The people of Florida scored an important victory recently in the ongoing legal saga related to insurance claim tort reform. Florida’s Fifth Circuit Court of Appeal recently overruled a trial court ruling that allowed changes to Florida Statute 627.428 to apply retroactively. Why does the appellate court decision matter to the people of Florida? Attorney Paul Reed of Reed & Reed explains the recent legislative changes and addresses how Florida Plaintiffs would be negatively impacted by retroactive application of those changes.
2023 Changes to Attorney Fees in Insurance Lawsuit
When a homeowner files a claim with their insurance company for damages to the property, the insurance company typically does one of three things: pays the claim in full, denies the claim in its entirety, or offers to pay less than the full value of the claim. If the homeowner is unable to negotiate a satisfactory out-of-court resolution, a lawsuit may be initiated against the insurance company alleging breach of contract. For more than 100 years, the law of the State of Florida has been to allow a Plaintiff to recover attorney fees from the defendant when such a lawsuit is successful. In other words, if you sued your homeowner’s insurance company, and you won, you could collect attorney fees from the insurance company.
Changes to Florida Statute 627.428, which took effect on March 24, 2023, changed that long-standing precedent. Now, even if your lawsuit is successful, you cannot collect attorney fees in an insurance claim lawsuit. In practical terms, changes to the law have removed all incentives for insurance companies to act in good faith when negotiating claims.
Listen to Paul and Jason discuss this case on the LiveFeedReed podcast
What Does Retroactive Application Mean?
Generally, changes to the law do not take effect immediately. Instead, most legislation specifically notes an “effective date” upon which the law will become effective. In that case, the relevant law will apply to all cases initiated after the law’s effective date. It is possible, however, for a law to be effective retroactively, meaning that the law will apply to cases that began prior to the date the law was passed.
In the case of attorney fees in insurance claim cases, applying the law retroactively would mean that cases already pending when the law took effect would no longer be eligible for an attorney fees award even if the Plaintiff won. To put the impact of retroactivity in perspective, imagine a Plaintiff in a $500,000 lawsuit against an insurance company has incurred over $50,000 in legal fees litigating the case; however, both the Plaintiff and the attorney have relied on the ability to collect attorney fees from the defendant when they win the case – and they do win the case. Now, however, the Plaintiff stands to lose $50,000 of their damages award because they are unexpectedly responsible for paying their legal fees.
How Does the Court of Appeal Ruling Impact Florida Plaintiffs?
There is no doubt that the change to Florida Statute 627.428 was a huge win for the insurance industry in the State of Florida. Without the need to worry about a substantial attorney fees award, insurance companies can now routinely deny claims and only pay up if the insured goes to the trouble and expense of litigating the claim.
As is so often the case, insurance companies pushed for an even bigger victory by attempting to argue that the new law should apply retroactively, meaning that Plaintiffs with cases already pending when the law went into effect would also be barred from collecting attorney fees. After listening to arguments from a Plaintiff and Defendant, one trial judge agreed that the law should be applied retroactively.
Fortunately, a similar case was taken up on appeal to the Fifth Circuit Court of Appeals wherein the court found that the law should not apply retroactively, pointing to the legislation itself which states “[e]xcept as otherwise expressly provided in this act, this act shall apply to causes of action filed after the effective date of this act.” While the Court of Appeals decision does not impact Plaintiffs contemplating an insurance claim lawsuit today, it does provide a measure of protection for those Plaintiffs who had a lawsuit pending on March 24, 2023 by ensuring that they are still entitled to attorney fees if their case is successful.
If you have additional questions or concerns about insurance claim attorney fees, contact the insurance claim attorneys at Reed & Reed.