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Legal and regulatory

Could social inflation trends push insurers to the brink in Florida?

The frequency of costly claims will also continue to impact individuals seeking homeowners coverage.

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By Jeffrey Wank & Jordan Lande

As Florida’s courts have gradually started to re-open in-person hearings and jury trials, there has been an audible sigh of relief from the plaintiff’s bar.

Without question, the lack of jury trials due to COVID-19 has had an impact on plaintiffs and their attorneys. Plaintiffs have not been able to rely on the backstop of arguing their case to a jury. The pressure of cases sitting dormant, along with increased expectations that come with plaintiffs firms’ use of new media, has caused attorneys to revisit how first-party property insurance cases are prosecuted. The ever-increasing number of homeowners claims throughout the State of Florida has left insurers scrambling, and homeowners footing the bill.

From the beginning of the pandemic, plaintiffs’ attorneys have been more aggressive in pushing cases in order to find ways to create “wins” for clients. From the date suit was filed, plaintiffs’ attorneys have pressured to set depositions, filed motions to compel, and in many cases, pushed for methods of alternative dispute resolution. Plaintiffs’ counsels claim the requested depositions are imperative to fact-finding and to demonstrate they are moving their cases forward.

Generally, however, these depositions are nothing more than boilerplate question-and-answer sessions. The early-and-often push to set depositions has definitively increased since the pandemic began, as plaintiffs’ counsel scramble to find new ways to generate settlements in light of the absence of trials. This aggressive push to set depositions has been a strategic mechanism used by plaintiffs’ counsel, forcing carriers to decide between the costly attendance and defense of depositions, or conversely, considering settlement.

There has also been a definitive increase in the number of Civil Remedy Notices filed. Civil Remedy Notices are intended to put insurers on notice of bad faith allegations, and are a prerequisite to a claim for bad faith damages. However, these Civil Remedy Notice filings are often unsupported by actual facts that would rise to the level of bad faith. Instead, they are intended to force an insurer’s hand to consider settlement. Filing a Civil Remedy Notice at the beginning of the case provides plaintiff’s attorneys another leverage point and the hope of securing an early resolution.

That being said, plaintiffs’ counsel are not alone in taking advantage of the lack of jury trials and the subsequent increase in early settlements and/or mediations. Defense counsels have used the ongoing pandemic and congested court system to leverage the settlement of claims that otherwise may not have settled, or settled them earlier and more affordably. The threat of no jury trials is something that counsel on both sides can appreciate. The possibility of a plaintiff not obtaining resolution for years can encourage a favorable settlement.

As both the plaintiff and defense bars came to grasp that the pandemic would not end swiftly, this argument has become more helpful in both informal negotiations and at mediation. It has been especially helpful at mediation, where plaintiffs are presented with this argument in person and with the help of a mediator to show it is not just posturing by the insurance company.

COVID-19 hit at a time when plaintiffs’ firms’ use of social media had reached a new peak. Firms have switched from print and broadcast media to new forms of advertising, including social media platforms such as TikTok, Instagram and Facebook. The goal for firms that engage in these new forms of legal marketing is to obtain the largest exposure with a clever jingle and a perceived promise to effect good results. This includes law firms that specialize in first-party property insurance claims.

In Florida, where a single hurricane can lead to years’ worth of claims and lawsuits, it is not a stretch to say COVID-19 came in a year that was already primed for an explosion of first-party property insurance claims. The increased use of social media, paired with the rush to file last-minute Hurricane Irma claims, has contributed to the existing backlog of cases lingering in civil courts.

This social trend in the insurance industry should not just be a concern for insurance companies and defense counsel. Every homeowner in Florida is feeling the impact of the frequency and cost to defend first-party property claims. It has been reflected in the price of homeowners insurance, along with the availability of insurers in certain areas. The price of homeowners insurance is steadily on the rise, a number of insurers have discontinued binding policies in areas of Florida, and some have pulled out of the state entirely. The situation will inevitably continue to worsen and become more costly as the use of social media in the legal sector rises, especially if Florida continues to be impacted by more frequent hurricanes.

It appears the restart of jury trials will come on more like a slow drip rather than a flood. Counties have put procedures in place to restrict the typical pre-COVID mass jury pools. Jurisdictions have built in new COVID-19 excusals for potential jurors. This will only limit an already restricted jury pool. Further, civil cases will take a back seat to an equally growing backlog of criminal cases. Chief Judges across the state have prioritized both felony and misdemeanor criminal cases ahead of circuit and county civil cases.

Thus, it is unlikely we will see much relief of the backlog by way of jury trials. What is more likely is the continued use of alternative dispute resolution methods, including informal settlement negotiations, appraisal and mediation. Social inflation trends in the legal field may well continue to push insurers to the brink in Florida, and the frequency of costly claims will continue to have an adverse impact on individuals seeking homeowner’s insurance coverage in this state.

Jeffrey Wank is Chair of Kelley Kronenberg’s First-Party Property Insurance Defense in Fort Lauderdale, where he assists insurers in all aspects of coverage disputes.

Jordan Lande is an attorney with Kelley Kronenberg’s First-Party Insurance Defense in Fort Lauderdale. 

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