ATTORNEY S FEES & FLORIDA S INSURANCE MARKET. Ashley Kalifeh

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1 ATTORNEY S FEES & FLORIDA S INSURANCE MARKET Ashley Kalifeh

2 WHO? LAWYERS. 4.00% Population, Job & Lawyer Growth in Florida 3.50% Florida has 11 law schools. 3.00% The rate of lawyers in Florida grows 1%-2% more than population growth. 2.50% 2.00% In a 2013 Membership Survey, the Florida Bar reported that 49% of lawyers reported that too many attorneys was the most serious problem faced by the legal profession today. 1.50% 1.00% 0.50% 0.00% Job Growth in Florida Lawyer Growth in Florida Population Growth in Florida

3 WHAT? ONE-WAY FEES Attorney s fee. (1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured s or beneficiary s attorney prosecuting the suit in which the recovery is had. Wilder v. Wright, 278 So.2d 1 (Fla. 1973) was intended to govern the relationship between the contracting parties to the insurance policy. While the injured party may become a third party beneficiary under the policy, as stated in Shingleton, that third party may not automatically invoke all the provisions of the contract or statutes governing the rights and responsibilities flowing between insurer and insured. Continental Casualty Co. v. Ryan Inc. Eastern, 422 So.2d 314 (Fla. 1982): Despite the express limitations in Section as to the class of designated entities entitled to recover attorney s fees, this Court has previously approved an award of attorney s fees in situations where policy coverage was obtained through an assignment from the insured.

4 THIRD PARTIES + ONE-WAY ATTORNEY FEE STATUTE= ZERO WAY ATTORNEY FEE STATUTE 1) Insurers pay the other party s fees when they lose. 2) Insurers pay their own fees when they win. 3) Insurers pay the other party s fees when they win! (we ll get to this in a minute)

5 WHAT? TRANSFER OF ONE-WAY ATTORNEY FEE THROUGH ASSIGNMENTS. Getting legal standing transferred is the name of the game Bring a direct lawsuit Get fees Bad faith becomes an option

6 Suits in SOP Database % of total suits in SOP database that are marked a/a/o STEPPING INTO THE POLICYHOLDER S SHOES All Lawsuits vs. a/a/o Lawsuits Closer Look: a/a/o Lawsuits as a Percentage of Total Lawsuits 250,000 40% 36% 35% 200,000 35% 33% 30% 150,000 25% 24% 29% 100,000 20% 15% 16% 20% 18% 19% 50, Year Total a/a/o Suits Total Overall Suits 10% 5% 0% 10% 3% 8% 8% 1% 6% Year

7 Suits in SOP database Suits in SOP Database PIP *Corporate plaintiffs suing over personal lines benefits means, almost de facto, that some transfer of benefits has occurred. 45,000 Total Suits by Chiro/Medical/Imaging/Massage/MRI Providers 40,693 60,000 PIP County Court Litigation by Plantiff Names 40,000 50,000 35,000 30,000 40,000 25,000 30,000 20,000 15,000 10,000 5, ,586 9,227 9,815 10,933 12, Year 20,000 10, Year Chiro County Medical County Imaging County Massage County MRI County

8 Plaintiff/Service Provider Name Suits in SOP database 8,000 AUTO GLASS Plaintiffs with "Glass" in Name 7,000 6,000 6,753 5,000 4,000 3,000 2,000 1, ,176 1, Year "Glass" Plaintiffs 2014 Top Glass Lawsuit Plaintiffs Auto Glass America Mobile Auto Glass Express Auto Glass Premier Promotions (Premier 1 Auto Glass) Cornerstone Mobile Glass (Fry Enterprises) Easy Auto Glass AmeriPro Auto Glass ,000 1,200 1,400 1, Suits in SOP Database

9 Number of Policies in Force Litigated Cases as a % of Policies in Force PROPERTY Residual Market: Citizens, FWUA, FRPCJUA Lawsuits by Plaintiff Keyword 1,600, % ,400, % ,200, % ,000, % , % 600, % , % , % Year 0.00% Policies in Force Litigated Cases as a % of Policies in Force water restor roof floor remed mitigat mold emergency carpet dry

10 WHEN? DEPENDS ON THE LEGISLATURE. Accident Cleaners v. Universal Insurance, 5D14-352, April 10, 2015 Facts: Assignee provided emergency cleanup services to repair a home from damage caused by a decomposing body. Insurer alleged that the pleading was insufficient for lack of an insurable interest. Lower court dismissed the complaint on the grounds that the assignee did not have an insurable interest. Issue: Must a post-loss assignee have an insurable interest at the time of loss in order to pursue a claim for benefits? Decision: Reversed. The right to recover is freely assignable after loss. An assignee has a common-law right to sue on a breach of contract claim, and in Section , F.S., the Legislature did not state that it was displacing common law regarding the free assignability of contractual rights. Section , F.S., only requires the property owner to have an insurable interest at the time of loss, not the assignee. One Call Property Services v. Security First, 4D14-424, May 20, 2015 Facts: Assignee brought breach of contract claim against insurer for reimbursement for water removal services. Insurer refused to reimburse the claim and moved to dismiss the lawsuit for breach of contract citing lack of standing by the assignee and policy terms prohibiting such assignments. Lower court granted motion to dismiss. Issue: Must payment be due under the loss payment provisions before an insured may assign a post-loss claim? When does an assignable right to benefits accrue? Can a loss payment provision in an insurance policy preclude an assignment of a post-loss claim? Can an assignment be invalidated on the theory that it attempts to assign a contractual duty to adjust from the insured to a third party? Decision: A third party assignee may recover benefits on a covered loss so long as the insured complies with all policy conditions. In addition, loss payment provisions do not create a contractual bar to assignment, even when payment is not yet due. Loss payment clauses merely address the timing of the payment and contemplates that a lawsuit could occur before payment is due. An assignable right to benefits accrues on the date of loss, even though payment is not yet due under the loss payment clause. Further, assignments cannot be invalidated on the theory that it assigns a duty to adjust since an insured is not an adjuster and does not determine the amount that the insurer will pay to cover losses.

11 WHEN? DEPENDS ON THE LEGISLATURE. Security First v. OIR, 1D , June 22, 2015 Facts: Insurer sought to restrict post-loss assignments in policy contract by requiring the insurer s written consent. OIR disapproved the form, citing Florida law authorizing such assignments. OIR s decision was upheld in administrative processes, leading to the appellate challenge. Issue: Was OIR s refusal to approve the policy, which required insurer s written consent for post-loss assignments, in error? Decision: Affirmed. Florida law clearly allows policyholders to freely assign claims without insurer consent. [W]e are not unmindful of the concerns that [insurer] expressed in support of its policy change, providing evidence that inflated or fraudulent post-loss claims filed by remediation companies exceeded by thirty percent comparable services; that policyholders may sign away their rights without understanding the implications; and that a cottage industry of vendors, contractors, and attorneys exists that use the assignments of benefits and the threat of litigation to extract higher payments from insurers. These concerns, however, are matters of policy that we are ill-suited to address. United Water v. State Farm, 1D July 8, 2015 Facts: Homeowners alleged 2012 water damage and entered into contract, including assigning benefits, with United Water Restoration. State Farm denied United Water s request for $2, and notified homeowner that the water damage was not covered as it was consistent with repeated leakage and seepage Lower court ruled that coverage questions could not be pursued by third party assignees. Issue: Was dismissal of case pursued by assignee appropriate? Can assignee allege breach of contract as well as seek coverage determinations in court? Decision: Reversed. Dismissal was inappropriate, as coverage question was an affirmative defense. Further, assignee is able to sue for breach of contract and, if necessary, seek a coverage determination.

12 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 WHERE? SOUTH FLORIDA. PREDOMINANTLY URBAN AREAS. 0 a/a/o Cases Filed by County YTD Miami-Dade Broward Hillsborough Orange County Palm Beach Miami-Dade Hillsborough Palm Beach Lee Duval Polk Volusia Brevard St. Lucie Hernando Leon Marion Clay St. Johns Bay Okaloosa Indian River Highlands Monroe Gadsden Santa Rosa Hendry Walton Holmes DeSoto Jackson Washington Union Madison Lafayette Hamilton Glades Franklin Calhoun Total a/a/o by County: YTD 0 20,000 40,000 60,000 80, ,000

13 80,000 Top Counties for a/a/o Litigation as % of Population 5.00% 70, % 60,000 50, % 3.50% 3.00% 40, % 30, % 20,000 10, % 1.00% 0.50% % Total a/a/o YTD as % of Population a/a/o a/a/o a/a/o YTD

14 WHY? 1. INFLATED FEES FOR VENDORS. Auto Glass Pricing Comparisons $ % $ % $ $ $ $ $ $ % 120% 100% 80% 60% 40% 20% $ % $ Volkswagen Tiguan 2006 Mercury Montego 2005 Chrysler Pacifica 2006 Lexus IS Dodge Dakota 2011 Chevrolet Aveo 2008 Nissan Versa 4 Door Hatchback Vendor Price with Tax Safelite Retail Price with Tax % difference between Vendor Price and Safelite Retail -20%

15 INFLATED FEES FOR VENDORS, CON T Line Total Requested for Reimbursement Final Amount of Reimbursement Property $516, $371, Auto $19, $15, Florida Justice Reform Institute (FJRI) study reviewed 93 surveys which listed an amount requested for payment and an amount of final payment separate from any global settlement. Companies are saving an average of 28.62% on bills by questioning them before making final reimbursement. Almost all of these were negotiated as part of a settlement. Tacit admission by vendors that their initial bills were too high?

16 WHY? 2. ATTORNEY S FEES. Of the FJRI surveys, 60 contained a stated value for both final attorney s fees and final reimbursement. 48 of these were for property claims and 12 were for auto glass. Of these claims, attorney s fees represented an average of 274% of the total amount reimbursed to the vendor. In 48 of these claims, the assignee accepted a final reimbursement LESS that what was initially requested, BUT ATTORNEY S FEES WERE STILL PAID!!!!!

17 COME AGAIN? Corporate Plaintiff Claims Adjuster The shift of the one-way attorney fee AWAY from the policyholder and TO a corporate plaintiff removes the equilibrium effect intended by the statute. The corporate plaintiff s attorney has a no-risk proposition for litigation. Therefore, they *may* be incentivized to encourage their plaintiff to move to trial in the event a settlement does not include fees. What does this mean? Even when a corporate plaintiff/vendor technically loses a case by voluntarily agreeing to a lower reimbursement amount, the plaintiff s attorney *may* discourage settlement until and at such time as an insurer also agrees to make the attorney s fees part of the settlement. INSURERS ARE BEING PUNISHED FOR ENGAGING IN ECONOMICALLY EFFICIENT BEHAVIOR BECAUSE OF THE WAYWARD APPLICATION OF TO NON- POLICYHOLDERS!

18 THE DECISION: 1) Claim/bill received by corporate vendor with assignment of benefits= a) Litigation likely. b) Defense costs inevitable. 2) Inflated price based on objective metrics. a) Pay sticker price when unjustified. b) Question bill. 3) Seek resolution after questioning bill. a) Proceed with lawsuit and incur additional costs. b) Try to settle for the lower, more objective, but don t pay attorney s fees lawsuit imminent. Go back to 3)a). c) Try to settle for lower, more objective amount, and pay something in attorney s fees to remove incentive for litigation. Claim Bill Pricing Discrepancies? Payment Plaintiff Attorney Fees Hail damage to roof $26,891 Unclear scope; higher than Xactimate $15,727 $4,500 $6,664 Slab leak; carpet, drywall & paint $5,634 Excessive equipment & scope; incomplete logs; higher than Xactimate Savings $2,468 $2,000 $1,166 Water mitigation $16,525 $14,598 higher than insurer pricing $4,000 $3,500 $8,025 Pipe leak in wall; damage to carpet, drywall, paint, cabinets Pipe leak; damage to carpet, cabinets & vanities $3,722 Excessive equipment & scope; incomplete logs; pricing higher than Xactimate $3,788 Excessive equipment & scope; incomplete logs; pricing higher than Xactimate $1,684 $1,800 $238 $1,413 $2,000 $375

19 THE RESULT.

20 RECAP One-Way Attorney Fee Statute Nonpolicyholder, Corporate/ Vendor Plaintiffs Zero-Way Attorney Fee Statute

21 FOR MORE INFORMATION Thank you.