Florida Passes Notable Statutory Changes to its Property Insurance Laws

On Dec. 16, 2022, Florida Gov. Ron DeSantis signed Senate Bill 2-A (SB-2A), passing significant changes to Florida’s property insurance statutes and accounting for Florida’s third round of property insurance reform since 2019.

Florida’s initial property insurance reform bill created new requirements for assignment agreements and allowed property insurers to prohibit policyholders from assigning post-loss insurance benefits under certain circumstances.

Florida’s second round of property insurance reform bills, which were signed into law on May 26, 2022, precluded an assignee vendor from recovering attorney fees in a suit against an insurer and required a policyholder to acquire favorable judgment against an insurer before proceeding with a bad faith lawsuit. As discussed below, SB-2A clarifies and expands Florida’s previous property reform bills.

Removal of Florida’s One-Way Attorney’s Fees Provision in Favor of Policyholders

The most substantial change is SB-2A’s removal of Florida’s one-way attorney’s provision in favor of policyholders under residential or commercial property insurance policies issued by both admitted and surplus lines insurers. Previously, if a policyholder secured a judgment against an insurer under an insurance policy, for any amount, the policyholder would be entitled to reasonable attorney’s fees and costs.

SB-2A also deletes the attorney’s fee provision within pre-suit notice statute, which allowed a policyholder to recover attorney’s fees if the policyholder recovered a certain percentage of the original amount claimed.

Additionally, SB-2A authorizes a property insurer to make a joint offer of judgment (PFS) that requires mutual acceptance by the joint offerees in a breach of contract action. Previously, it was unclear under Florida law whether an insurer was permitted to require mutual acceptance of a PFS.

Both changes should encourage earlier settlements and reduce unnecessary litigation over property insurance disputes.

Effective Removal of Assignment of Benefits Under Property Insurance Claims

SB-2A also significantly changes assignments in Florida as an assignment agreement must be executed under a residential or commercial property insurance policy on or after July 1, 2019, and before Jan. 1. Effectively, an insured will not be able to assign any rights under a residential or commercial property policy beginning in 2023.

Any attempt by an insured to assign post-loss property insurance benefits under a policy after Jan.1 will be void, invalid, and unenforceable. However, this prohibition of assigning post-loss insurance benefits may not apply to surplus lines insurers. It does not specifically state that it applies to a surplus lines insurer.

Heightened Communication Requirements for Insurers

Beginning on March 1, SB-2A will change property insurers’ duties to acknowledge communications regarding claims, including shortening claim communication and coverage determination deadlines, as follows:

• • Insurers will be required to respond to claim communication within 7 days as opposed to 14 days.
  • After receipt of a proof-of-loss statement, insurers will be required to begin the claim investigation within 7 days and must conduct a physical inspection within 30 days.
  • The insurer will be required to send the insured a copy of any estimate prepared by the insurer’s adjuster within 7 days after the estimate is generated.
  • Insurers will be permitted to conduct electronic claims investigations, including using video conferencing, such as Zoom, by an adjuster and insured, taking photographs and videos with a drone, and other machines that can move independently or by remote control.
  • Insurers will be required to maintain claim records, including dates, of all communications with the policyholder, completed inspections, estimates generated by the adjuster, and the insurer’s payment or denial of the claim.
  • Insurers will be required to pay or deny a claim, including a supplemental or reopened claim, within 60 days as opposed to 90 days.

Additionally, if there are at least 15 days before the deadline for the insurer to pay or deny the claim, the above requirements will be tolled upon the failure of a policyholder to provide material claims information requested by the insurer within 10 days.

Shorter Claim Reporting Deadlines for Policyholders

In addition to changing the above communication requirements on insurers, SB-2A alters the claim submission requirements of an insured as follows:

• • Reducing the time that an insured must submit an initial or reopened claim from 2 years within the date of loss to 1 year.
  • Reducing the time that an insured must submit a supplemental claim from 3 years after the date of loss to 18 months.

Permitting Insurers to Include Mandatory Binding Arbitration in a Policy

SB-2A also authorizes an insurer to require an insured to participate in mandatory binding arbitration if the following requirements are met:

• • The mandatory binding arbitration requirements must be attached as a separate endorsement to the policy.
  • The insured must receive an actuarially sound premium credit for including the binding arbitration requirements.
  • The insured must sign a form electing to accept mandatory binding arbitration.
  • The arbitration endorsement establishes that the insurer will comply with the mediation provision
  • The insurer offers the policyholder a policy that does not require mandatory binding arbitration.

SB-2A does not specifically state that it applies to surplus lines insurers. Thus, there remains a question of whether a surplus lines insurer may include a binding arbitration provision in a policy.

Changes to Florida’s Bad Faith Statute

Finally, SB-2A modified Florida’s bad faith statute to clarify uncertainty as to the definition of establishing a breach of an insurance policy. SB-2A’s changes now make it clear that to proceed with a claim, a policyholder must establish the property insurer breached the policy through an adverse adjudication by a court of law, in which a final judgment or decree must have been entered. Notably, acceptance of an offer of judgment or the payment of an appraisal award does not constitute an adverse adjudication. However, the difference between an insurer’s estimate and the appraisal award may be used as evidence of bad faith.

Those Not Impacted

Unless otherwise noted, the above statutory changes took effect when Govern DeSantis signed SB-2A into law on Dec. 16, 2022. Generally, the changes will not impact policies issued before Dec. 16, 2022, as Florida courts have found that statutory changes affecting insurance policies cannot be applied retroactively to policies issued before the effective of the statute.

Please reach out to Kyle Gretel or any member of Phelps’ Insurance team with questions or for advice and guidance.