Hurricane Season Is Here – If you Suffer a Casualty, You Need to Know About This New Law

A good reason why society provides for prevailing party attorney fees and costs is to make a potential plaintiff think twice before filing a lawsuit. Imagine being able to sue your adversary in court without worry that if you lose you will NOT have to pay prevailing party attorney fees and costs to the other side. Such a situation could lead to an avalanche of lawsuits, and that is exactly what happened when Florida laws permitted contractors holding an “assignment of benefits” in their favor, who were unhappy with the award from the insurance company, to sue the insurance company with nothing to lose but to pay for their own attorney. Simply put, an assignment of benefits is an agreement transferring a homeowner’s insurance benefits to a contractor who may then file a claim against the homeowner’s insurance policy without the involvement of the homeowner. Notwithstanding the assignment of benefits, the homeowner is still responsible to pay the insurance premium and deductible. If the contractor then makes a claim against the insurance policy and is unhappy with the insurance proceeds received, the contractor can sue the insurance company with no threat of having to pay prevailing party attorney fees if the contractor lost its lawsuit against the insurance company. Without the fear of a prevailing party attorney fees award, these types of lawsuits became very prevalent. Insurers claim that this led to ever increasing insurance premiums. Not anymore!

Due to the passage of House Bill 7065 (“HB 7065”), officially taking effect on July 1, 2019, consumers may begin to notice a decrease in their insurance premiums as HB 7065 creates liability for the contractor for attorney fees and costs based upon the difference between the amount recovered and the amount offered during settlement negotiations as compared to the disputed amount. When HB 7065 takes effect, if the contractor holding the assignment of benefits sues and the difference between the judgment obtained by the contractor and the presuit settlement offer by the insurer is less than 25% of the disputed amount, the insurer is entitled to an award of reasonable attorney fees. On the other hand, if the difference between the judgment obtained by the contractor and the presuit settlement offer by the insurer is at least 50% of the disputed amount, the contractor is entitled to an award of reasonable attorney fees. Finally, if the difference between the judgment obtained by the contractor and the presuit settlement offer by the insurer at least 25%, but less than 50%, of the disputed amount, no party is entitled to an award of attorney fees.

Insurers claim that the old system resulted in abuse of property insurance claims, as contractors were inflating repair costs and essentially operating without significant financial risk during insurance litigation, thus allowing contractors to assert numerous claims in hopes that one would stick. As a result, insurance companies were left bearing the costs of these lengthy litigations, and thus, sought to recover their litigation expenses through the consumer – the homeowner – by increasing insurance premiums. While a homeowner is still able to enjoy the benefits of the one-way attorney fee privilege, this right is no longer transferable to the contractors through assignment of benefits. Clearly, this is a drastic change that will affect contractors around the entire State.

With hurricane season approaching, in the event you experience a casualty, before signing an assignment of benefits in favor of the contractor who shows up, often uninvited, not only do you need to read the fine print, but it is strongly suggested you have an attorney review the assignment of benefits contract first.

If you have any questions regarding the impact of this new law, please discuss them with your association’s attorney.

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