BREAKING: Good News For Florida Insurance Companies!
Updated: Jan 23, 2020
Just in time for the season of giving, good news for insurance companies comes in the gift of the Florida House Bill 301 which offers changes that ought to decidedly affect the bottom line for everyone involved. The progressions relate to liability insurance, civil remedies, claims administration, and property insurance claim mediation.
1. Insurers may now recover defense costs when another insurer has a right to defend against a mutual insured and neglects to do so.
2. Insurers will have to confirm that its reservation of rights letters are timely issued to the named insured by one of the techniques prescribed in the statute.
3. Insurers may see less statutory bad faith claims, which could decrease insurance costs and, therefore, rates for Florida's insureds!
4. Insurers will have an increased opportunity to resolve claims through appraisal, as it will be a lot harder for courts to discover insurers waived their right of appraisal due to lack of notice.
Right of Contribution for Defense Costs
With the passing of HB 301, liability insurers may now assert a claim of contribution for defense costs when multiple insurers are defending against the same insured. This enables insurers to recover defense costs when another insurer has a right to defend and neglects to do as such.
The law adequately overrules Argonaut Insurance v. Maryland Casualty, 372 So. 2d 960 (Fla. 3d DCA 1979) and its progeny, which held that a guarantor couldn't state a case for contribution against another insurer that had an obligation to protect their mutual insured and neglected to contribute to the defense.
The last bill examination of HB 301 noticed that under the Argonaut standard,
“...where multiple insurers have a duty to defend, a waiting game may ensue prior to one insurer taking on the defense of the matter and beginning to incur defense costs.”
HB 301 contains two provisos relative to this new right of contribution. In the first place, while this section mostly applies to “liability insurance policies,” it explicitly excludes motor vehicle liability insurance or medical professional liability insurance. Second, it just applies to cases, suits or actions started on or after Jan. 1, 2020.
Verification of Mailing
Asserting Coverage Defenses in a Reservation of Rights Letter
Florida's Claims Administration Statute, Fla. Stat. Section 627.426, provides, partially, that a liability insurer may not assert a “coverage defense” unless notice is given to the insured “within 30 days after the liability insurer knew or should have known of the coverage defense.” Before HB 301 was passed, the statute required notice be given to the insured by “registered or certified mail,” and was unclear if other mailing administrations, for example, FedEx or UPS could be utilized.
HB 301 amends the notice requirement, providing that notice must be given
“...by United States postal proof of mailing, registered or certified mail, or other mailing using the intelligent mail barcode or other similar tracking method used or approved by the U.S. Postal Service.”
While there is case law pardoning an insurer's compliance with this statute where the insured received actual notice on a timely basis, see Phoenix Insurance v. McCormick, 542 So. 2d 1030 (Fla. 2d DCA 1989), given the particular language added to this segment, insurers should confirm that its reservation of rights letters are timely issued to the named insured by one of the techniques prescribed in the statute.
Common Remedies Against Insurers
HB 301 contains two updates to Florida's Civil Remedy statute, Fla. Stat. Section 624.155, which makes a statutory bad faith cause of action against an insurance company.
While a complainant must still provide facts and other information with specificity in a civil remedy notice, HB 301 removes the Department of Financial Services (DFS) from any duty to survey the substance of the civil remedy notice. Rather, insurers may challenge the sufficiency of the notice in court instead of through DFS.
Furthermore, HB 301 will give insurance companies a head start in the appraisal process when taking care of private property protection guarantees and may diminish the quantity of bad faith claims. The new law requires an insured to wait 60 days before filing a civil remedy notice after appraisal has been invoked, allowing an insurer more time to finish the appraisal process and for any payment owed to be given to the insured. As indicated by the last bill examination, by settling contested cases before a civil remedy notice can be filed, insurers may see less statutory bad faith claims, which could decrease insurance costs and, therefore, rates for Florida's insureds.
Property Insurance Claim Mediation
Before HB 301 was passed, Fla. Stat. Section 627.7015(2) expected insurers to notify its insureds “of its right to participate in the mediation program under this section “at the time a claim was made by the insured." However, HB 301 amends that section to add that an insurer may give notice of the mediation program “at the time of issuance and renewal of a policy or at the time a first-party claim” is made. This amendment aids insurers issuing personal lines and commercial residential policies that seek to resolve disputed claims pursuant to appraisal.
The Third District Court of Appeal recently fortified the principle that an insurer can waive its right to appraisal by not giving an insured with notice pursuant to Section 627.7015(2) of the right to mediate after a claim is made. See Kennedy v. First Protective Insurance, 271 So. 3d 106 (Fla. 3d DCA 2019). Under the new version of this section, an insurer can now comply with Section 627.7015(2) by providing notice of the right to mediate “at the time of issuance and renewal of a policy.”
Because of this amendment, insurers ought to have an increased opportunity to resolve claims through appraisal, as it will be a lot harder for courts to discover insurers waived their right of appraisal due to lack of notice.
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