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By Christine M. Renella, William G. Zieden-Weber and Kevin M. Neslage
To read this article in PDF format, please click here.

Florida S.B. 76, designed to curb first-party property insurance litigation in Florida, took effect on July 1.[1]

While the bill addresses several critical property insurance topics including roof-surface reimbursement schedules, regulation of contractors,[2] proper notice, the right to inspect, and determination of whether abatement is applicable, the crown jewel of the bill amends Florida's infamous attorney fees statutes, Sections 626.9373 and 627.428 of the Florida Statutes, as they apply to property insurance disputes. 

Background to Florida Attorney Fees Statutes

In most jurisdictions in the U.S., each party to insurance litigation pays its own attorney, regardless of the outcome of the litigation. In fact, a court may only award attorney fees to the prevailing side if authorized by statute or agreement of the parties to the litigation.

Florida, however, is one of the minority jurisdictions that has allowed an insured to recover his or her own attorney fees if the insured prosecutes a lawsuit to enforce an insurance policy for more than a hundred years.[3] Florida has kept some version of this law on the books since 1893, and it reads in pertinent part as follows, with the underlined text added by S.B. 76:[4]

Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which the recovery is had. In a suit arising under a residential or commercial property insurance policy not brought by an assignee, the amount of reasonable attorney fees shall be awarded only as provided in s. 57.105 or s. 627.70152.

The Florida Supreme Court has historically supported the need for fee and cost reimbursement in the realm of insurance litigation as being deeply rooted in public policy. The court has given the Legislature deference in this area of the law, recognizing its sentiment on how essential it is to level the playing field between the economically advantaged insurance companies and the individual citizen.[5]

However, practicing Florida attorneys have seen a perversion of this intent play out in recent years. In first-party coverage disputes specifically, an insured would often file a lawsuit in instances in which the dispute was simply over the scope of damages.

This created a situation in which, as long as an insured prevailed in its lawsuit with a judgment greater than any amount of the insurance proceeds originally paid by the insurer — even $1 — the insured would be entitled to attorney fees. As such, insureds were often able to leverage larger settlements using the attorney fees statutes.

Section 627.70152 Notice Requirement

Florida's new legislation effectively puts an end to the attorney fees statutes as they pertain to property insurance, which historically established a strong presumption that using a "lodestar fee" to compensate attorneys for property insurance claims was considered sufficient and reasonable.[6] This presumption is only rebutted in rare and exceptional circumstances with evidence that competent counsel could not have been retained in a reasonable manner.[7]

Instead, S.B. 76 creates a new statute, Section 627.70152, which establishes a scheme for attorney fees structured around a presuit notice requirement. Now that S.B. 76 has passed, the path to attorney fees for an insured is less certain, and insurers are hopeful that the vast number of suits filed against insurers in Florida every year will decrease.

Specifically, the burden has essentially shifted to an insured to prove entitlement through the imposition of a judgment between 20%-50% higher than the presuit settlement offer in order to obtain fees.

Additionally, the notice requirement provides an additional hurdle for insureds in that a suit may not be filed prior to the issuance of a written notice of intent. Specifically, the notice statute imposes a notice requirement on claimants, stating that as a condition precedent to filing suit under a property insurance policy, a claimant must provide the insurer with written notice of intent to initiate litigation.[8]

Under the notice statute, this notice must be served by certified mail, return receipt requested, or electronic delivery at least 10 days before filing suit,[9] but may not be served before the insurer has made a coverage determination under Section 627.70131.[10]

The immediate effect of the statute is the prohibition of suit prior to a coverage determination being issued. This alone will lead to less litigation as insurer's often file suit before the conclusion of the investigation of a claim and issuance of a coverage determination. 

Additionally, the statute requires that each notice include the following information: (1) that the notice is being provided pursuant to this section;[11] (2) the alleged acts or omissions of the insurer giving rise to the action;[12] and (3) that the notice has been provided to the insured if represented by an attorney.[13]

In cases in which the notice is provided following a denial of coverage, the notice must include an estimate of damages.[14] In cases in which the notice is provided following something other than a denial of coverage, the notice must include the disputed amount of damages and a presuit settlement demand itemizing damages, attorneys fees and costs.[15]

The online form used to submit the notice can be found on the civil remedy and required legal notices webpage of Florida's Division of Consumer Services.[16] 

The additional information required per the statute including the disputed amount of damage and presuit settlement demand in cases other than a denial of coverage will provide insurers with the requisite information necessary to evaluate the claim prior to suit being filed.

Prior to the imposition of the statute, insureds were able to file suit at anytime without having ever provided insurers with supporting documentation that in many cases would obviate the need for suit altogether. However, after July 1, insurers are in a position to address disputed damages in an attempt to avoid lawsuits.

In response to the notice, an insurer is now required to respond in writing within 10 days. Specifically, in the response to a notice regarding denial of coverage, the insurer must either (1) accept coverage, (2) deny coverage, or (3) assert the right to reinspect the property within 14 business days.[17]

Conversely, in the response to a notice regarding something other than denial of coverage, the insurer must respond by making a settlement offer or requiring the insured to participate in an appraisal process.[18]

As a check and balance on the presuit process, the notice statute allows a court to dismiss without prejudice any suit in which the claimant failed to provide notice or the presuit period did not properly conclude, again reducing the amount of frivolous lawsuits that insurers are forced to defend.

If a claimant commences an action in a Florida court based upon or including the same claim against the same adverse party that such insured has previously voluntarily dismissed, then the court may order the insured to pay the attorney fees and costs of the adverse party resulting from the action that had previously been voluntarily dismissed.[19] 

Finally, the notice statute states that the notice and other documentation is admissible as evidence in a civil action or an alternative dispute resolution proceeding.[20] The notice and submissions requirements do not limit the evidence of attorney fees, damages or loss that may be offered at trial.[21] They also do not relieve any obligation that an insured or assignee has to give notice under any other provision of law.[22]

While the notice statute imposes more stringent requirements on policyholders, the effect in practice will likely be a dramatic reduction in the amount of suits filed. Accordingly, litigation costs for insurers will decrease, while meritorious suits are likely take less time to filter through the courts.

Section 627.70152 Attorney Fees Scheme

Most importantly, the notice statute sets a forth a new scheme for calculating the amount of attorney fees allowed to be awarded, which is based on the difference between the amount ultimately obtained by an insured compared to the amount originally in dispute. [23]

That difference can then result in three distinct scenarios:

1. The claimant does not recover attorney fees — when the difference between the amount obtained by the insured and the presuit settlement offer by the insurer is less than 20% of the amount in dispute during the presuit notice period, a claimant may not be awarded attorney fees under Sections 626.9373 and 627.428.[24]
2. The claimant recovers 20%-50% in attorney fees — when the difference between the amount obtained by the insured and the presuit settlement offer by the insurer is between 20%-50% of the amount in dispute during the presuit notice period, a claimant may recover the same percentage of attorneys fees under Sections 626.9373 and 627.428.[25]
3. The claimant recovers all attorney fees — when the difference between the amount obtained by the insured and the presuit settlement offer is greater than 50% of the amount in dispute at the presuit during the presuit notice period, a claimant the full amount of attorney fees under Sections 626.9373 and 627.428.[26]

With the applicability of fees now based on this mathematical formula, courts will have considerably less discretion to order payment of attorney fees and costs, and insureds will be less inclined to race to the courthouse.

Many Florida practitioners hope that the notice statute will tip the scales in favor of a more balanced scheme for the imposition of attorney fees and costs. While previously insureds were able to recover fees upon the rendition of a judgment alone, now insureds will be forced to show entitlement through the imposition of a judgment at least 20% higher than the amount in dispute during the notice period. 

Conclusion

In conclusion, the notice statute is expected to bring much needed change to the landscape of property insurance litigation in Florida by adding some semblance of balance to a historically hostile environment for property insurers.

Christine Renella and William Zieden-Weber are partners and Kevin Neslage is an associate at Zelle LLP.

Zelle summer law clerk Estefania Re contributed to this article.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] The Florida Senate, https://www.flsenate.gov/Session/Bill/2021/76/?Tab=BillText (last visited Jul. 21, 2021).

[2] Based on the "substantial likelihood" of a free speech violation under the First Amendment, a district court judge recently issued a preliminary injunction preventing enforcement of the portion of SB 76 that would prohibit contractors from encouraging someone to file a roof damage claim. See Gale Force Roofing & Restoration, LLC v. Julie I. Brown, Case No. 4:21-cv-00246-MW-MAF (N.D. Fla. July 11, 2021).

[3] See Tillis v. Liverpool & London & Globe Insurance Company, 35 So. 171 (1903) (rejecting an insurance company's argument that the 1893 law providing that an insured may recover attorney fees in actions against an insurance company to enforce a policy violates due process and equal protection).

[4] Fla. Stat § 627.428 (2021). Fla. Stat § 626.9373 (2021) is nearly identical to § 627.428 but regulates surplus lines insurers; SB 76 adds the same language to both attorney fees statutes.

[5] Johnson v. Omega Ins. Co., 288 SO.3d 1207, 1215-1216 (Fla. 2016).

[6] Fla. Stat § 627.428 (2021).

[7] See Fla. Patient's Comp. Fund v. Rowe, 472 So.2d 1145 (1985).

[8] Fla. Stat § 627.70152(3)(a) (2021).

[9] Id.

[10] Id.

[11] Fla. Stat. § 627.70152(3)(a)(1) (2021).

[12] Fla. Stat. § 627.70152(3)(a)(2) (2021).

[13] Fla. Stat. § 627.70152(3)(a)(3) (2021).

[14] Fla. Stat. § 627.70152(3)(a)(4) (2021).

[15] Fla. Stat. § 627.70152(3)(a)(5) (2021).

[16] https://www.myfloridacfo.com/division/consumers/civilremedy.htm.

[17] Fla. Stat. § 627.70152(4)(a)(1)-(3) (2021).

[18] Fla. Stat. § 627.70152(4)(b) (2021).

[19] Fla. Stat. § 627.70152(7)(c) (2021).

[20] Fla. Stat. § 627.70152(4)(a) (2021).

[21] Fla. Stat. § 627.70152(4)(b) (2021).

[22] Fla. Stat. § 627.70152(4)(c) (2021).

[23] Fla. Stat. § 627.70152(8) (2021).

[24] Fla. Stat. § 627.70152(8)(a)(1) (2021).

[25] Fla. Stat. § 627.70152(8)(a)(2) (2021).

[26] Fla. Stat. § 627.70152(8)(a)(3) (2021).