TALLAHASSEE, Florida — A new study commissioned by the Florida Legislature reveals a concerning trend in the state’s insurance landscape. The study analyzed 58,395 insurance claims that led to lawsuits in 2022 and found that a disproportionately high number of these claims occurred in Miami-Dade, Broward, and Palm Beach counties. This raises suspicions of potential fraudulent or abusive practices prevalent in these areas. Additionally, litigated claims were found to be more than six times more expensive than non-litigated claims, potentially contributing to the high homeowners insurance premiums in Florida.
Florida Insurance Commissioner Mike Yaworsky expressed concern over the litigation issue in the state, stating that the significant disparity in costs is ultimately borne by all residents. However, the report does not align with the narrative pushed by Governor Ron DeSantis and insurance companies, who claim that frivolous or abusive lawsuits are the primary factors driving up insurance premiums. Despite legislative efforts to make it increasingly difficult to sue insurance companies, premiums have not decreased.
The litigated claims studied accounted for less than 8% of all insurance claims closed in 2022 and less than 1% of the total 7.2 million policies in effect that year. Although these claims cost insurance companies approximately $580 million, it represented a small fraction of the nearly $16 billion paid in premiums by Floridians. The data also suggests that some lawsuits were filed due to insurers’ delays in closing claims, indicating that consumers were not receiving the expected compensation.
Senator Erin Grall, a lawyer and Republican from Vero Beach, voiced her concern over the data, stating that it contradicts the insurance industry’s claims. She accused insurance companies of fabricating arguments and data to manufacture a crisis and avoid paying legitimate claims owed to homeowners.
State regulators were required to compile this data under a bill approved by Governor DeSantis in 2021. However, the release of the study was delayed due to insurers’ failure to provide complete and accurate information. Despite the missing data, the report sheds light on the disparities among counties, revealing that litigated claims were particularly prevalent in Miami-Dade, Broward, and Palm Beach counties, as well as in certain Central Florida counties.
Insurance companies have previously blamed lawyers, contractors, and public adjusters for filing frivolous lawsuits. Last month, one leading contractor was arrested on charges of inflating a roof claim. Insurers reported that 58% of policyholders who sued them engaged a public adjuster. Former State Senator Jeff Brandes acknowledged that Miami-Dade County has long been problematic in terms of the high rate of litigation, and questioned what steps the state would take to address the issue.
The study particularly refutes claims by insurance companies and business groups that a contingency fee multiplier, which doubles attorneys’ fees in certain cases, incentivizes frivolous litigation. The data shows that the multiplier was awarded only four times in 2022, suggesting it is not a significant cause of the high insurance premiums.
While litigation is not the sole reason for the inflated insurance premiums in Florida, it is undoubtedly a contributing factor. The absence of major storms in the state for 12 years, coupled with the rising cost of reinsurance, has also driven up rates. However, insurers’ mismanagement and fraud have been cited as the primary causes of many insurance company failures, with litigation playing a lesser role.
The study’s findings highlight the need for further examination and action to address the insurance landscape in Florida. It is essential to strike a balance between protecting policyholders’ rights and avoiding unnecessary litigation that drives up premiums. Improving efficiency in claims handling and encouraging transparency among insurance companies could help alleviate the insurance crisis in the state.