Florida fights back – tort reform battles plaintiff bar

On March 24, the Florida legislature passed House Bill 837 (“HB 837”), giving businesses and society at large a defense against the outsized influence of the plaintiffs’ bar and the severe social inflation prevalent in the state.

“Nuclear” verdicts in excess of $10 million and “mega” verdicts in excess of $100 million have permeated the U.S. landscape in the last decade and continue to increase in both frequency and severity.

The highly organized plaintiffs’ bar has developed a playbook which incorporates various strategies to sway jury pools and achieve runaway liability verdicts. Class actions and mass torts are being funded via sophisticated investment capital vehicles, with wealthy investors seeking as much as 30% to 40% ROI, and flooding television, social media and community billboards with attorney advertising at a scale previously unseen.

The effect has been a toxic legal environment where the insurance marketplace has paid billions of dollars in excessive verdicts. This has led way to untenable combined ratios, reduced insurer capacity, limited coverage terms and volatile premium rates.

Florida’s need for reform

By multiple metrics, tort reform was desperately needed in Florida. Florida’s legal environment has been defined by mechanisms that let attorneys file an inordinate number of cases, with the goal of collecting on all claims whether legitimate or fraudulent. According to the state’s Office of Insurance Regulation, the state accounts for nearly 80% of the nation’s homeowners’ insurance lawsuits, but it only sees 9% of all homeowners’ insurance claims.¹

Florida has also been a hotbed of outsized verdicts driven by attorney advertising. From 2010 to 2019, Florida trials produced 213 nuclear verdicts, the value of which totaled $35 billion.² This was more than any other state, and was by far the most per capita. And between 2017 and 2021, viewers in Florida were subject to the most local television legal services ads on television as compared to viewers in any other state, and more money was spent on these local TV ads for trial lawyers than in any other state.³ In this context of runaway liability claims, defendants and insurers were unable to manage these untenable risks posed by social inflation and an opportunistic plaintiffs’ bar.

Florida’s response – the Tort Reform Act

On March 24, 2023, Florida enacted a significant tort reform law, HB 837, which will have far-reaching effects in a number of ways. In particular, the “Act” had the following provisions:

• Statute of limitations: The time for a plaintiff to bring a claim based in negligence, including some personal injury claims, was cut in half from four years to two years.
• Bad faith: The Act consolidated the two avenues for bad faith that previously existed in Florida – common law bad faith and statutory bad faith. It bars a finding of bad faith where an insurer tenders policy limits or the demanded amount within 90 days of receiving notice of the claim. It also clarifies that mere negligence alone cannot constitute bad faith. Finally, it requires that plaintiff demands be made in good faith, and allows judges and juries to consider whether a claimant or counsel did not act in good faith and potentially reduce damages against an insurer accordingly.
• Comparative fault: The Act modified Florida’s previous system of “pure” comparative fault, in which if a defendant was at fault to any degree, a plaintiff could recover based on the percentage of fault assigned to that defendant – even if the plaintiff was the cause of the accident to a greater degree. Now, in certain actions, if a plaintiff is more than 50% at fault for his or her own injuries, they cannot recover damages.
• Medical damages: Juries will now be permitted to consider the actual cost and value of medical expenses submitted as damages during trial, including rates paid by Medicare, Medicaid and insurance coverage. They can also hear evidence as to the relationship between plaintiffs’ counsel and the plaintiffs’ medical provider, including fee agreements and timing of payment.
• Attorneys’ fees: The Act repealed the ability of plaintiffs’ attorneys to recover their fees in most claims, and eliminated the use of contingency risk multipliers when judges are calculating attorney fees. It also required a “strong presumption” that a lodestar fee is sufficient and reasonable; a lodestar fee is determined by multiplying a reasonable attorney hourly rate by a reasonable number of hours required to try the case.⁴
• Security presumption: The Act set a presumption against liability for criminal acts committed by third parties where residential building owners or managers meet certain security baselines, including security cameras, lighting in parking lots and common spaces, and locking controlled access points. It also allows judges and juries to consider the fault of all persons who contributed to an injury for which the claimant seeks recovery.

Immediate and long-term effects of the Florida reform

Many of the provisions will go into effect immediately, and will apply to rights that arise after the effective date of March 24, 2023, or an action or claim that accrues after March 24, 2023. That means the clock begins ticking on the shorter statutes of limitation for new claims now, and claims filed as early as March 25 will be subject to the new rules as to evidence and disclosure. This will require litigants, courts, and attorneys to adjust to the new rules on an accelerated timeline.

However, parties, attorneys and the Florida judicial system will first have to manage the tens of thousands of cases that were reportedly filed in the state at the 11^th hour before the Act was passed. Plaintiffs’ attorneys, aware of the pending legislation, took steps to ensure that their cases would be filed before the Act was passed. Any such actions will not be subject to the provisions of the Act and will be litigated based on the laws in effect at the time the case was filed. Such a massive influx of litigation will potentially overburden a number of actors. Defense counsel will have to file answers or responsive motions or risk default judgments. Plaintiffs will have to be mindful of the deadlines to amend actions, add parties, and file motions. And court attorneys, clerks and judges will be forced to manage dockets and trial calendars that are already stretched thin before the sudden increase in litigation across the state. It remains to be seen how the system handles these developments.

In the longer term, this reform is a welcome respite to business owners, insurers, taxpayers and society as a whole. Jonathan Drummond, WTW’s Head of Broking for North America, noted that, “Over the past decade, excess loss costs have grown exponentially and that has directly led to a challenged excess casualty marketplace. While this legislation is welcomed, our industry and elected officials need to continue pushing for more reform.” In a statement, the American Property Casualty Insurance Association’s vice president of state government relations Logan McFaddin said the Florida reform “will help restore fairness to Florida’s legal system, reduce the excessive number of frivolous lawsuits being filed, and ultimately help benefit consumers by increasing the availability and affordability of insurance over time.”⁵

Risk considerations

As noted in the near term, many corporations are likely to see an initial uptick of claims filed in Florida – any potential actions which were looming were probably filed prior to March 24, if plaintiffs’ attorneys were able to do so. When considering the changes, policyholders will need to be highly conscious of the legislation in evaluating and trying cases, including when valuing resolution opportunities and the likelihood of a nuclear verdict versus a defense verdict.

Insurers will certainly be analyzing the overarching effects of the legislation and the impact the various provisions will have on individual cases and defense strategy. As always, policyholders, insurers, broker advocates and counsel will need to communicate and share analysis in order to achieve the best realistic outcome in light of the risks of any specific claim or action. And certain industries, including construction, real estate management and trucking will pay close attention to how loss history and exposure are modified in light of these changes. Clients should consult their broker contacts and resources with respect to macro changes this tort reform brings and how it influences their particular risks, coverage and claims.

Footnotes

¹ Trends and Insights: Addressing Florida’s Property/Casualty Insurance Crisis

² Judicial Hellholes 2022/23

³ Legal Services Advertising Report (United States) – ATRA

⁴ Fla. Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985).

⁵ APCIA Praises Governor DeSantis and Florida Legislature for Taking Action to Address Rampant Legal System Abuse in Florida

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice. We strongly encourage you to consult with appropriate professional advisors, including legal counsel, if you have any questions concerning the tort reform update provided herein. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).