Lawsuits against major Florida property insurers generally declined between 2022 and 2023, and insurers say they would have declined even more had Hurricane Ian not hit the state in September 2022.
Insurers say it’s a clear sign that legislative reforms enacted in 2022 are starting to work even if premiums have yet to follow suit.
The South Florida Sun Sentinel analyzed data from a state website that records lawsuits filed with insurance companies, including those that sell property, casualty, auto and health coverage.
The analysis omitted data from Florida property insurers that are also licensed to sell auto insurance because there is no simple way to identify lawsuits in the database related to automobiles or property.
The total lawsuits filed against the 25 largest insurers included in the Sun Sentinel analysis shows a decline from 44,550 in 2022 to 38,678 in 2023 — a difference of 13.2%.
This decline came after a 7.3% decline between 2021 and 2022. Between 2021 and 2023, the number of lawsuits decreased by 19.5%.
Lawsuits against the state’s three largest insurers have declined significantly.
Citizens Property Insurance Corp. testified. State-owned, despite growing to more than 1 million insurance policies in late 2022, saw a decline in lawsuits from 12,234 in 2022 to 9,716 in 2023. That’s a 20.6% decline.
Lawsuits filed against State Farm Florida decreased 18.2% – from 4,787 in 2022 to 3,918 in 2023.
The data shows that lawsuits filed against Universal Property & Casualty fell by 46.8% – from 10,314 to 5,483 – during the same period.
While 13 of the 25 companies in the analysis saw declines, another 12 saw increases.
But many of these companies were new to Florida, such as Kin Interinsurance Network, Track Insurance Exchange, Homesite Insurance Company, and Slide Insurance Company, which would have seen increased litigation as policy numbers increased whether or not the reforms were enacted.
The declines show the success of the reforms
Sen. Jim Boyd, who sponsored key reforms in 2022, said the decline in lawsuits shows the legislation is working.
“Although some companies have recognized a reduction in those allowances, not everyone has realized it yet, but it should follow,” Boyd said via email.
He pointed to other positive signs, including six new companies entering the Florida market with more expected, and national airlines showing “interest in Florida again.”
A report on real estate claims and litigation, released in early January by the Florida Office of Insurance Regulation, said the reforms created an “enhanced market.”
The report counted 58,395 judicial claims and 534,738 non-judicial claims reported by 180 insurance companies as of 2022, before most of the reforms took effect.
The tri-county area of South Florida had the largest share of lawsuits in the state – 27.5%, compared to 9.9% in Seminole, Orange, Lake and Osceola counties and 5.4% in all other counties.
The report showed that lawsuit claims cost insurers an average of $9,934 in loss adjustment expenses compared to non-judicial claims, which cost an average of $1,576.
Claims filed also result in much higher damages awards. According to the report, policyholders who filed a lawsuit received an average of $31,862 for non-weather-related water claims compared to $14,035 for those who did not file a lawsuit.
These claims result from malfunctions inside homes, such as broken household pipes, hot water tank failures, and appliance leaks.
The state report also showed that litigated hurricane claims resulted in an average payout of $67,862 compared to $14,154 for non-litigated hurricane claims. Average storm or blizzard damage payments were $37,910 when policyholders filed a lawsuit and $10,961 when they did not file a lawsuit.
The office said that future reports will enable the state to compare the results of the reforms.
When those reforms were enacted in 2022, critics called the reforms a giveaway to insurance companies and complained that the state did not require insurers to lower their rates for landlords.
Supporters of the reforms countered that a rate-cutting mandate would be counterproductive and prompt private market insurers to abandon the state.
They said the repairs would take at least 18 months to start working. Policies written under the old rules should expire and be replaced with new policies that reflect policy language that bars attorneys from requiring so-called “one-way attorney fees,” bars most benefit waivers, and makes it more difficult to force insurers to pay. To replace surfaces.
“While we cautioned that the reforms will take some time to take full effect, we are pleased and optimistic that good things are starting to happen in the real estate market,” Boyd said.
The repairs also hurt homeowners, the attorney says
Joe Ligman, a plaintiff’s attorney who worked in Miami before moving to Panama City, said the reforms meant he filed fewer lawsuits.
One reason is that policyholders must pay their attorneys out of their own pocket or give up 30% of what they recover. Before the reforms, lawyers would collect fees from insurers if they settled for any amount above the original offer made by the insurers. The so-called “one-way attorney fee” provision has been established in Florida case law for more than a century.
But insurance companies said lawyers took advantage and raised frivolous claims.
He said insurance companies have also set a cap on the amount of money they are willing to pay to replace floors and ceilings when only a portion is damaged.
He said lawsuits have also been reduced through new pre-suit notice laws that allow insurers to force disputes into alternative resolution processes such as mediation and arbitration.
Ligman said the reforms “hurt a lot of people — insureds, lawyers, government officials.”
He added: “If insurance companies paid claims honestly, policyholders would not have to hire lawyers to sue them.”
Many insurers are seeing a decline in non-weather-related water claims, which have historically fueled the lawsuits that insurers have complained about the loudest, said Paresh Patel, CEO of HCI Group, owner of Homeowners Choice and TypeTap.
Before the repairs, insurance companies said contractors would begin demolition and file lawsuits in the homeowners’ names before letting the insurance companies know about the claims.
The result, they said, will often be lawsuits that cost tens of thousands of dollars more than it would have cost to make repairs.
“People were filing claims so they could file lawsuits,” he said. The reforms “removed the profit motive.”
Excessive lawsuits — coupled with increased claims from hurricanes and other extreme weather events — have caused most insurers to report net operating losses over the past five years, while insurance premiums charged to Florida homeowners have more than doubled.
In 2023, Florida’s insurance industry as a whole reported net income for the first time since 2016, according to a July report from the Florida Office of Insurance Regulation.
Hurricane Ian claims slowing decline
Meanwhile, while the number of lawsuits fell 13.2% between 2022 and 2023 for insurers in the Sun Sentinel analysis, the decline slowed to 5.9% for the same companies in the fourth quarter.
A look at the source of these lawsuits indicates that many of them were filed by victims of Hurricane Ian in Southwest Florida.
In the fourth quarter of 2023, Lee, Charlotte and Sarasota counties filed 2,016 lawsuits compared to 2,881 lawsuits in Miami-Dade, Broward and Palm Beach counties.
The state’s new First Loss Notice website shows a 27.3% increase in proposed lawsuits logged by insurance customers in the fourth quarter of 2023 compared to the same period in 2022.
Five of the 11 largest cities where the claims arose suffered direct impacts from Hurricane Ian: Cape Coral, Fort Myers, Port Charlotte, Lehigh Acres, and Punta Gorda.
Patel said lawsuits would have declined further in 2023 if Hurricane Ian had not hit southwest Florida with near-Category 5 strength.
At the same time, premiums have stabilized for Security First Insurance Co. customers, said Luke Burt, founder and CEO.
In November, his company filed a notice with the state saying it was not seeking rate increases for single-family homeowners. In February, the company plans to offer a 2% discount to property owners who purchase residential/fire coverage.
“I said litigation is responsible for 20 percent of every premium dollar,” Burt said, before enacting the reforms. When the reforms were passed, I said litigation would decrease by 50%. So 20 cents would probably come out to 10 cents on the dollar.
Whether reductions in lawsuits will lead to lower premiums remains to be seen, he said.
“Why are the rates so high?” He said. “The first factor is inflation. It is responsible for 75% of increases. While customers think of price as the premium they spend for coverage, insurers see price as the cost per $1,000 of coverage. This cost can remain the same, but insurance Homes cost customers more when material and labor costs continue to rise.
Ron Hurtebes covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.