Recent changes to Florida law will directly impact home and business owners and their ability to challenge insurance companies when they encounter problems getting a first-party property claim paid. Specifically, changes to Florida Statute 627.428 took away the right to attorney’s fees when a homeowner or business owner successfully litigates a denial or underpayment of a claim.
What Was the Established Law Regarding Attorney Fees?
For over a century, established law in the State of Florida entitled a property owner to collect attorney fees from an insurance company when the property owner successfully challenged a denial of a claim or underpayment of a claim. In other words, imagine that your home suffered $50,000 worth of damage in a hurricane, but your insurance company only offered you $10,000 to settle the claim. Prior to the change in the law, you could file a lawsuit against your insurance company and if you won the lawsuit, the insurance company would be required to pay you the additional $40,000 plus pay your attorney fees incurred in pursuit of the lawsuit. Now, even if you win the lawsuit, you are not entitled to any attorney fees.
Listen to Paul and Jason discuss this case on the LiveFeedReed podcast
How Does the New Law Impact a Property Owner’s Right to Challenge Claims?
Imagine, once again, that you are the property owner who has suffered $50,000 worth of damage to your home. You likely do not have money to pay an attorney upfront to litigate a claim against your insurance company. Knowing that, property law attorneys have historically agreed to pursue litigation knowing that they will be awarded attorney fees to be paid by the insurance company if the lawsuit is successful. Now, there is no right to attorney fees, even if the attorney successfully litigates the case. This makes it more difficult for attorneys to be able to financially justify representing property owners in claims against insurance companies. Even if they are certain that a property owner has a winning case against an insurance company, it is ultimately up to the property owner to pay the legal fees involved in litigating the claim.
Worse still, the new law actually provides an incentive for insurance companies to delay paying claims. As attorney Paul Reed mentions in his YouTube interview, if an insurance company owes an insured $50,000, and the insurance company knows that worst case scenario the insurer will only owe you that original $50,000 – even if they lose a lawsuit – they have zero incentive to pay the claim immediately? On the contrary, they now have every incentive to hold onto that money and invest it, only paying it out when forced to as a result of litigation. Consequently, property owners may see an increase in the number of first-party insurance claims that are denied or underpaid.
The property damage attorneys at Reed & Reed have decided to tackle the problematic change in the law by agreeing to take property damage cases on a 20 percent contingency basis, meaning they will only get paid if they win the case. While that still means that attorney fees will ultimately be paid by property owners, it eliminates the need for clients who are already facing significant financial losses from also having to pay for an attorney upfront. It is also noticeably less than the 30-40 percent contingency fee traditionally paid in personal injury cases.