On April 30, 2021, the Florida legislature passed SB 76, which includes important provisions that will impact Florida property insurance claims handling and litigation. Governor Ron DeSantis signed the bill into law on June 11, 2021, making it effective on July 1, 2021. The legislature acted in response to the unsustainable losses recently experienced by the insurance market in the state. The law will directly affect public adjusters, contractors and other companies that encourage consumers to bring insurance claims by limiting or prohibiting such advertisement. The bill also decreases the time limit to file insurance claims, introduces a pre-suit notice requirement, provides limitations on attorney’s fees, and permits the consolidation of related lawsuits.
Reining in Contractor-Driven Residential Roof Claims
As many Florida property insurance professionals are aware, roofing contractors have been a driving force behind many claims that would otherwise never have been filed. A typical scenario involves a contractor soliciting a property owner to make an insurance claim based on the contractor’s opinion that the property has sustained covered damage. Contractors have also been known to provide gift cards and other valuable items in exchange for an insured making an insurance claim. As recent claims experience has shown, many of these claims involve only long-standing deterioration and wear and tear, which are causes of loss not typically covered by property insurance.
SB 76 creates Florida Statute § 489.147 to curb certain questionable marketing practices by contractors. This provision would prohibit a contractor from encouraging a consumer with written marketing material to contact a contractor or public adjuster for the purpose of making an insurance claim for residential roof damage. Contractors would no longer be permitted to make such solicitations by way of door hangers, business cards, magnets, flyers, pamphlets, and emails. Contractors will also be prohibited from:
The statute carries fines of up to $10,000 per violation of its provisions. It also imposes restrictions (and fines upon violation) on public adjusters against providing anything of value in exchange for permitting an inspection of a roof, for making an insurance claim for damage to a roof, and against receiving referral fees or rewards for the referral of any roof repair services payable by insurance proceeds.
It is important to recognize that this section of the legislation does not regulate insurers. Rather, it regulates contractors and public adjusters. For the claims handling professional, however, this statute may make the arrangement between an insured and her contractor or public adjuster an important area to explore during adjustment. Late reported roof claims exhibiting long-term damage, in particular, should be examined to determine if any violations have occurred. If they have, the contractor or public adjuster may then be reported to the appropriate authorities. Claims may not be denied solely on the basis of any violations, but they will likely undermine the merits of such claims.
Amending Deadlines for Submitting All Property Insurance Claims
Florida Statute § 627.70132 currently applies a maximum three-year period within which an insured must report a hurricane claim to his property insurance carrier. The new statute expands the reach of this statute to encompass all property insurance claims. Specifically, under SB 76, an insured must provide notice of a claim or a “reopened claim” within two years of the date of loss. A “supplemental claim” is barred unless notice of the supplemental claim is provided within three years of the date of loss. A “reopened claim” is a claim that was previously closed but reopened for additional costs for loss or damage previously disclosed. A “supplemental claim” is a claim for additional loss or damage from the same peril previously adjusted or for costs incurred while completing repairs. In addition, the bill specifically expands the statute to apply to surplus lines property insurance policies.
Claims handling professionals must take steps to implement procedures to assure that untimely claims are denied on that basis before expenses are incurred that could otherwise be avoided. In addition, an insurer that fails to deny an untimely claim before adjusting it may be deemed to have waived the time limitations of this section.
Mandatory Pre-Suit Notice for All Property Insurance Claims
SB 76 creates Florida Statute § 627.70152 applying to lawsuits arising under property insurance policies, except for lawsuits from an assignee of benefits. This new statute applies to both admitted and surplus lines insurers. An insured must now provide a notice of intent to litigate at least ten business days prior to filing a lawsuit. The notice must be on a form to be provided by the Department of Financial Services, and the notice must be furnished to the insurer through the email address on file with the department.
The mandatory pre-suit notice must state with specificity all of the following information:
The insurer must have a procedure for analysis and investigation of the notice. An insurer must respond in writing within ten business days of the notice by accepting coverage, continuing to deny coverage, or asserting the right to re-inspect the premises. Any re-inspection must be completed within 14 business days after the insurer demands to re-inspect the premises. Following the re-inspection, the insurer can accept coverage or continue to deny coverage. The new statute is silent as to the remedy for an insurance carrier’s failure to respond to the pre-suit notice, but when taken in conjunction with Fla. Stat. § 626.9541, which mandates claims handling communications by an insurer, there is the potential for the failure to respond to the pre-suit notice to support an insured’s claim of bad faith.
Unless the claim is denied, the insurer must respond by making a settlement offer or requiring alternative dispute resolution. Alternative dispute resolution, which includes appraisal, must be completed within 90 days. If not completed within that timeframe, the claimant may immediately file suit without providing additional notice to the insurer. If the claimant does not comply with the mandatory pre-suit notice, the new statute requires a court to dismiss the lawsuit without prejudice.
This new notice requirement extends the five-year statute of limitations period under Florida Statute § 95.11 by the time it takes to participate in the procedures mandated by this proposed legislation.
Attorneys’ Fees and Costs in Property Insurance Lawsuits
SB 76 amends Florida Statutes § 626.9373 (applying to surplus lines insurers) and § 627.428 (applying to admitted insurers) – the statutes that mandate awards of attorneys’ fees in property insurance cases. The proposed legislation would mandate that the amount of fees and costs can only be awarded only as provided in Florida Statutes § 57.105 (the frivolous litigation statute) or § 627.70152 (the new pre-suit notice statute referenced above.)
SB 76 makes attorneys’ fee awards dependent on the specific results obtained in relation to the pre-suit demand and offer discussed above. Specifically:
Property insurance carriers should develop a course of action for evaluation and response to the pre-suit notices to allow for resolution of claims on the merits in an expeditious manner. Combined with the pre-suit notice and offer provisions above, these changes should facilitate resolution of disputed claims when attorneys’ fees are a driving force behind the claim. Care should be taken to evaluate the merits of every disputed claim in relation to these provisions in order to choose the most efficient course for resolution in light of the amounts in dispute.
Consolidation of Multiple Lawsuits
SB 76 creates Florida Statute § 627.70153, which requires every party to a lawsuit to provide notice to the court of all other lawsuits involving the same property insurance policy and for the same property. Thereafter, the court, on its own initiative or on the motion of a party, may consolidate all the lawsuits. This measure is designed to reduce the expense when defending multiple lawsuits concerning the same loss, such as a homeowner claim and a related AOB claim.
The Bottom Line
SB 76 reflects the Florida legislature’s recent efforts to implement property insurance reform and has the potential to moderate the litigation landscape for property insurance claims. This legislative package warrants immediate attention from all property insurance carriers in Florida and the development of new claims protocol to ensure timely responses to the expected influx of pre-suit notices and monitor compliance with the new statutory requirements. The full impact of the new legislation remains to be seen, but insurance carriers should prepare now to update claims handling protocols in accordance with the new law.
At Chartwell Law our attorneys are available and ready to assist you with Senate Bill 76. Please contact Chris Cooper at ccooper@chartwelllaw.com, Allison Drompp at adrompp@chartwelllaw.com or Ben Light at blight@chartwelllaw.com with questions or concerns.
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