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Florida’s “Groundbreaking” Property Insurance Reform Law

Fort Lauderdale, Fla. (April 18, 2023) – On December 16, 2022, Florida Governor Ron DeSantis signed into law Senate Bill 2-A (S.B. 2-A, or the Act). Widely touted as “groundbreaking,” S.B. 2-A reforms many aspects of the claims process, including the timing for paying and adjusting claims, eliminating one-way attorneys’ fee awards, and banning assignment-of-benefits agreements. This alert provides an overview of the key provisions of S.B. 2-A. Unless otherwise stated in each amended statute, December 16, 2022 appears to be the effective date of the Act.

I. Assignment of Benefits – Section 627.7152 (effective January 1, 2023)

  • A policyholder may not assign any post-loss insurance benefits under any residential or commercial property insurance policy. Any attempt to assign such benefits is void, invalid, and unenforceable.

II. Claim Requirements and Deadlines Applicable to Insurers – Section 627.70131(1)(a), (3)(a), (3)(d), (3)(e) and (7)(a) (effective March 1, 2023)

These statutory amendments include the following changes applicable to insurers' duties:

  • Reduces the time from 14 to 7 days to review and acknowledge receipt of communications unless payment is made within that time or unless the failure to acknowledge is caused by factors beyond the insurer’s control.
  • Reduces the time from 14 to 7 days after receiving a proof-of loss (POL) to begin an investigation unless otherwise provided by the policy or law, or unless failure to begin such investigation is caused by factors beyond the insurer’s control.
  • Reduces the time from 45 to 30 days after receiving a POL to conduct a physical inspection of the property.
  • Permits use of electronic methods to investigate losses.
  • Requires the provision of detailed estimates of loss to policyholders within 7 days after the estimate is written, removing the requirement that the policyholder first request a copy of the estimate.
  • Reduces the time from 90 to 60 days after receiving notice of an initial, reopened, or supplemental claim for an insurer to pay or deny the claim or a portion thereof, unless failure to pay is caused by factors beyond the insurer’s control.
  • Any claim payment made 60 days after receiving notice of the claim or after the expiration of any additional timeframe provided pursuant to an order of the Office of Insurance Regulation (OIR), whichever is later, bears interest as set forth in section 55.03 and begins to accrue from the date the insurer receives notice of the claim.

However, the time requirements above are tolled if a policyholder fails to provide material claims information requested within 10 days after the request, if the request is made at least 15 days before the insurer is required to pay or deny the claim. The time requirements are also tolled during any statutory mediation proceeding or any alternative dispute resolution proceeding provided for under the policy.

III. Claim Deadlines Applicable to Insureds – Section 627.70132

  • Any claim or reopened claim is barred unless notice is given in accordance with the terms of the policy within one year after the date of loss.
  • A supplemental claim is barred unless notice is given in accordance with the terms of the policy within 18 months after the date of the loss.

IV. Attorney Fees – Section 626.9373(1) and (3) (Applicable to Surplus Lines Carriers)

  • In suits arising under residential or commercial property insurance policies, there is no right to attorneys’ fees in favor of insureds.
  • Subsection (1) restricts the elimination of one-way attorneys’ fees to suits brought under policies executed on or after the effective date of the Act.

V. Attorney Fees – Section 627.428 (Applicable to Admitted Carriers)

  • In suits arising under residential or commercial property policies, there is no right to attorneys’ fees in favor of the insureds.
  • Section 627.428 does not expressly restrict itself to policies executed on or after the effective date of the Act. However, the changes will not likely impact policies issued before that date.

VI. Civil Remedy Actions Against Property Insurers – Section 624.1551

  • In any claim for extracontractual damages, no action shall lie until an insured or named beneficiary establishes, through an adverse adjudication by a court of law, that the insurer breached the policy and a final judgment has been rendered.
  • Acceptance of an offer of judgment or an appraisal award does not constitute an adverse adjudication and does not, on its own, give rise to a cause of action.

VII. Mandatory Binding Arbitration Endorsements Authorized – Section 627.70154

An insurance policy may require that a policyholder participate in mandatory binding arbitration if:

  • The arbitration requirements are contained in a separate endorsement attached to the policy;
  • The premium charged includes a credit or premium discount;
  • The policyholder signs a form electing to accept mandatory binding arbitration;
  • The form provides notice of the rights given up in exchange for the credit or premium discount, including the right to a jury trial;
  • The endorsement establishes compliance with the mediation provisions set forth in section 627.7015 before initiation of arbitration; and
  • The insurer also offers a policy that does not require participation in mandatory binding arbitration.

VIII. Offers of Judgment – Section 768.79

  • For breach of contract actions, a property insurer may make a joint offer of judgment that is conditioned upon the mutual acceptance of all the joint offerees.

What to Expect

The above-referenced reforms represent significant changes to Florida’s Insurance Code. In particular, the elimination of one-way attorneys’ fee awards has been on the radar of the OIR for many years now. These reforms should benefit both policyholders and insurers. Policyholders will receive quicker claim decisions and payments, and insurers should eventually see fewer abusive lawsuits. Although it appears likely these reforms will have a positive impact on the insurance market in Florida, it will take at least a few years before insurers see the Act’s true effects on the volume of property insurance claims and suits.

For more information on this Act, contact the authors of this alert. Visit our Insurance Coverage Practice page for more alerts in this area.

Authors:

Bradley S. Fischer, Partner

Laura Farrant, Partner

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