Florida Bill Could Spike Insurance Litigation Costs, Industry Warns
A bill under consideration in the Florida Legislature is generating concern within the insurance industry. House Bill 1551 proposes awarding attorney fees to the prevailing party in insurance litigation, a move that industry groups warn could reverse recent tort reforms and lead to escalating litigation expenses.
Under the proposed legislation, policyholders would be deemed the prevailing party if they secure a judgment exceeding the insurer’s highest good faith settlement offer. Conversely, if the judgment falls below that offer, the insurer would be considered the prevailing party. The bill specifies that a judgment encompasses reasonable attorney fees, taxable costs, and prejudgment interest accrued by the insured at the time of the settlement offer. Settlement offers revoked before the passage of five business days would be treated as acts of bad faith.
The Personal Insurance Federation of Florida (PIFF) has expressed apprehension that the bill might trigger a surge in litigation, consequently increasing costs for both insurers and policyholders. PIFF president Michael Carlson (pictured below) stated that the proposed law would demand defendants to estimate plaintiffs’ attorney fees to prevent judgments from surpassing final settlement offers. He warned that this could result in more plaintiff judgments exceeding insurers’ final offers, entitling plaintiffs to recover attorney fees. Florida previously repealed its one-way attorney fee law in 2023 as part of wider reforms, credited with stabilizing the property and auto insurance markets.
Carlson cautioned that if the bill becomes law, insurers will need to reassess risk pricing in Florida, and reinsurers are likely to follow suit. He added that such changes would ultimately impact policyholders through higher premiums, describing the bill as a reversal of recent reforms.
Rising Litigation Costs in the US
Insurance litigation costs in the United States have significantly increased in recent years, influenced by factors such as social inflation and evolving legal landscapes. The US commercial casualty insurance sector, in particular, experienced substantial losses, growing at an average annual rate of 11% over the last five years, culminating in $143 billion in 2023.
Social inflation, characterized by rising litigation costs and larger jury awards, has significantly impacted liability claims. According to the Swiss Re Institute, social inflation increased liability claims in the US by 57% over the past decade, reaching an annual peak of 7% in 2023. Courts have also seen the expansion of legal theories, such as public nuisance, which have been applied in cases involving environmental and public health issues. This trend has broadened the scope of liability for companies.
Supporters of House Bill 1551 argue that it strikes a balanced approach by allowing policyholders to recover attorney fees if they prevail against insurers. The bill’s sponsor, Rep. Hillary Cassel, a Republican representing District 101, said the legislation aims to discourage wrongful claim denials while preventing insurers from incurring excessive litigation costs when making good faith settlement offers.
