Florida’s Tort Reform: Changes and Implications for the Insurance Industry

Florida’s legislature is continuing its efforts to mend the insurance crisis in Florida. The newest proposed bill targets litigation, attorney fees, admissibility of medical bills and bad faith actions. Herein, we will be discussing the changes and potential implications for insurance carriers, their insureds and counsel.

Attorney Fees and Attorney-Client Privilege Removal of Attorney Fee Multipliers

In some situations, a ‘contingency fee multiplier’ increases the amount of attorney fees awarded to a plaintiff. It can multiply the attorney fee award (known as the lodestar amount) by 1.5 to 2.5 times. The proposed law would essentially eliminate attorney fee multipliers, under the presumption that lodestar fees were reasonable. Multipliers would only be awarded in extraordinary circumstances. This proposed law will result in reduced attorney fees awarded to a plaintiff. It may also dissuade attorneys from taking some plaintiff cases, in turn reducing the number of lawsuits filed.

Removal of Attorney Fee Statutes Pertaining to Insurance Cases

Under current law, if an insured receives a judgment against an insurer in Florida, including a surplus lines carrier, the insured can recover reasonable attorney fees. The proposed law would remove the Florida Statutes which pertain specifically to attorney fees in lawsuits against insurers and surplus lines insurers. This change would eliminate the one-way attorney provision meaning each party would be responsible for its own attorney fees and costs. As such, an insurer would not be responsible for a plaintiff’s attorney fees even where the plaintiff prevailed in the lawsuit.

Limitation on Attorney-Client Privilege

Under current Florida law, the attorney-client privilege protects communications between the attorney and the client, except in a few circumstances. Communication between the attorney and the client wherein the attorney refers the client to a health care provider is protected.

The proposed law would eliminate the attorney-client privilege for communications where a lawyer referred the client to a health care provider for medical services. Other parties to a lawsuit, including insurance carriers, would be entitled to discover the communications between the attorney and the client concerning the client’s referral to a health care provider.

New Requirements and Clarifications for Bad Faith Actions

Under current Florida law, whether an insurer acted in bad faith is determined under a “totality of the circumstances” standard. The jury determines whether the insurer’s actions constitute bad faith on a case-by-case basis. An insurer must act in good faith to settle a claim, but no such good faith obligation exists for the plaintiff. The proposed law would explicitly clarify that “mere negligence” does not amount to bad faith on the part of an insurer.

Furthermore, when there was more than one third-party claim that exceeds policy limits and the claims arose out of one occurrence, all entitled parties would receive a pro rata share of the policy limits. These changes to bad faith actions could reduce the chance that an insurer was found liable for bad faith, especially if there were multiple claimants and the insurer offered the policy limits or the claimants’ demand. These changes to the requirements and standards for bad faith actions could reduce the number of bad faith lawsuits and an insurer’s potential liability.

Change to Negligence Standard

Florida is a pure comparative negligence state. The jury assigns a percentage of fault to each party and then allocates damages in accordance with the assigned percentage(s) of fault. The proposed law would bar a plaintiff from recovering any damages If the plaintiff is found to be more than 50% at fault. This means that an insurer will not be obligated to pay damages in any lawsuit where the plaintiff is found to be 50% or more at fault.

Reduction of Limitations Period for Negligence Cases

Under current Florida law, the statute of limitations for negligence cases is four (4) years. The proposed law would reduce the limitations period to two (2) years. This would reduce the amount of time for a plaintiff to file a general negligence case, which will obviously reduce the number of viable lawsuits filed. If fewer lawsuits are filed, fewer litigation expenses will be incurred by insurers.

Letters of Protection

A letter of protection is an agreement where the provider will defer payment until damages (if any) are awarded with the assurance that the medical bill(s) will be paid from the awarded damages. Under current Florida law, there is no obligation to disclose letters of protection. The proposed law would require the disclosure of letters of protection in addition to certain details about the billing and whether the health care provider sold the accounts receivable to a third-party. This would allow the other parties, including carriers, to know all individuals and entities that have an interest in the outcome of the litigation.

Past and Future Medical Bills

Under current Florida law, a plaintiff can present evidence to the jury showing the full amount of medical bills, but a defendant cannot inform the jury of collateral payments. After the jury awards damages to a plaintiff, the court reduces damages by any amounts paid by collateral sources, such as health insurance companies. The amount billed for medical treatment and services may not be the amount received by the provider or facility. Factors such as whether a party has health insurance and whether there is a negotiated rate with the health insurance company can impact the amount paid. Thus, a jury may award future damages based upon the full cost of medical treatment and services because the jury does not know the amount the provider or facility actually received or will receive. Future medical expenses are based on the treating physician’s diagnosis and the costs associated with the treatment for the plaintiff’s prognosis. Under the collateral source rule, the cost of future medical treatment and services is not adjusted.

Under the proposed law, the damages for medical treatment or services would be limited to the amounts provided in the evidence produced and could not exceed the sum of the amounts actually paid, the amount outstanding at the time of trial and the amount for future reasonable and necessary medical treatment and services. Furthermore, the proposed law would set forth specific requirements for determining the amount of damages for past and future medical treatment and services. For past medical treatment or services, the damages would be the amount actually paid and the amount of unpaid expenses for prior care. If the plaintiff had health insurance, the damages would be the negotiated rate paid by health care coverage plus any amount owed by a party. There would be requirements if a party did not have health insurance. Additionally, there would be different requirements if there was a letter of protection. Future medical expenses would be limited in a manner similar to past medical expenses.

These changes would limit the evidence at trial for past and future medical treatment and services. As a result, the amount recovered by a plaintiff would likely be reduced.

Conclusion

The proposed Florida law has a target effective date of July 1, 2023. Most of the proposed changes in the law will be beneficial to insurers, including (a) the limit on evidence at trial for past and future treatment and services; and (b) the mandatory disclosure of any letters of protection. The proposed Florida law would potentially reduce the amount of damages recovered by a plaintiff.