The Impact of Florida’s Tort Reform Bill on Insurance Litigation

On March 24, 2023, a sweeping tort reform bill was signed into law by Florida Governor Ron DeSantis. House Bill 837 was touted by DeSantis as being designed to reduce frivolous lawsuits and prevent predatory practices of trial attorneys. Notably, the bill will have a significant impact on insurance litigation as it modifies the bad faith framework, eliminates one-way attorneys’ fees, shortens the statute of limitations for negligence claims and changes the comparative negligence standard.

Attorney’s Fees

HB 837 repeals laws authorizing the recovery of one-way attorney fees in insurance cases, with the exception of declaratory judgment actions. One-way attorney fees entitle an insured or beneficiary to recovery reasonable attorney’s fees in a lawsuit wherein they prevail against an insurer and any amount of recovery is awarded. Now that insureds will have to bear the burden of their own attorney’s fees regardless the outcome, insurers will likely see a decline in lawsuits filed by Florida insureds and beneficiaries, as well as an increase in early settlements for claimants that do opt to litigate.

Statute of Limitations

HB 837 shortens the statute of limitations for negligence actions from four years to two years. This applies to causes of actions that accrue after the effective date of the law (March 24, 2023). This narrowing of the window of opportunity for claimants to pursue negligence actions will likely result in a reduction of bad faith claims against insurers, leaving insureds and beneficiaries to rely more heavily on breach of contract actions, which have a five-year limitations period in Florida. Although rare in the insurance bad faith context, the threat of punitive damages will be lessened as a result.

Bad Faith

One of the biggest changes implemented by HB 837 is the legal framework for bad faith claims. Under the new law:

• An insurer can avoid an action for bad faith involving a liability insurance claim if the insurer tenders policy limits or the amount demanded by the claimant within 90 days after receiving actual notice of the claim.
• Failure of an insurer to tender within 90 days is not bad faith and is inadmissible in a bad faith action.
• If the insurer fails to tender within 90 days, any applicable statute of limitations is extended for an additional 90 days.
• Mere negligence alone is insufficient to constitute bad faith.
• Insureds, claimants and their representatives have a duty to act in good faith in furnishing information regarding a claim, making a demand, and attempting to settle an insurance claim.
• In a bad faith action, the trier of fact may consider whether the insured, claimant or their representative did not act in good faith and may reasonably reduce the damages awarded against the insurer.
• If two or more third party claimants have competing claims arising out of a single occurrence, which in total may exceed the insured’s available policy limits, the insurer does not commit bad faith by failing to pay if, within 90 days after receiving notice of the competing claims, the insurer either files an interpleader action or follows the arbitration procedures outlined in the bill.

With these changes, insurers will have multiple tools at their disposal to avoid bad faith liability altogether or lessen a potential award based on a showing of the insured’s own bad faith. This, coupled with a shorter statute of limitations period, will significantly constrain plaintiffs’ ability to pursue meritless bad faith claims.

Negligence-Based Damages

HB 837 also changes Florida’s damages recovery system from pure comparative negligence to modified comparative negligence, except for medical negligence cases. Under pure comparative negligence, a plaintiff could recover the defendant’s proportion of responsibility for an injury, regardless of plaintiff’s own amount of responsibility. Under a modified comparative negligence standard, a plaintiff who is more at fault for their injuries than the defendant cannot recover damages from the defendant. Thus, insurers are now protected from claims by insureds and beneficiaries who are more than 50% at fault.

Going Forward

The law applies to all causes of action filed after its effective date of March 24, 2023, and — to the extent that it impacts rights under an insurance contract — also applies to insurance contracts issued or renewed after that date.

In a frantic attempt to avoid the effect of the new law, the plaintiffs’ bar hurriedly filed an onslaught of complaints, estimated to exceed 100,00 filings, just before the bill was signed. Although insurers may have seen a brief uptick in complaints, it seems fairly clear that the law will ultimately lead to a reduction in insurance lawsuits in Florida.