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Governor Ron DeSantis signed Senate Bill 2-A into law in December 2022, followed by his signing of HB 837 on March 24, 2023. Together, these new laws provide sweeping reforms that dramatically effect Florida’s insurance and tort landscape. As concrete proof of their impact, plaintiffs have flocked en masse to the courts to get in under the wire before these laws take effect. The following is a digest of several key takeaways that insurance carriers and practitioners should know about the comprehensive changes in Florida law.
Extra-contractual liability can be costly, and insurance carriers risk extra-contractual liability if they fail to settle a claim despite having an opportunity to do so fairly and honestly under the circumstances. See generally Section 624.155, Florida Statutes. Now, HB 837 provides a host of additional protections for insurance carriers and outlines specific mechanisms to avoid bad-faith. For instance, where an insured or a third-party claimant sends a demand for payment to an insurance carrier, HB 837 immunizes the carrier from a bad-faith suit when it tenders its policy limits (or the amount sought in the demand, whichever is lesser) within 90 days of the demand.
Of critical importance to carriers, failure to tender payment within this 90-day safe harbor period is not evidence of bad faith and is inadmissible as evidence of bad faith. Further, HB 837 codifies that “mere negligence” alone is insufficient to establish a bad-faith claim, thereby requiring a heightened showing of bad faith to establish a claim. This is a meaningful change and should enable carriers to avoid lengthy litigation over minor errors in the adjusting process. The 90-day time frame also effectively eliminates arbitrary time-limit demands as a mechanism for “setting-up” a bad-faith claim.
The law also creates an affirmative obligation on insureds, third-party claimants, and their representatives, to act in good faith in providing the carrier with information about the claim, making demands of the carrier, setting deadlines, and attempting to settle their claim. If a fact finder determines that an insured, a third-party claimant, or their representatives failed toact in good faith in pursuing a claim, damages against the carrier can be reasonably reduced. This is especially important in instances where an insured and a third-party claimant pursue a bad-faith action against a carrier, as the insured or the claimant’s failure to act in good faith may impair settlement opportunities with a carrier.
A Civil Remedy Notice (“CRN”) has generally been a condition precedent to filing a bad-faith suit against a carrier under Florida. See Section 624.155(3), Florida Statutes. Yet under prior law, CRNs were only required as a condition precedent for first-party bad faith suits from insureds; there was no similar CRN requirement for third-party or “common law” bad faith claims against a carrier. HB 837 brings consistency to bad-faith claims in Florida by requiring a CRN to be filed as a condition precedent in both first-party and third-party bad-faith actions.
HB 837 also provides carriers with additional protections for matters involving competing claims which exceed an insured’s available policy limits. Up until now when a carrier was faced with multiple claims there was no mechanism in place to avoid a subsequent bad-faith claim. Instead insurers were required to make complicated decisions as to which claims should have higher settlement priority, often with limited information and the pressure of time-sensitive demands, while also avoiding “indiscriminately settling selected claims and leaving the insured at risk of excess judgments . . . .” Farinas v. Florida Farm Bureau Gen. Ins. Co., 850 So. 2d 555, 560 (Fla. 4th DCA 2003). Without clear parameters carriers were often uncertain how to meet this duty.
Now, if a carrier receives notice of competing claims for a single occurrence, HB 837 provides that carriers do not commit bad-faith and are not liable above the policy limits when they either: (1) file an interpleader action under the Florida Rules of Civil Procedure; or (2) tender the full policy limits among each demanding party pursuant to a binding arbitration arrangement between the carrier and the claimants. This is a dramatic change will eliminate a sizable portion of the type of bad-faith claims that have been brought.
HB 837 also substantially changes Florida’s fee entitlement statute, Section 57.104, Florida Statutes. Federal courts generally follow the “lodestar” fee computation model, where fees are calculated by multiplying the hours an attorney worked on a matter by a reasonable attorney fee rate. Under Florida’s prior fee statute, courts were not required to follow the lodestar model and held broad discretion to award fee multipliers. HB 837 brings Florida into lockstep with the federal lodestar model by creating a “strong presumption” that a lodestar fee is reasonable and sufficient for a given matter. Fee multipliers can still be obtained, but only in (1) “rare and exceptional circumstances” with (2) supporting evidence that competent counsel could not otherwise be retained. As such, Section 57.104, Florida Statutes, creates a strong presumption against fee multipliers going forward.
HB 837 repealed Fla. Stat. §§ 629.9373 and 627.428, which permitted only insureds and third-party claimants to recover attorney’s fees against surplus line insurers and insurers, respectively. These provisions have colloquially been dubbed as “one-way attorney’s fees” because there is no statutory fee entitlement for carriers. Now, HB 837 has repealed these one-way attorney’s fees, and neither a plaintiff or a carrier has a statutory right to fees in actions against carriers.
Notwithstanding the above, carriers should be aware that HB 837 does create a limited right to attorney’s fees in certain declaratory judgment actions. Specifically, insureds and third-party claimants are entitled to attorney’s fees against a carrier only when the carrier completely denies coverage and a court determines that the complete denial of coverage was improper. Recoverable attorney’s fees are limited to those incurred in the declaratory judgment action, and either party to the action can request the use of a summary procedure to expedite resolution of the matter.
A key change to Florida’s tort reform bill is the reduction of Florida’s statute of limitations for negligence actions. HB 837 reduced the statute of limitations for negligence actions from four years to two years.
Florida has traditionally been a pure comparative fault state, where plaintiffs could recover damages in a personal injury action even if they were mostly—or even nearly entirely—at fault for their own damages. See Section 768.81(2), Florida Statutes (“contributory fault chargeable to the claimant diminishes proportionately the amount awarded as economic and noneconomic damages for an injury attributable to the claimant’s contributory fault, but does not bar recovery.”). HB 837 modifies Florida’s comparative fault law to bar a plaintiff’s recovery if the they are more than 50% at fault for their own harm.
Following the Florida Supreme Court’s 2017 decision in Worley v. C. Fla. Young Men’s Christian Ass’n, Inc., 228 So. 3d 18 (Fla. 2017), financial relationships between a plaintiff’s law firm and their treating physicians have generally been undiscoverable under the veil of attorney-client privilege. This has placed plaintiffs and defendants on unequal footing, as financial relationships between a party’s law firm and their retained experts have been long been discoverable, but the relationship between a plaintiff’s law firm and a plaintiff’s treating physicians have not. Now, HB 837 abrogates Florida’s attorney-client privilege statute, Section 90.502, Florida Statutes, to expressly permit the discovery and admissibility of (1) attorney-referral evidence between a plaintiff’s law firm and treating physicians and (2) evidence of any financial relationship between a plaintiff’s law firm and medical providers. Accordingly, HB 837 allows practitioners to impeach a plaintiff’s medical treatment and damages evidence in ways that would have otherwise been prohibited by Worley.
Letters of Protection (“LOPs”) generally allow a patient to receive medical treatment up front and without cost, while also allowing medical providers to seek payment from a personal injury judgment or settlement. Carriers and practitioners alike have long suspected that LOPs may contain “inflated” costs for treatment, which are later presented to juries as uncontested evidence of unpaid medical bills. For plaintiffs who have health insurance but choose to treat under an LOP, evidence of what their own health insurance would have paid for their treatment can also be admitted to contest their proffered costs of treatment. For third parties who sell or purchase LOPs, evidence can also be admitted concerning the cost of the LOP, which are often a fraction of the billed cost for the treatment. Further, HB 837 bars the recovery of costs of treatment covered by an LOP if the plaintiff, among other things, fails to disclose:
Under HB 837, compliance with the above is a condition precedent to asserting a claim for medical treatment covered by an LOP.
HB 837 also permits the presentation of other objective evidence to contest the reasonableness of a plaintiff’s past and future medical damages. In addition to the LOP considerations discussed above, HB 837 expands the types of damages evidence that can be presented in a personal injury or wrongful death matter. For instance, if a plaintiff has health insurance, evidence can be admitted concerning the amounts that health insurance would have paid if the plaintiff submitted their bills to their own health insurer. If a plaintiff does not have health insurance, or receives Medicare or Medicaid benefits, evidence may be admitted showing that the reasonable cost of plaintiff’s treatment should be limited to 120% of the Medicare rate, or 170% of the Medicaid rate, for the patient’s treatment. Accordingly, fact finders no longer need to consider a plaintiff’s medical bills in a vacuum when considering the reasonableness of those bills.
Property owners now also enjoy additional protections under HB 837. For instance, in negligent security actions involving harm caused by the criminal acts of third parties, fact finders now must consider the fault of all persons who contributed to a plaintiff’s injuries when assessing causation and damages—including the fault of third-party criminal actors. These protections apply to the owners, lessors, operators, or managers of commercial or real property. Further, owners and operators of multifamily properties (i.e., apartments and condominiums) will enjoy a presumption against civil liability for claims involving criminal acts committed by a third-party if the property owner employs certain safety measures on their property. Among the list of safety measures are security camera systems that target points of ingress and egress, lighting in parking lots and common areas, deadbolts on each dwelling door, and locked gates with key or fob access. HB 837 creates a comprehensive list of security measures that multifamily property owners must utilize to enjoy the presumption against civil liability, so property owners would be well served by consulting with their local FMG attorney in navigating these new requirements.
Plaintiffs’ practitioners have been filing thousands of suits en masse in anticipation of the bill’s passing. And while HB 837 provides carriers, defense practitioners, and property owners with a host of new benefits and protections, it is expected that the law will be met with challenges. For instance, while the law took immediate effect upon receiving Governor DeSantis’ signature, it also provides that the law shall not be construed to impair any rights under an existing insurance contract. Thus, there will likely be disputes as to whether HB 837 applies to polices currently in effect prior to their renewal. Suits may also arise challenging the constitutionality of the law, as some may argue that shortening the statute of limitations, reducing damages recovery, and repealing fee entitlement for insurance cases impedes individual access to the courts. And naturally, disputes may arise as to the interpretation of any number of HB 837’s new provisions. Carriers and practitioners alike must keep a keen eye on any challenges made against HB 837 that may arise.
HB 837 creates new strategies for carriers, defense practitioners, and property owners to employ when resolving Florida insurance and tort claims. For more information, please contact Melissa A. Santalone at [email protected], Catherine M. Carson-Freymann, at [email protected], Julie B. Karron, at [email protected], Christopher T. Lawson, at [email protected], or your local FMG attorney.