Business groups in Florida saw their efforts to reform the state’s bad-faith law end suddenly for the year after a legislative committee voted by a one vote margin to kill a bill that would have placed additional restrictions on lawsuits.
The House Civil Justice Committee rejected HB 427, sponsored by Rep. Kathleen Passidomo (R-Naples), which would have provided insurers more time to settle claims before facing a possible third-party bad-faith lawsuit.
Such claims arise when an insurer fails to settle a third-party’s claim against the insurer’s policyholder, thus exposing the insured to monetary damages in excess of their policyholder limits. A third party can also directly sue an insured policyholder’s insurer in cases where they believe the insurer has failed to settle the claim in good faith.
Business groups and insurers maintain that the state’s current bad-faith law provides an incentive for trial lawyers to avoid settling claims in order to sue them for negligence, resulting in expense trials and potentially thousands of dollars in damages.
Passidomo said the state needs new restrictions on such lawsuits to rein-in the cost of insurance. “This bill would have a positive impact on small businesses by reducing ‘long-winded’ cases,” she said.
The Florida representative for The National Federation of Independent Business, Charles Wells, said that without legislative action, the cost of insurance threatens small businesses.
“The current law forces most every claim into litigation,” said Wells, a former State Supreme Court Judge. “Only attorneys benefits.”
Under the proposed bill, anyone seeking to file a bad-faith lawsuit would have to give 60-day notice to the state’s Department of Financial Services and the authorized insurer before filing suit. If the insurer decided to pay damages or the policy limit it would be shielded from any bad-faith claim.
Joining the NFIB in support of the proposals was the Florida Chamber, the Associated Industry of Florida, and a number of industry trade groups.
Opponents of the bill, however, argued that it would give insurers little incentive to promptly settle claims since it would give them a 60-day window to settle them before being open to a suit. As a result, claimants might have to accept smaller awards in order to settle claims and receive needed money.
While bill proponents quoted a recent Public Opinion Strategies Poll, which found that 73 percent of businesses polled agreed with the statement: “There are too many lawsuits in Florida, and our elected leaders should work to reduce the number of lawmakers.”
Trial lawyers questioned the need for the reforms at all.
Florida Justice Association President Fred Cunningham told lawmakers there is no crisis that would justify any changes in the current law.
“This is a draconian solution in search of a problem,” said Cunningham.