At a recent meeting held by the Florida Office of Insurance Regulation, an insurance management expert at USAA summarized the challenge that property insurers are about to face when asked to report the other side’s fees in construction disputes.
“We have not had the opportunity to know what the lawyer charges to the judge. We are the defendants,” said Marie Benedetto Ferrito, director of motor vehicle injuries at USAA, a national insurance and financial services company.
Insurers like USAA, along with OIR, are now in a frustrating situation, due to concerns over the ongoing Florida litigation. In an effort to identify the cost of lawsuits to Florida property insurance carriers and to measure the effectiveness of reform laws, Florida Senate Bill 76 in 2021 required all homeowner insurers to report annually on lawsuits filed, including costs. what they pay for. Plaintiff’s attorney’s fees, costs, and multipliers.
Regulators are now in the process of finalizing the rules and electronic forms that insurers will use to report what is required by law. The form itself is slow and causing heartburn for carriers: In its current form, the spreadsheet asks for a dollar amount for the payment, but leaves no other way to show if the amount is unknown.
“It’s a huge, huge project on the machine. And 71% will be empty.”
And while the costs of legal cases are reported when a court issues a decision, the portion of the money that goes to insurance lawyers is rarely known, lawyers and consultants say. And most legal disputes are settled, not decided in court.
Some insurance attorneys have reported that only about 1% of lawsuits produce details of how much the plaintiffs’ attorneys are paid from the settlement. In most cases, the appellate judge simply refuses to provide the information, according to Lisa Miller, a former deputy insurance commissioner in Florida, who is now an attorney and assistant attorney.
Steve Roddenberry, the deputy commissioner who is now an insurance consultant at the Pennington law firm in Tallahassee, said SB 76 and the proposed OIR report leave insurers with only one stupid choice:
“We can write a very nice letter to the plaintiff’s attorney, asking him, ‘Can you tell us how much you charged so we can report it to the government?'”
The OIR form also asks insurers to explain what they intend to do to obtain payment if it is not immediately available.
“I think we need to write a very good letter to the plaintiff’s attorneys,” Roddenberry said.
The entire data collection process now appears to be a huge investment of staff time, for insurers and OIR, but with little or no benefit, carrier representatives said. The proposed reporting form asks insurers to document hundreds of claims, though there is no legal fee.
“So, you’re going to have a lot of shortages where there isn’t a vendor, but we have to explain that there isn’t a vendor for any reason where we didn’t have vendors. It doesn’t make sense to me,” Ron Walker, with Hartford, said at the OIR meeting.
OIR Deputy Commissioner Susanne Murphy said in a webinar that the reporting form will be changed so that if the information is not available the form will “pass,” possibly even if the section is omitted.
“There’s functionality that I think needs to be there, we need to make sure it’s there,” Murphy said. Survey questions will also be provided to provide information about why data is not available.
That wouldn’t be very helpful, insurance industry advocates said.
SB 76 and the 2019 law were passed in an attempt to place restrictions on lawsuits, profit-sharing agreements and attorney fees. SB 76 also required prosecutors to provide notices of intent before filing lawsuits, in an effort to reduce the so-called high number of lawsuits in Florida, which has helped prevent some carriers from losing money. The bill’s data requirements are designed to capture more information on litigation costs and to assess how the bill reduces costs.
Roddenberry said the reporting requirements, without access to more and more accurate information on legal fees, will not achieve those goals.
“The cost is zero,” he said. “The business already has a lot, and you’re creating more jobs for everyone.”
Travis Miller, an attorney for Universal Property & Casualty Insurance, one of Florida’s largest insurers, agreed. He cited an oft-cited statistic, that 71% of awards in Florida lawsuits end up in the pockets of plaintiffs’ attorneys and only 8% go to insured plaintiffs.
“We’re doing all this to learn something, but we’re not learning anything about the 71% and that’s amazing to me,” Miller said at an OIR conference in July. “It’s a big, big job on the machine. And 71% will be empty.”
The length of time the OIR has taken to produce description form and began collecting that information became a major issue in the Florida Legislature’s special insurance session in May. Sen. State Sen. Jason Pizzo, D-Miami, said that SB 76 required the data by early 2022. Insurance Commissioner David Altmaier responded that his office interpreted the law to ensure that the data does not have to be reported to OIR until 2023.
Roddenberry doesn’t blame OIR officials for the delay or for the insurance companies they’re dealing with.
“OIR is in a tough spot,” he said. The law requires the bureau to collect information, but it is proving more difficult than many expected.
The original version of SB 76 would have asked the Florida Supreme Court to require attorneys on both sides to submit closing statements of fees and costs when lawsuits result in insurance reimbursements. But that language did not make it to the final bill.
There has been talk of asking the Florida Bar to require appellate attorneys to file closing arguments. But a Bar official last week said it was not something the council would be involved in.
After OIR finalizes the rules and reporting forms, the Financial Services Commission will review them. Affected individuals will have the opportunity to request a hearing on these regulations.
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