by the insurer within 10 days after the request was received. The tolling period ends upon the insurer’s receipt of the requested information. Tolling under this paragraph applies only to requests sent by the insurer to the policyholder or a representative of the policyholder at least 15 days before the insurer is required to pay or deny the claim or a portion of the claim.” § 627.70131(8)(b).

It should be noted that Florida Statute § 627.70131 is silent on any potential consequences for violating the time restrictions set out in the statute. It also makes no reference to Florida Statute § 624.155 – the Florida Bad Faith Statute. Likewise, Florida Statute § 624.155 does not make specific reference to Florida Statute § 627.70131. As such, it is this author’s opinion that Florida Statute § 627.70131 cannot form an independent basis for a civil remedy notice; since a civil remedy notice is a condition precedent for bad faith litigation, Florida Statute § 627.70131 has no specific impact on potential bad faith litigation.

With the above referenced elimination of one-way attorneys’ fees, the plaintiffs’ bar will likely seek new avenues to pursue fees, and bad faith litigation would seem a prime candidate. In the pre-Senate Bill 2A world, breach of contract litigation was generally far more appealing and lucrative for the plaintiffs’ bar than bad faith claims were – because of the statutory entitlement to fees. Even though bad faith claims have the potential for much larger damage awards due to punitive damages, the time and costs associated with litigating a bad faith claim was often not worth the effort when compared to breach of contract claims; plaintiffs’ attorneys preferred fee guarantees. With the elimination of statutory attorneys’ fees, plaintiffs’ attorneys may very well decide that it is now worth the time and effort to pursue the punitive damages associated with bad faith litigation.

The question therefore becomes how the plaintiffs’ bar can try to use Florida Statute § 627.70131 to expand or create new bad faith claims. As noted earlier, Florida Statute § 627.70131 makes no reference to Florida Statute § 624.155, and Florida Statute § 624.155 makes no reference to Florida Statute § 627.70131. A bad faith claim brought under Florida Statute § 624.155 still requires the insurer to violate one of the specifically enumerated statutes listed in Florida Statute § 624.155, e.g., Florida Statute § 626.9541. Plaintiffs’ counsel may, therefore, attempt to utilize Florida Statute § 626.9541(1)(i). Florida Statute § 626.9541(1)(i)(3) references the following potential violations on which a bad faith claim may be based: (a) failing to adopt and implement standards for the proper investigation of claims, (b) misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue, (c) failing to acknowledge and act promptly upon communications with respect to claims, (d) denying claims without conducting reasonable investigations based upon available information, (f) failing to promptly provide a reasonable explanation in writing to the insured of the basis in the insurance policy, in relation to the facts or applicable law, for denial of a claim, and/or (g) failing to promptly notify the insured of any additional information necessary for the processing of a claim.

The provisions of Florida Statute § 626.9541 are noteworthy because: (1) they all provide a basis for a bad faith claim under Florida Statute § 624.155, and (2) they arguably relate to the claims handling requirements set forth in Florida Statute § 627.70131. For example, if an insurer fails to comply with Florida Statute § 627.70131(1)(a) (7 days to acknowledge a claim), then the insured could argue that the insurer also violated Florida Statute § 626.9541(1)(i)(3)(c) (failing to acknowledge and act promptly upon communications with respect to claims). Similarly, if an insurer does not comply with the time periods set forth Florida Statute § 627.70131(3)(a-b) (7 days to investigate, 30 days to inspect), then the insured could argue that the insurer also did not comply with Florida Statute § 626.9541(1)(i)(3)(a, d) (failing to adopt and implement standards for the proper investigation and denying claims without conducting reasonable investigations). If an insurer fails to comply with Florida Statute § 627.70131(3)(e) (provide the insured with any estimate prepared by the adjuster within 7 days after the estimate is generated), then the insured could argue that the insurer also did not comply with Florida Statute § 626.9541(1)(i)(3)(b) (misrepresenting pertinent facts…relating to coverages). If an insurer fails to comply with Florida Statute § 627.70131(7)(a) (render a coverage decision within 60 days after the claim is reported), then an insured could argue the insurer fails to comply with Florida Statute § 626.9541(1)(i)(3)(f) (failing to promptly provide a reasonable explanation in writing…for denial of a claim). Finally, if an insurer fails to comply with Florida Statute § 627.70131(8)(b) (requiring the insured to make requests for information 15 days before coverage decision is due), then an insured could argue that the insurer also failed to comply with Florida Statute § 626.9541(1)(i)(3)(g) (failing to promptly notify the insured of any additional information necessary for the processing of a claim).

Obviously, this entire analysis is still theoretical. Insufficient time has passed to see exactly when or how plaintiffs’ attorneys may change their litigation practices based on the new provisions. It is very likely, however, that the vacancy created by the lack of incentive for filing breach of contract suits against insurers will lead to new types of litigation. Increased bad faith litigation is certainly one potential avenue for plaintiffs’ counsel to pursue.

As such, private insurance companies may need to update their claims handling procedures to comply with the new law and to avoid the possibility of dealing with a smaller number of cases with potentially much larger damage awards. Additionally, those representing insurance companies should be prepared to defend bad faith claims by arguing that that Florida Statute § 627.70131 provides no basis for filing a civil remedy notice and therefore, no basis for pursuing a bad faith claim.