Policyholders expect one thing when a case settles: closure.
But recently, State Farm has begun using a tactic that turns settlement into something else entirely, a pressure point.
Instead of simply paying what a claim is worth, State Farm is now attempting to control how policyholders receive their money by leveraging Florida’s proposal for settlement framework.
Florida’s Fee-Shifting Framework
Florida’s fee-shifting structure, driven by Florida Statute 768.79 and implemented through Florida Rule of Civil Procedure 1.442, is one of the most powerful and useful tools available in civil litigation in the state.
At its core, it is designed to encourage settlement by penalizing parties who unreasonably reject good faith offers. When properly used, it promotes resolution. When misused, it creates leverage.
What State Farm Is Doing
State Farm has begun issuing Proposals for Settlement (PFS) that go beyond money. These proposals incorporate non-monetary conditions, often embedded in a referenced release, including:
- Requiring the mortgage company to be listed as the first payee on the settlement check
- Dictating how settlement funds must be issued
- Restricting the use of an attorney trust account
These are not minor administrative details. They directly affect whether, and how quickly, policyholders actually receive their money.
Why This Matters
A Proposal for Settlement is not just an offer, it carries real consequences.
If a policyholder rejects a PFS and does not obtain a result at least 25% better at trial under Florida Statute 768.79, they may be responsible for the insurer’s attorneys’ fees.
That creates a forced choice:
- Accept the insurer’s payment structure, even if it delays or complicates access to funds;
or - Proceed with litigation and risk fee exposure
That dynamic shifts the balance. It is no longer just about the value of the claim, it is about the conditions attached to getting paid.
We’ve Seen This Before
This is not a new concept, just a new vehicle.
Over the past year, State Farm has pushed similar “mortgage-first” payment requirements during settlement negotiations. Those efforts often stalled or failed when challenged.
Why? Because Florida already has a system that works.
Settlement funds are routinely issued to an attorney’s trust account, where attorneys are legally obligated to protect all interests, including mortgage holders, before disbursing funds. There is nothing broken about that process.
What is new here is the attempt to achieve the same outcome indirectly, by embedding these conditions into a PFS and attaching fee-shifting consequences.
Real-World Impact on Policyholders
This tactic creates tangible problems for insureds:
- Delays in receiving funds
- Additional complications with mortgage companies
- Reduced control over settlement proceeds
- Increased financial risk for rejecting the offer
At a time when policyholders already face a more restrictive legal landscape, this adds another layer of pressure.
Let’s Call It What It Is
This is not about protecting mortgage companies.
It is about control…
control over the settlement process,
control over the disbursement of funds,
and ultimately, control over whether a policyholder feels they can safely reject an offer.
Florida’s proposal for settlement framework was intended to encourage fair and efficient resolution, not to force acceptance of terms that extend beyond the value of the claim.
Where This Is Headed
This issue is likely headed for judicial scrutiny.
Courts will eventually need to determine whether insurers can use Proposals for Settlement to impose non-monetary conditions, particularly those involving third parties or extending beyond the core dispute.
Until then, policyholders and practitioners need to read these proposals carefully and understand the full scope of what is being offered and what is being required.
The Bottom Line
If you receive a Proposal for Settlement from State Farm, do not just focus on the number.
Focus on the strings attached.
Because increasingly, those strings are the point.
