A proposed change to the Civil Remedy Law is coming up for vote today. This post will only comment about the impact it will have on first-party property insurance claims. The Bill is bad for homeowners, condominium owners, business policyholders and condominium associations. I am addressing practical aspects of how this law is harmful to policyholders with these types of claims that follow hurricanes, tornados, fires, floods and other disasters. If you are ever involved in an accident that results in a third-party claim against your insurer, this bill also changes existing law and the changes could make you liable for excess judgments that are essentially caused by your insurer’s failure to act in good faith to settle the claim.

Every business, driver, or any person who depends on their insurer to pay claims is harmed by this bill. It shields insurance companies that choose to delay paying insurance benefits, even when the delay is unreasonable and harms their customers. So, in many everyday situations where businesses and people have to deal with liability claims, insurance companies will be able to drag out those claims because this law takes away accountability for wrongful conduct. In my opinion, much of this bill goes far beyond what is necessary to correct situations where some attorneys were making it nearly impossible for third-party insurers to settle claims. The insurance lobby has proposed a bill that will strip the rights of all Floridians to address an isolated issue that could be eliminated with far less drastic measures.

The proposed language impacting first party claims:

1. Acting arbitrarily and contrary to the insured’s interests in failing Not attempting in good faith to settle claims within the policy limits if when, under all the circumstances existing at the relevant time, it could and should have done so, had it acted fairly and honestly toward its insured

The change is significant. Insurance companies have traditionally been held liable for lack of good faith when handling claims. All insurance adjusters are taught that they have an obligation of good faith. The duty of good faith claims adjustment is much greater than not Acting arbitrarily and contrary to the insured’s interests in failing to settle claims. Good faith requires an affirmative action by insurance companies to have a sufficient number of qualified claims handlers with authority to determine and pay the amount of the loss quickly. If this is the new standard, insurers will simply wait to make decisions. They will wait for policyholders to determine the amount of the loss. Policyholders will have to pay expert engineers and contractors to present the claim because the insurer’s only obligation is to not act arbitrarily and then not against your interest when claims are presented.

This is even more draconian when you look at the devious language in the bill that states:

An insurer has an affirmative defense to any such action if the third-party claimant, the insured, or their representatives fail to fully cooperate in providing all relevant information and in presenting the claim.

Right now, insurers must fully investigate claims at their own expense because of the good faith obligation. If this obligation is eliminated and replaced with the limited obligation proposed in the bill and depends on policyholders having to provide — I assume at their expense — “all relevant information,” it invites insurers to unreasonably drag out claims by demanding more information. QBE Insurance Company and Citizens Property Insurance Company often do this, and insurance claims will get dragged out and POLICYHOLDERS will have to pay for things such as estimates, which are currently covered by the premiums they pay to insurance companies.

These two provisions may have been intended to apply to third-party cases, but it wasn’t written in such a limited fashion. They are game-changers for every person who has a property insurance claim. Policyholders and insurers have contractual obligations to cooperate with one another, and policyholders have to provide what insurers ask for. Under the proposed bill, the policyholder has to provide relevant information and present the claim by law; presentation of a claim and the timing of a settlement based upon information is a third party claims concept under modern theories of claims handling. Somebody mixed these up and included it in first-party claims. First-party insurers are supposed to investigate claims in good faith at their own expense and pay policyholders for covered damages. The insurance industry teaches their adjusters that this is their obligation; it makes no sense that Florida legislators would not require the same in law.

Can you imagine those who are disabled or live on limited budgets paying out of pocket to do this themselves? It would be difficult for almost anyone after a catastrophic loss. That is why so many hire attorneys after third-party accidents, but rarely do when making a first-party insurance claim.

(e) An insurer has an affirmative defense to any such action if the third-party claimant, the insured, or their representatives fail to fully cooperate in providing all relevant information and in presenting the claim. (discussed above)

(6) An insurer is not liable for amounts in excess of the policy limits or of the award, whichever is less, if it makes timely payment of an appraisal award.

This invites delay and denial. If an insurer does nothing, makes you pay a lot of money to prove your claim, acts in bad faith or even intentionally, but pays years later after you go through an expensive appraisal proceeding, where you have to pay your own appraiser and half of an umpire’s fees, the insurer has a “get out of jail card.” This only benefits insurers that delay and cheat their customers. Even if you go bankrupt waiting for an appraisal award, the insurer gets to hold the money and then pay years later without worry.

How can anybody say this proposed bill only applies to third-party claims because third-party claims do not have appraisal? Appraisals can result from numerous disputes. However, when they result from insurance companies that drag matters out and offer lowball offers, if any offers at all, why should we give them immunity from wrongful and dishonest conduct that leads to the appraisal in the first place? Under current case law, insurers don’t have to pay interest, costs, or attorneys fees if they properly invoke the appraisal—even if they intentionally keep undisputed portions of claims. Policyholders will get hammered with this proposed law if the insurer demands appraisal.

(a)(b) The notice shall be on a form provided by the department, sent by certified mail to the claim handler if known or, if unknown, to the specific office handling the claim, and shall state with specificity the following information, and such other information as the department may require:

1. The statutory provision, including the specific language of the statute, which the authorized insurer allegedly violated.
2. The facts and circumstances reasonably known to the insurer giving rise to the violation, stated with specificity, and the corrective action that the insurer needs to take to remedy the alleged violation.

This language allows delay and an escape if the technical requirements are not met. The Department of Insurance sends the notice to the insurance company. Under this law, policyholders now have to send an extra copy of the electronic filing to the adjuster. Why? The insurer already gets the notice from the Department of Financial Services. Policyholders also have to tell their insurance company everything it must do to correct their wrongful adjustment. Often, we don’t know why the insurance company has done something wrong because we cannot see the claims file. All policyholders know is that there is delay and non-payment. Why make it more difficult for policyholders to have a remedy for wrongful conduct? Why do policyholders have to tell the insurer how to do its job?

(14) The civil remedies specified in this section are the sole remedies and causes of action for extracontractual damages for bad-faith failure to settle under an insurance contract. Any related common-law causes of action are replaced and superseded by this section. The provisions of this section apply to all cases brought pursuant to this section unless specifically controlled by s. 766.1185.

Wow!! Even if the insurer intentionally harmed you, this is the only remedy you have under the statute. What is worse, is that a case pending in the Florida Supreme Court may finally allow first-party bad faith claims. The current language allows insureds to choose between a remedy at common law or by statute. The proposed bill stops bad faith claims at common law for first party claims, and prevents policyholders from asserting other rights of foreseeable damage. If it was meant to be for “third-party claims,” the proposed bill could have said so. This proposed change takes away policyholder rights and has never been the law in Florida. Instead of being a civil remedy law, the proposed law takes away civil remedies.

This is a bad bill for policyholders who make first-party claims. It is terrible public policy because it allows cheaters to prosper and protects them. Our society will be a mess if the rules of fair play are changed so that those that promise to pay quickly and fairly are not held accountable to that standard under the law. Under the proposed bill, not only are they not held accountable, but the notion of “good faith” that is part of all contracts is stricken from insurance. The rules of the game will change if this is passed in its current form. Everybody should write their representatives as soon as possible and ask them to vote against House Bill 1187.