Reforms likely to face court challenges

Fight in store for insurance claims plan, attorneys say

Even if lawmakers finally agree this year on measures aimed at curbing home insurance claims abuses, court challenges will likely follow, plaintiffs attorneys say.

The proposed reforms take aim at attorneys’ income streams by seeking to revise a right that’s been part of Florida lawsince 1893— the right of insurance customers to collect legal fees if they sue their insurance company and win the case.

“If this statute does get passed into law, its enforceability will be litigated,” said Ely Levy, a trial lawyer atHollywood-based Militzok& Levy.

The new bill, filed Feb. 17 by Sen. Dorothy Hukill, R-Ormond Beach, aims to reduce the amount of money insurance companies say they are losing in litigation stemming from water damage claims. The bill was crafted with input from state-run Citizens Property Insurance Corp., the state Office of Insurance Regulation, and industry interest groups.

Many insurers say the lawsuits — and the losses — are forcing them to raise premiums for all of their customers.

Citizens’ CEO Barry Gilway blamed increases in litigation for rate hikes in the tricounty region ranging from 8.9 percent to 10 percent this year. Many private insurance companies raised rates as well on 2017 policies, and state insurance officials expect more rate hike requests this year.

In 2011, less than 15 percent of water claims against Citizens went to litigation, Gilway told the Sun Sentinel editorial board in a recent presentation. By 2016, that percentage increased to 46 percent.

Gilway and other insurers blame the increased litigation on “assignment of benefits” — when repair contractors coerce policyholders into signing over the benefits of their policies after a loss, then stand in the shoes of policyholders and file hundreds, if not thousands, of lawsuits against insurers each year.

But courts have consistently upheld assignment rights, and efforts in the Legislature to restrict assignment of benefits laws have died in each of the past four years.

Nowinsurers are targeting the “one-way attorney fee statute” that requires insurance companies to pay legal fees against any named “or omnibus insured” who wins a court judgment or decree in an action against the insurer.

Courts interpret “ominbus insured” as meaning any assignee of the insured, and in cases against property insurers, that usually meanswater repair contractors.

Armedwith assignments of benefits frompolicyholders, the contractors and their plaintiff attorneys started realizing around 2010 that huge money could bemade challenging claims denials