What is it? And how does it affect Insurance?

May 2023 

On March 24, 2023, Florida Gov. Ron DeSantis signed House Bill 837 into law. The tort reform will have a significant impact on civil litigation going forward. What will this mean for Insurance? In this advisory, we will explore how this bill may affect claims.

Why the need for a tort reform bill in Florida? Besides insurer insolvencies, the insurance market in the state has struggled for some time due to surging claims litigation. Plaintiffs’ attorneys have been tying up claims for extended periods to generate higher fees from insurance carriers, industry trade groups and carriers say. Or frivolous lawsuits have been filed in hopes of winning a quick settlement instead.

House Bill 837 targets Florida’s claimant-friendly environment and the number of questionable suits filed each year that ultimately drive up insurance costs and policyholder premiums. Florida has long been deemed a “judicial hellhole,” according to DeSantis, and the bill will bring the state’s litigation practices in line with the rest of the country, he said.

Here are some of the most notable changes:

Pure Comparative Negligence changed to Modified Comparative Negligence

Comparative negligence reduces the amount of damages a plaintiff can recover according to the degree of fault each party contributed to the incident. Prior to the bill, Florida was a “pure” comparative negligence state, which means a plaintiff could recover even if a defendant had very little liability for the incident.

So how does this work in insurance? If Party A is 10% at fault for an accident, they would only recoup 90% of damages from Party B. But think of it in reverse. A party who is 90% at fault could still sue and see their award reduced by 90%. Under modified comparative negligence, a plaintiff cannot recover if deemed to be 50% or more at fault (this does not apply to personal injury or wrongful death from medical malpractice). Overall, this will lead to fewer cases before the court.

House Bill 837 also protects businesses and property owners as it relates to criminal activities considered “intentional torts.” Prior to this bill, the court would not assign fault to a third-party criminal who intentionally harmed a plaintiff. As a result, the property owner or business owner was financially responsible. Now, a court will consider the fault of all parties who may have contributed to a plaintiff’s injury. Imagine a bank robbery scenario. A bank robber pistol whips a customer and leaves. Prior to this bill, the bank would bear the financial responsibility. Now the court must also consider the robber’s liability for the plaintiff’s injury.

In addition, the bill also has requirements for presumption against negligence as it relates to property owners and general
claims.

Those requirements are:

1. A list of physical property safety requirements
2. An analysis that shows crime prevention training has been completed within three years
3. Training for all employees on crime prevention

The following physical property safety measures also must be in place:

1. Security cameras at all points of entry and exits and the footage must be maintained for at least 30 days
2. The parking lot must be well lit from dusk until dawn
3. If no window is next to a door, a peephole must be present
4. If a pool is present, there should be locked gates
5. All common areas must be well lit
6. All windows and doors must have a locking mechanism
7. The main door must have a deadbolt lock

Statute of Limitations

Under this bill, the statute of limitations reduces the time a plaintiff can bring a negligence case from four to two years. What does this
mean for insurance? Less time to file suit. If a plaintiff does not purse an action within two years from the date of injury, they cannot
seek recovery. It will require plaintiffs’ attorneys to act faster and could potentially promote early settlements of claims rather than going to
trial.

Medical Expenses

There are many cases where a plaintiff has their medical expenses paid for by an insurance provider, Medicare/ Medicaid or Workers’ Compensation. Prior to House Bill 837, a plaintiff could claim an amount for medical expenses that did not factor in Medicare/Medicaid or reductions offered by an insurance carrier. Why does this matter? Because settlements are based on damages. If $25,000 is the amount paid, a plaintiff should not be able assert that medical expenses totaled $100,000.

Overall, for past medical expenses the plaintiff now can only claim the amount actually paid, regardless of who paid it. For unpaid medical expenses (future medical expenses, etc.), the claim can only be for an amount deemed necessary and reasonable. For unpaid and future medical, if a plaintiff has insurance but chooses to not go through their insurance provider, the claims would be for the amount the provider would have paid in addition to the plaintiff’s share of medical expenses, such as copays and coinsurance. In a case where a plaintiff does not have insurance, then it is 120% of the Medicare reimbursement rate. Or if there is no rate for medical services, it will be 170% of the state Medicaid rate.

Letters of Protection

A plaintiff’s counsel must now reveal when a Letter of Protection exists in a loss. Letters of Protection are used when a plaintiff has no means to pay their medical bills yet has a lawsuit pending for an accident against an “at-fault” third party. The Letter of Protection guarantees the medical provider that the bills incurred will be paid when the claim is settled. Now these Letters of Protection must be disclosed. Among the items to be disclosed with the letter is whether or not the plaintiff’s attorney referred the plaintiff to the medical provider. If the answer is yes, evidence pertaining to a financial relationship between the attorney and the medical provider

–including the number of referrals, how often, and related financial benefit – is relevant to the issue of bias if the medical provider should testify.

Bad Faith

All parties to a claim have a duty to cooperate and provide information regarding the claim in addition to setting reasonable deadlines to respond. Time-constrained policy limit demands were frequently issued to insurance companies by plaintiffs’ attorneys, often without reasonable time to respond. If the time limit was not met by the insurer, a “bad faith” claim could be added. The new bill does not allow a separate claim for bad faith, i.e., so-called negligence on the part of an insurer. Instead, it can be considered when apportioning damages. But it also requires the claimant to be held to the same standards when furnishing information, making demands and setting deadlines, which wasn’t true in the past.

The new bill allows the Insurer to pay policy limits at the outset of a claim when there are multiple parties to a single loss. In addition, it only allows a contingency fee multiplier in rare circumstances.

In many states, a plaintiff’s attorney will receive compensation from the settlement of a claim. Prior to this bill, if an insurer was sued and lost in Florida, the insurance carrier would pay, and the insurer would be ordered to pay attorney fees. This bill will mean the attorney’s fee will come out of the settlement and will not be an addition to the settlement.

Sources:
Nationalreview.com: Florida’s New Tort Reform Package: Changes Affect Admissibility of Evidence and Calculation of Medical Damages Marshaldennehey.com: Florida Passes Tort Reform: What You Need to Know, Joanne I. Nachio, Kimberly Kanoff Berman, Alan C. Nash, March 27, 2023 Floridarealtors.com: DeSantis Signs Tort Reform Into Law, Dylan Abad
Clydeco.com: Changes to Florida Tort and Bad Faith Laws – authors Frederick Fein and Nanci Schanerman
Propertycasualty360.com: Florida Governor Signs More Property Insurance Reforms Into Law, Michael A. Mora