Jeffrey Wade
Florida has recently introduced several notable changes to its property insurance laws, which aim to reduce insurance premiums for policyholders and address the state's litigious nature. These changes include the elimination of one-way attorney fees, reforms to the legal fees system, and the prohibition of Assignment of Benefits (AOB). The new laws also provide grants for home-fortifying improvements, increase transparency in policy terms, and require timely notifications to policyholders regarding premium hikes or cancellations. Understanding these changes is crucial for Florida homeowners to protect their coverage and advocate for their interests.
| Characteristics | Values |
|---|---|
| Changes to attorney fees | One-way attorney fees are no longer allowed. |
| Changes to My Safe Florida Home Program | The program now includes all Florida homes that meet the specified criteria, not just those in wind-borne debris regions. The insured value of eligible homes has increased to $700,000 or less, and grants for low-income homeowners have increased to $10,000. |
| Mandatory arbitration | Policyholders who select this option waive their right to file a lawsuit against the company. |
| Disclosure requirements | Surplus lines insurance companies must disclose that their rates and forms are not approved by any Florida regulatory agency, and insureds must sign a disclosure notice confirming their understanding of available coverage options. |
| Flood insurance | Homeowners insurance does not typically cover flood damage, and buyers are encouraged to discuss separate flood insurance with their agent. |
| Surplus lines insurance companies | These companies can now take out policies from Citizens for dwellings that are not primary residences or homestead properties if they meet certain financial requirements. |
| Reinsurance | Primary insurance carriers can now purchase reinsurance from the FORA Fund, increasing competition in the market and potentially lowering prices for homeowners. |
| Claim filing deadline | Policyholders must now file a claim within one year of an incident, down from two years. |
| Claim acknowledgement | Insurers must acknowledge receipt of a claim within seven calendar days and pay or deny the claim within 60 days, providing a reasonable explanation for any denial. |
| Tort law reforms | Assignment of Benefits (AOB) has been prohibited to prevent fraud and abuse by contractors, and one-way attorney fees have been eliminated to reduce legal expenses for insurers. |
| Bad-faith claims | Policyholders can no longer file bad-faith claims based solely on an appraisal award or acceptance of judgment. |
| Consumer protections | SB 128 and SB 7052 enhance consumer protections by requiring insurers to provide clear and concise information about policy terms, coverage options, and premium calculations. |
| Tax relief | HB 7073 provides $1.07 billion in tax relief for Floridians, including a waiver of insurance premium taxes for one year on homeowners' and flood insurance policies. |
| Home-fortifying improvements | SB 7028 and HB 1029 provide grants for home improvements to fortify homes against storms, potentially lowering insurance premiums. |
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What You'll Learn
Changes to attorney's fees
Florida has long been considered a highly litigious state when it comes to insurance. In 2021 and 2022, the Florida Legislature passed sweeping insurance reform bills that significantly limited policyholders' rights. One of the most notable changes was the elimination of one-way attorney fees in property insurance litigation.
Previously, Florida Statute § 627.428 granted insured policyholders the right to reasonable attorneys' fees if they secured any amount in a lawsuit against their insurers. This provision was seen as essential for policyholders to engage in fair disputes with insurance companies. However, this statute was repealed by Senate Bill 2A, which was enacted on December 16, 2022, and went into effect on January 1, 2023.
Under the new law, insurance companies are no longer held responsible for paying attorney fees, even if they improperly denied a claim. Policyholders are now required to pay their own attorney fees, regardless of the outcome of their case. This change has increased financial risks for policyholders, who may now face more expensive legal battles when pursuing claims against insurers.
The elimination of one-way attorney fees is intended to reduce frivolous lawsuits, lower overall costs, and create a more balanced and fair insurance market. By reducing the financial incentives for litigation, the bill aims to discourage unnecessary lawsuits that drive up costs for insurers and policyholders alike. This change is particularly critical given the recent volatility in Florida's insurance market, where an overwhelming number of lawsuits have contributed to the insolvencies of several insurance companies.
While the repeal of one-way attorney fees aims to address the homeowner insurance crisis and foster competition in the insurance market, there are concerns about potential access to justice issues. The removal of this provision may impede access to justice for policyholders, especially those with limited financial resources. The costs of litigation may become prohibitive for some homeowners, potentially deterring them from seeking legitimate compensation.
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Changes to policy language
Florida has seen a series of legislative changes that have impacted the insurance landscape for homeowners. One of the key areas of reform has been the policy language used in insurance contracts.
One notable change is the requirement for clear and concise policy language. Senate Bill 2-D (SB-2D) and Senate Bill 4D (SB 4D), signed into law on 26 May 2022, mandate that insurance policies use straightforward and understandable language to explain coverage limits, exclusions, and deductibles. This clarity is designed to ensure that homeowners fully comprehend the extent of their coverage and any potential gaps, empowering them to make more informed decisions.
The new laws also address the issue of surplus lines insurance. Surplus lines insurers are now required to include a disclosure notice in their policies, stating that their "policy rates and forms are not approved by any Florida regulatory agency". This disclosure aims to enhance transparency and ensure that insured individuals understand the nature of their coverage. Additionally, surplus lines insurance companies that meet specific financial requirements can now offer policies for dwellings that are not primary residences or homestead properties.
Another significant change relates to the handling of claims. Insurers must now acknowledge receipt of submitted claims within seven days and take action within 60 days. They must either pay or deny the claim within this timeframe, providing a reasonable explanation for any denial. This change is intended to reduce potential litigation and encourage prompt claim adjustments. Policyholders also have a new responsibility to file a claim within one year of an incident, down from two years, to help insurers accurately determine the cause and extent of the claim.
Furthermore, the new legislation has impacted the legal fees system. Florida has eliminated one-way attorney fees, which previously allowed insured individuals to recover legal fees from insurers in certain situations. This change reduces costs for insurance companies and discourages frivolous lawsuits. The reforms also address the abuse of Assignment of Benefits (AOB) by contractors, which had led to inflated costs and unnecessary litigation in the past.
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Changes to insurance market
Florida's insurance market has undergone significant changes in recent years, with lawmakers passing new bills and regulations to address issues such as high premiums, litigation, and natural disasters. The state's insurance market has been volatile, with frequent storms and hurricanes contributing to a high number of claims and subsequent litigation.
One of the key changes to the insurance market in Florida is the reform of the legal fees system. The state has eliminated one-way attorney fees, where insurers were required to pay the insured's legal fees if the insured won a lawsuit. This move is expected to reduce costs for insurance companies and discourage frivolous lawsuits, ultimately lowering costs for policyholders. Senate Bill 2-D (SB-2D) and Senate Bill 4D (SB 4D), signed into law in May 2022, are examples of this reform, impacting property insurance policyholders.
The state has also addressed the issue of frivolous lawsuits driven by the abuse of Assignment of Benefits (AOB) by unscrupulous contractors. Previously, contractors could assume a homeowner's insurance benefits and then sue the insurer, often inflating costs. With the new changes, such as HB 837, the state has targeted this issue by reforming tort laws, making it clear that insured individuals cannot assign any rights under a residential or commercial property policy.
Florida has also taken steps to enhance consumer protection and increase transparency in the insurance market. Senate Bill 2-A (SB-2A), signed into law in December 2022, introduced stricter regulations on insurance practices. Insurers are now required to provide clear and concise information about policy terms, coverage options, and premium calculations. This allows homeowners to make more informed decisions and feel more confident in their coverage choices.
In addition, the state has implemented measures to help homeowners better prepare for natural disasters, such as storms and hurricanes. The My Safe Florida Home Program, established through SB 7028 and HB 1029, provides grants for home-fortifying improvements, reducing the risk of damage and subsequently lowering insurance premiums. The program offers grants for installing hurricane shutters and reinforcing roofs, with a total investment of over $600 million since 2022. Furthermore, HB 7073 provides tax relief for policyholders, including a waiver of insurance premium taxes for one year on homeowners' insurance policies and flood insurance policies, directly lowering the cost of premiums.
Overall, the changes to Florida's insurance market aim to create a more balanced, fair, and transparent environment for both insurers and policyholders, while also addressing the challenges posed by frequent natural disasters in the state.
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Changes to tax on premiums
Florida's insurance regulators have introduced a series of changes to address runaway home insurance premium costs and create a more balanced and fair insurance market.
One of the key changes is the introduction of tax relief measures. The state has implemented a comprehensive tax relief package, HB 7073, which includes a waiver of insurance premium taxes for one year on homeowners' insurance policies and flood insurance policies. This initiative provides savings for policyholders by directly lowering the cost of premiums by $500 million statewide. Additionally, the law mandates insurance companies to offer a deduction of 1.75% on the total premium for homeowners' insurance, personal or commercial flood policies, and residential properties, effective between October 1, 2024, and September 30, 2025.
The state has also addressed the issue of frivolous lawsuits, which have contributed to higher costs for insurers and policyholders. By eliminating one-way attorney fees, Florida is discouraging unnecessary litigation and reducing financial incentives for law firms to pursue claims. This move is expected to significantly reduce costs for insurance companies and create a more stable insurance market.
In addition to these measures, Florida has expanded the My Safe Florida Home Program, which provides grants for home improvements to fortify properties against hurricanes. Eligible homeowners can receive matching grants of up to $10,000 to harden their homes, reducing the likelihood of damage caused by hurricanes and potentially lowering their insurance premiums.
The state has also introduced Senate Bill 2-D, which includes provisions for increased transparency and fairness in insurer-policyholder interactions. This bill mandates clear and concise policy language to ensure homeowners fully understand their coverage and any potential gaps.
With these changes, Florida aims to protect homeowners and enhance the affordability and reliability of home insurance in the state.
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Changes to claim filing
Florida's insurance regulations have undergone significant changes, including modifications to claim filing. Here are the key details:
Timeline for Claim Filing
The deadline for policyholders to file a claim has been reduced from two years to one year after an incident for a new or reopened claim. This change aims to help insurers determine the cause and extent of a claim more accurately and promptly. Supplemental claims now have an 18-month deadline, down from three years.
Prompt Payment of Claims
Insurers are required to acknowledge claim submissions within seven calendar days of receipt. They must then pay or deny a claim within 60 days, a reduction from the previous 90-day period. This amendment to prompt pay laws aims to expedite the resolution of claims.
Alternative Dispute Resolution (ADR)
Senate Bill 2-D introduces an ADR process, such as mediation or arbitration, to provide a quicker and more efficient path to resolving conflicts between homeowners and insurers. This approach aims to reduce the burden on the court system and ensure timely settlements for homeowners.
Attorney Fees and Litigation
Florida has eliminated one-way attorney fees, where insurers were responsible for paying the insured's legal fees if the insured won in court. This change should reduce costs for insurance companies. Additionally, the circumstances under which homeowners can recover attorney's fees have been narrowed to discourage frivolous lawsuits that drive up costs.
Prohibition of Assignment of Benefits (AOB)
The practice of assigning rights to third parties, such as contractors or electricians, to file claims and receive payments for work done on a property has been prohibited. This change addresses concerns about fraud, inflated claims, and unnecessary or unperformed work.
Bad Faith Claims
Senate Bill 2-A modified Florida's bad faith statute, clarifying the process for establishing a breach of an insurance policy. Policyholders must now obtain an adverse adjudication by a court of law, demonstrating that the property insurer breached the policy. Acceptance of a judgement offer or appraisal award does not constitute an adverse adjudication.
These changes to claim filing procedures in Florida aim to streamline the process, reduce costs, and provide timely resolutions for homeowners while also addressing concerns about litigation and fraud.
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Frequently asked questions
The new laws are aimed at reducing the number of lawsuits and litigation costs, lowering insurance premiums, and enhancing consumer protection.
The new laws eliminate one-way attorney fees, meaning that if an insurer and an insured end up in court and the insured wins, the insurer does not need to pay for the insured’s legal fees. This is expected to reduce the number of frivolous lawsuits.
The new laws provide tax relief for policyholders, allocate funds for home-fortifying improvements, and encourage more insurance providers to enter the Florida market, increasing competition and promoting more competitive pricing.
The new laws require insurers to provide clear and concise information about policy terms, coverage options, and premium calculations, so that homeowners can make more informed decisions.
Generally, the new laws will not impact policies issued before December 16, 2022. However, homeowners should stay vigilant about upcoming legislative actions that could further influence their insurance landscape.
