DeSantis and Legislature Stopping Greedy Trial Lawyers Causing High Property Insurance Rates
Differences of opinion have sprung up following the actions taken by the Florida legislature and Gov. DeSantis addressing Florida’s property insurance crisis. Because Florida is a favorite target of hurricanes, the state’s homeowners pay the highest insurance premiums in America. And the premiums here have been climbing much faster than premium boosts across the rest of the U.S.
But even as premiums have risen, insurance companies are losing money because of the overwhelming swarms of claims stemming from hurricane damages and greedy attorneys. Over a dozen insurance companies no longer write homeowners policies in this state, and a half dozen companies have gone out of business. They cannot operate at a profit. It has reached the point where the only way to retain the insurance industry presence in Florida was to pass legislation that will bolster insurers so they won’t leave the state.
Florida was not allowing insurance companies to charge what they needed to earn a profit. The companies can’t get reinsurance to control their risks because re-insurers cannot make a profit either. All this has hindered new building efforts across the state at a time when affordable housing is needed.
The legislation recently passed in Tallahassee is a constructive package that will stop the collapse of Florida’s homeowner’s insurance market, although it won’t happen immediately. The blame for the past tsunami of lawsuits filed against insurance companies is traced back directly to plaintiff trial lawyers that have not only driven insurance companies away but could severely damage our state budget.
Think I am exaggerating? Try this on for size: Florida is plagued with 80% of all insurance lawsuits across the nation, and yet only nine percent of all insurance claims are filed in Florida. In 2021, Florida insurers were slammed with more than 100,000 lawsuits with claims of $7.9 billion. All of the remaining 49 states combined were hit with 24,700 claims, totaling $2.4 billion. According to the James Madison Institute, “92% of the $15 billion in insurance payouts since 2013 (in Florida) went to lawyers and legal expenses, not policyholders”.
This happened because policyholders in the state are allowed under Florida’s “assignment of benefits” (AOB) law to shift or assign their benefits to law firms or contractors to deal directly with insurance companies. This resulted in attorneys frequently inflating their charges for damages so significantly that insurers rejected the claims. Lawyers would then sue the insurance companies. Even worse, under the AOB law, the companies were forced to pay attorney’s fees if they lost the case. But if the insurers won, the law did not require policyholders to pay insurers’ costs.
This caused a tidal wave of lawsuits. The legal imbalance pushed insurance companies to settle cases, leaving insurers with the need to raise insurance premiums to cover legal fees, court fees, and risks. But even increased premiums did not prevent insurance companies from suffering underwriting losses of $2 billion in 2020 and 2021. Since early 2020, more than a dozen insurance companies have abandoned Florida, and several others have failed.
The good news is that the Legislature’s reforms have eliminated AOB, including the law that insurance companies must pay for plaintiff attorney’s fees when they lose. The reforms also created a $1 billion Florida reinsurance fund to reinforce insurers and reduce their risk.
These needed changes, called for by Gov. DeSantis in October, now pave the way to attract additional insurance companies to the Florida market by creating a competitive, balanced and stable legal climate. It also reduces the heavy financial pressure on Florida-backed Citizens Property Insurance Corporation, which provides below-market premiums to beleaguered homeowners needing insurance at lower costs to them. This means that Florida reduces its risk exposure by reluctantly being in the insurance business.
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