How the changing insurance industry in Florida is impacting homeowners

By: Aaron Silvers

The insurance market in the U.S. is a trillion-dollar industry. Yes, that number is a “T” and not a “B.” In 2021, GEICO spent roughly $1.5 billion in advertising and several other carriers spent roughly $500 million in advertising. Insurance advertising is everywhere — commercials, TV, billboards, sporting events. You name it. It’s there.

If you own a car or a home, you likely have insurance. The saying, “You hate it, until you need it” rings true for many consumers when it comes to insurance. The basic understanding of insurance is you pay a yearly premium in exchange for compensation for damages in the event an incident occurs. Or, at least, that used to be the basic understanding.

Many of our clients no longer have any expectation to receive compensation if they have a homeowners insurance claim. In fact, many clients I’ve spoken with are hesitant to even file a claim due to fear: fear of being blackballed in the industry, dropped from coverage, or being hit with an increase in rates. There is no dispute. The insurance companies have all the leverage. They run the industry, have all the money in the world, can portray a fairytale on TV, and then turn it into a real-life nightmare. 

For years, under Florida Statute 627.428, homeowners had the right to recover their attorney’s fees if they prevailed against their insurance carrier in a court of law. Why? The rationale is simple — to discourage insurance companies from refusing to pay valid claims and level the playing field. But it hasn’t worked. I’ve handled hundreds of insurance lawsuits over the years, many which were denied claims that eventually settled for full value after a year and a half of litigation.

It’s a tactic I’ve seen over and over. I call it the 3-D tactic:  delay, deny and defend for as long as possible with the hope that the low- to middle- income homeowner eventually “gives up.” This tactic is easy to deploy — insurance companies have the money and the resources to fight for as long as necessary. Many homeowners do not have the same luxuries. 

Even with the threat of having to pay attorney’s fees, carriers still managed to deny and underpay claims. Make no mistake about it — litigation is rampant in Florida and insurance rates are through the roof (pun intended). The carriers say the reason for increased insurance rates is due to the number of lawsuits, many of which the carriers deem “fraudulent.”

I say, prove it. Show us the statistics. Show us what percentage of lawsuits were fraudulent. And show us the criteria used to label a lawsuit “fraudulent.” Then, show us what percentage of lawsuits were filed on outright denied claims. Next, show us what percentage of lawsuits were filed on claims that were valued by the carrier at less than the deductible. Show us how much has been paid in attorney’s fees — and do not give us a single number. Split the number to show us how much was paid to carriers’ attorneys and how much was paid homeowners’ attorneys over that same timeframe. Then, show us how much the defense attorney billed per case compared to the homeowner’s attorney in the same case. Show us how much carriers have paid experts to support a defense in cases that ultimately failed. Show us how much has been paid to insurance executives on average in the last ten years.

How the changing insurance industry in Florida is impacting homeowners

Rumor has it, in 2015, former CEO of Heritage Insurance Holdings, Bruce Lucas, raked in more than $25 million in compensation. This leads me to the final request – tell us the real reasons why several insurance companies went under in the last couple of years. Was it due to litigation costs? Poor business management? Excessive bonuses? Just tell us the truth.

Over the last several years, carriers have complained about all the insurance litigation in Florida. In response to the carriers’ complaints over the number of assignment of benefit (AOB) lawsuits, the legislature created a law in 2019, which imposed greater restrictions on AOBs and limited the right to attorney’s fees. Carriers continued to complain about the number of lawsuits and amount of attorney’s fees they pay out each year. The legislature responded in 2021 by imposing new procedural restrictions on homeowners’ lawsuits and substantive restrictions on the right to attorney’s fees. Notwithstanding the changes lobbied for, the carriers complained some more. And now, they have won.

Florida homeowners are no longer entitled to have their attorney’s fees paid for by the insurance company when they win in court. You heard it — homeowners must pay attorneys out of pocket or on a contingency basis if they want to sue their insurance company to obtain benefits they’re contractually owed. One argument I often hear, “well, that is how it is in personal injury,” is without merit. Personal injury cases are between the injured and the at-fault party – they are not homeowner against their own indemnity carrier.

The key word is “indemnity.” There is a contractual relationship that when a loss occurs, the policyholder is supposed to be indemnified – i.e. made whole. Also, property insurance claims involved money to fix damaged property. Whereas, in personal injury claims, much of the payout is for “pain and suffering.” If you require a policyholder to sue their indemnity carrier because the carrier failed to make the policyholder whole – the policyholder will never be “made whole” if they have to pay an attorney to enforce their rights under the contract. Practically, if a jury determines a homeowner is entitled to a new roof – there won’t be enough for a new roof after paying an attorney to enforce those rights.

With the new legislation, the carriers are going to get exactly what they asked for — less litigation for claims they deny and underpay. In addition, we should expect to see an uptick in denied and underpaid claims. Why? Because there is no incentive to pay full value for a claim if the threat of attorney’s fees no longer exists. Also, the effects go beyond an increase in denied and underpaid claims. Less paid claims mean more houses in disrepair. More houses in disrepair means either high-interest loans to fix the houses or more bankruptcies and foreclosure to get out from a devalued property.

Let’s not forget the job market. If there is less litigation, there will be less jobs – less defense attorneys, less plaintiff attorneys, less support staff, less court reporters, less experts, less independent adjusters, less public adjusters, and less litigation adjusters.

The best-case scenario is we monitor the effects of this legislation with the hope that the lawmakers see the negative consequences and long-term implications the new laws are likely to have.