At a recent workshop held by the Florida Office of Insurance Regulation, a claims specialist for USAA summed up the conundrum that property insurers are about to face when asked to report the other side’s legal fees in claims disputes.
“We’re not privileged to know what the attorney fees are for plaintiff’s counsel. We’re the defendant,” said Marie Benedetto Ferrito, auto injury manager for USAA, the national insurance and financial services company.
Insurers like USAA, along with the OIR, are now in a frustrating situation, thanks to continued concerns over Florida’s overheated claims litigation environment. In an attempt to discern just how much attorney fees are costing Florida property insurance carriers and to measure the effectiveness of reform legislation, Florida Senate Bill 76 in 2021 required all residential property insurers to annually report detailed information about litigated claims, including the amount paid for claimants’ attorney fees, costs, and fee multipliers.
Regulators are now in the process of finalizing rules and electronic forms that insurers will use to report the information required by the legislation. The form itself has been delayed and is causing heartburn for carriers: In its current version, the spreadsheet asks for a dollar figure on fees, but leaves no clear alternative if the amount is unknown.
And while policyholder legal fees are reported when a court awards them in a judgment, the share of settlement amounts that go to insureds’ lawyers are rarely made public, attorneys and consultants said. And the vast majority of litigated claims disputes are settled, not decided in a courtroom.
Some insurance attorneys have said that only about 1% of cases produce details on how much claimants’ lawyers are actually paid from a settlement. Many times, a plaintiff’s counsel simply refuses to provide the information, according to Lisa Miller, a former Florida deputy insurance commissioner, now a lobbyist and consultant.
Steve Roddenberry, another former deputy commissioner, now an insurance consultant with the Pennington law firm in Tallahassee, said SB 76 and the proposed OIR reporting requirements leave insurers with only one, ridiculous choice:
“We could write a real nice letter to the plaintiff’s attorney, asking ‘Would you please tell us how much you charged in fees so we can report it to the state?'”
The OIR form also asks insurers to explain what they plan to do to get the fee data if it’s not immediately available.
“I guess then we’ll have to write an even nicer letter to the plaintiffs’ attorneys,” Roddenberry said.
The whole data-gathering exercise now seems like a huge investment of employee time, for insurers and for OIR, but for little or no gain, carrier representatives said. The proposed reporting form asks insurers to list information for hundreds of claims, even when no legal fee data is available.
“So, you’re going to have a lot of blanks where there’s no vendor, but we have to explain there’s no vendor on each claim where we didn’t have vendor. It’s not making sense to me,” Ron Walker, with the Hartford, said in the OIR workshop.
OIR’s deputy commissioner, Susanne Murphy, said at the online meeting that the reporting form will be revised so that if the information is not available the form will still “go through,” perhaps even if the field is left blank.
“There is some functionality I think that needs to be — we need to make certain it is there,” Murphy said. A survey questionnaire will also be provided to give further information on why the data is not available.
That may not be very helpful, insurance industry advocates said.
SB 76 and a 2019 law were approved in an attempt to place some restrictions on claims litigation, assignment-of-benefits agreements and attorney fees. SB 76 also required plaintiffs to file notices of intent before filing claims lawsuits, in an effort to curtail what has been called excessive amounts of claims litigation in Florida, which has helped drive some carriers into insolvency. The bill’s data requirement was designed to capture information about litigation costs and to measure how effectively the bill is at reducing those costs.
Roddenberry said the reporting requirements, without access to complete and accurate info on legal fees, won’t accomplish those goals.
“The value is zero,” he said. “The industry already has a lot on its plate, and you’re creating more work for everyone.”
Travis Miller, attorney for Universal Property & Casualty Insurance, one of Florida’s largest insurers, agreed. He cited an often-quoted statistic, that 71% of awards in claims disputes in Florida end up in the pockets of plaintiffs’ lawyers with just 8% going to the insured plaintiffs.
“We’re doing all of this to learn something, but we’re learning nothing about the 71% and that’s just weird to me,” Miller said at the OIR workshop in July. “This is a massive, massive undertaking for the system. And the 71% is going to be blank.”
The length of time it has taken OIR to devise the reporting form and to start gathering the data became something of an issue in the Florida Legislature’s special insurance session in May. State Sen. Jason Pizzo, D-Miami, argued that SB 76 had required the data by early 2022. Insurance Commissioner David Altmaier responded that his office had interpreted the law to mean that the data did not have to be reported to OIR until 2023.
Roddenberry doesn’t blame OIR officials for the delay or for the dilemma insurers find themselves in.
“OIR is in a difficult position,” he said. The law requires the office to collect the data, but it’s proving trickier than many may have expected.
An early version of SB 76 would have asked the Florida Supreme Court to require attorneys on both sides to submit closing statements on fees and costs when litigation results in a recovery for the insured. But that language did not make it into the final bill.
There’s been some talk of now asking the Florida Bar to require plaintiff’s attorneys to provide the closing statements. But a Bar official last week said that was not something the association is likely to get involved in.
Once the OIR finalizes the rules and the reporting forms, the state Financial Services Commission will review. Stakeholders will then have an opportunity to request another hearing on the regulations.
Was this article valuable?
Here are more articles you may enjoy.