NEW INSURANCE LAW TAKES AWAY DAVID’S ABILITY TO FIGHT GOLIATH
On March 24, 2023, with little debate, but much fanfare, Florida passed many new insurance laws. Although I have something to say about many of the changes, lets stick with the one that is statistically likely to affect you the most…the elimination of one-way attorney fees. One-way attorney fees gave the little guy [i.e. you] the hope to be able to fight Goliath [i.e. the insurance companies].
Before the new laws, if you believed an insurance company did you wrong in Florida, you could hire an attorney and not pay a dime. If the attorney won your case, the insurance company would pay your attorney. That law gave your insurance company an economic incentive to do right by you [i.e. pay your legitimate claims]. Under the old laws, an insurance company had reason to fear that if they did you wrong, your “free” attorney would file a lawsuit and force them to pay not only your legitimate claim, but also your lawyer’s fee.
Now some lawyers, being lawyers, saw in this as an opportunity to thoroughly abuse the system for their own financial gain and they took advantage…a lot. Something really needed to be done to reduce the abuse. I’ll give you just one example, although there are many others. You have a 35 year old roof that leaks—no surprise and you’re prepared to pay for a new roof. But when you call a roofing company, they explain that there’s no need to pay for the new roof out of your own pocket. They tell you it wasn’t the roof’s age that caused your leak, far from it. It was “wind damage” from a recent storm that you forgot about and so your loss [i.e. need for a new roof] is covered by your insurance company. The roofing company will even give you the name of an “independent” public adjuster who will absolutely confirm what their friend the roofing company told you. The adjuster will give you the name of a lawyer who has worked with that adjuster in the past. And guess what, the attorney will hire the adjuster as your expert witness to testify that yes, the leak is the result of wind damage. The roofing company, the adjuster, the attorney will all get paid from an insurance company settlement. Why will the insurance company settle? Because it’ll be less expensive than risking the expense of a jury trial. And that’s how you get a new roof…completely free.
Scenarios just like this were happening throughout Florida. Roofing companies would go into a large subdivision, knock on all the doors and explain that “Your neighbor is getting a free new roof, would you like one too?” Not many could resist. Everybody was a winner, except the insurance companies.
In response, the insurance companies could raise everyone’s rates [which they did], threaten to leave Florida [which they did] or lobby for huge changes in the law [which they did, most effectively]. And that’s how you are now stuck with a new law that no longer requires the insurance company to pay your attorney if you win your case against them.
So, let’s take a look at what this new law means to you. Warning: you are not going to like it. The insurance company now has no economic incentive to do the right thing…EVER! Let’s take an example: You are in an auto accident that causes significant damage to your car. Your insurance company decides that your vehicle is a total loss and offers you $5,000 so you can replace it. But you know from a Google search that to replace your vehicle is going to cost you $20,000. Your insurance company refuses to budge on its $5,000 offer. What are you going to do about it?
In the past, you would have hired an attorney who would work for you for “free”. The attorney would have looked at the facts and because you had a strong case, know that eventually the insurance company would pay not only you, but also their legal fees.
Under the new law you can still hire that attorney, but you won’t. The lawyer is going to want an upfront retainer to pay their hourly fees…do you have $5-10,000 in cash to hand over? You’re going to ask the lawyer, “Will $10,000 get me my $20,000?” Good question and the answer, probably not. The insurance company is already lawyered up and ready to battle you to the death. Goliath after all has deep pockets and a huge staff. They know you aren’t going to be able to afford to keep your lawyer “retained” through trial, let alone an insurance company appeal [should the trial happen to go in your favor].
So the insurance company has no economic incentive to behave reasonably. Their worst day in Court is what they were supposed to do anyway from the beginning, plus some time of their staff lawyers. Are you financially and mentally prepared to pay your attorney some huge, unknowable amount of money to fight the insurance company for the additional $15,000 you deserve? No. You’ll take the $5,000, know that you should have received $20,000 and simmer knowing there’s nothing that you can logically do about the insurance company having ripped you off.
Now apply this to every insurance product and you get the same result. Life insurance…we’re only paying you ½ of what your loved one purchased from us. Fire burns your house down…we’re only giving you one-third the money to rebuild. Auto injury…we’re obligated to pay up to $10,000 for your medical expenses, but we’re going to cut you off at $1,500. You get the idea…Goliath wins every time.
The insurance companies won’t fully abuse you and every other Floridian in every claim. They’re too smart for that. The outrage would appear on the internet too fast and too loud resulting in demands for immediate change. Instead, they’ll be a bit more subtle, but the result will be the same. You paid premiums to an insurance company so they’ll pay you for legitimate claims. But under the new law, the insurance company will never have any economic incentive to pay for your legitimate claims.
The ”old” law was put into place for a reason. The old law was abused and needed to be changed, not eliminated. But elimination is what you got.
And what did you get in return for this new law? Nothing, nada, zippo. The insurance companies are not required to lower your premiums and they can still ask the Department of Insurance to raise them. The insurance companies can still leave the State, but frankly, with such juicy profits on the table, why would they?