Hurricane Milton blew across the State of Florida barely two weeks after Hurricane Helene hit the Sunshine State. Collectively, Hurricanes Helene and Milton are estimated to have caused over $100 billion in damage. Homeowners throughout Florida will be filing insurance claims for the foreseeable future. Unfortunately, many more claims will be denied or underpaid because of changes to Florida Statute 627.428. Those changes significantly tilted the balance of power between insurance companies and homeowners in favor of the insurance companies by effectively removing the financial penalty for an insurance company that acts in bad faith when processing a property damage claim.
Listen to Paul and Jason discuss this case on the LiveFeedReed podcast
What Is Bad Faith?
When you purchase property insurance, you enter into a contract with the insurance company. Within that contract is an implied duty of good faith and fair dealing. In short, this means that the insurance company is supposed to act fairly and honestly when processing and paying claims filed by an insured. Bad faith involves an insurance company’s breach of this implied duty through the company’s acts or omissions. Common examples of bad faith on the part of an insurance company include failing to investigate a claim, knowingly offering an insured less than the value of the claim, or denying a valid claim without just cause. Prior to the changes to Florida Statute 627.428 which took effect in 2023, an insured could collect attorney fees if they prevailed in a lawsuit against the insurance company, providing insurers with a significant financial incentive to avoid acting in bad faith.
“Bad Faith” After Changes to Florida Law
Before the law was changed, insurance companies knew that acting in bad faith would likely result in a verdict that included substantial attorney fees if they litigated the claim and lost. In other words, acting in bad faith would cost them more money in the long run. Now, as attorney Paul Reed said on Lawyer Podcast, “What used to be bad faith is now standard operating procedure.” Insurance companies no longer have an incentive to act in good faith because they no longer face an additional financial penalty in the form of attorney fees.
By way of illustration, consider an example that attorney Reed mentioned in the podcast. Imagine that a homeowner purchased property insurance and paid the premiums as required under the terms of the contract. During Hurricane Milton, that homeowner’s roof was destroyed. Estimates for replacing the roof are around $20,000; however, the insurance company only sends out a check for $2,000. You don’t have to work in the insurance or construction industry to know that you cannot get someone to install a new roof for $2,000. The insurance company knows this as well. In fact, the insurance company likely knows that the insured will prevail in a lawsuit. The problem is that the insurance company, despite clearly acting in bad faith, will only be required to pay the original $20,000 claim even if they lose at trial. In the interim, that $20,000 is earning interest, meaning the insurance company will actually spend less money litigating the claim than they would if they paid the full value of the claim at the time the claim was filed.
How Can a Property Damage Insurance Claim Lawyer Help?
If your property has sustained significant damage, you are undoubtedly counting on your homeowner’s insurance to cover the cost of repairing or replacing the property. Knowing that your insurance company no longer has an incentive to handle your claim in good faith is certainly disconcerting. The best way to balance the scales is to get an experienced property damage insurance claim lawyer on your side immediately if you experience delays in the claims process, your claim has been denied, or the insurance company is attempting to pay you less than the full value of your claim. An attorney can protect your rights throughout the claims process and advocate on your behalf if litigation becomes necessary.