Data from the Florida Office of Insurance Regulation (OIR) suggests that the introduction of legislation and reforms designed to curb excessive litigation associated with the use of Assignment of Benefits (AOB), and ultimately stabilise the state’s property insurance market, could be working.
The OIR’s recently published Property Insurance Stability Report explores litigation practices and outcomes of insurers amid challenges for Florida’s property market as a result of the frequency and severity of litigated claims.
The comprehensive report leverages data from the NAIC InsData financial database, the Quarterly and Supplemental Reporting System – Next Generation (QUASRng), the Florida DFS, internal reviews of company data, annual data calls with insurers, the Catastrophe Stress Tests, the internal OIR system data, and OIR legislative reports.
Within the report, data from the NAIC Market Conduct Annual Statement (MCAS), a regulatory tool that collects information from insurers on a uniform basis to identify concerns regarding claims and underwriting, reveals the percentage of nationwide homeowners’ claims and lawsuits opened in Florida.
In 2016, 7.75% of nationwide homeowners’ claims opened in Florida, and in the same year, 64.43% of nationwide homeowners’ lawsuits opened in the state, which shows the uniqueness and challenge of the insurance litigation landscape in the state.
The following year, 16.46% of nationwide homeowners’ claims opened in Florida, while 68.07% of nationwide homeowners’ suits opened in the state. In 2018, 11.85% of claims opened in the state, and a huge 79.91% of nationwide homeowners’ lawsuits opened. In 2019 the percentage of claims fell to 8.16%, but at 76.45%, the percentage of nationwide homeowners’ suits opened in Florida remained very high.
During 2019, Florida passed legislation designed to curb excessive litigation associated with the use of AOBs. Two years later, in 2021, the state’s legislature passed a bill which restructures litigation rules for disputed insurance claims. Then, in 2022, further litigation reforms were introduced which targeted attorney fees to third parties in property insurance cases, as Governor Ron DeSantis signed Senate Bill 2-D (SB 2-D) into law, which made important reforms designed to stabilise the Florida property market.
The Florida legislature also passed a bill in 2023 which “provides that a contingency fee multiplier for an attorney fee award is appropriate only in a rare and exceptional circumstance, and repeals Florida’s one-way attorney fee statutes, with certain exceptions.”
Of course, once legislation such as this has been introduced it takes time for the changes to filter through, but the data suggests that the reforms could be working.
In 2020, so a year after the first piece of legislation arrived, the percent of nationwide homeowners’ claims opened in Florida was in line with 2019 at 8.81%, but at 79.16%, the percentage of nationwide homeowners’ suits opened in the state increased further.
However, in 2021, and more notably in 2022, the percentage of nationwide homeowners’ suits opened in Florida declined. For 2021, 6.91% of nationwide homeowners’ claims opened in Florida, and 76% of suits opened in the state, so down slightly from 2020.
In 2022, the percentage of nationwide homeowners’ claims opened in Florida rose to 14.93%, the second highest since 2016, but importantly, the percentage of lawsuits opened in Florida in that year fell to 70.83%, the lowest since the reforms were introduced, and lowest since 2017.
The decline in Florida as a percentage of all litigated homeowners’ claims could suggest that the reforms are working, and it will be interesting to see the data for 2023 and if the percentage of lawsuits opened in the state declines further still.
