THE FLORIDA LEGISLATURE STALLS IN ITS EFFORTS TO PASS LONG-SOUGHT REFORMS TO THE PERSISTENT LAWSUIT ABUSES
Having finally enacted several reforms in 2019 like assignment of benefits reform and narrowing the dan- gerous instrumentality doctrine, the legislature stumbled in 2020, failing to make much progress on top priority issues.
ONE BRIGHT SPOT ON VICARIOUS LIABILITY
In the one notable victory of the session, the legislature unanimously passed HB 977 to shield motor vehicle dealers from vicarious liability when they provide temporary replacement vehicles, i.e., service loaners. In other words, an auto dealership cannot be sued as a deep pocket when a customer gets into an accident simply because he or she was driving a loaner. While only a small improvement to the overall legal climate, in Florida, every little bit counts.
REFORMS STILL NEEDED
BAD FAITH ON BAD FAITH
Bad faith lawsuits targeting insurers continue to be fertile ground for trial lawyers looking to game the system, but the Florida legislature continued to avoid addressing the larger issues at play for yet another year. This is especially disappointing as more than 80 percent of Floridians think it is unfair that insurance rates rise due to excessive lawsuits and inaccurate claims against insurance companies.
Currently, most often in situations where there is clear liability, substantial damages, and low policy limits, trial lawyers use delay tactics and multi-pronged, impossible-to-satisfy demands to set insurers up for a bad faith action. Legislation introduced in 2020 would have established a “reckless disregard” standard for third- party bad faith lawsuits, and procedures for settling claims with multiple claimants in order to avoid bad faith.
Bad faith lawsuits can result in eye-popping numbers. In just one notable bad faith action, Harvey v. GEICO, the insurer tendered the full $100,000 policy limits nine days after the accident, but was ultimately hit with an $8.47 million judgment. Legislators must address the process that leads to these distorted results or risk jeopardizing the judicial system’s legitimacy.
MULTIPLYING ATTORNEY’S FEES
Attorney fee awards in ordinary insurance disputes are calculated under a so-called “lodestar” fee of the number of hours reasonably expended by the attorney multiplied by his or her hourly rate. Attorneys may also qualify for a “contingency risk multiplier” designed for rare and exceptional circumstances where the lodestar figure does not adequately compensate for a particularly difficult case, or one where it’s hard to obtain capable and willing counsel.
Unfortunately, as the result of the Florida Supreme Court’s decision three years ago in Joyce v. Federated National Insurance Company (prior to Governor DeSantis’s appointments), contingency risk multipliers in Florida are now commonplace. As just one example, in a run-of-the-mill insurance coverage dispute, Santiago v. Florida Peninsula Insurance Co., the Court awarded the plaintiff’s attorney $1.2 million in fees on a $41,000 plaintiff’s award using a 2.0 multiplier. The chance that a court may award a multiplier in any given case is a real risk that’s pushing defendants to pay higher, unreasonable settlements.
The Florida Legislature had an opportunity to pass legislation in 2020 and realign Florida with the federal standard, so that contingency risk multipliers are only awarded in “rare and exceptional” circumstances, but the legislature failed to do so. It should not miss the opportunity again in 2021.
FIXING THE “NO-FAULT” PERSONAL INJURY PROTECTION SYSTEM
The history of fraud in Florida’s “no-fault” personal injury protection (PIP) system has been long chronicled in the Judicial Hellholes report. Under the current PIP system, insurers are required to pay up to $10,000 for medical expenses stemming from auto accidents no matter who is at fault. Florida lawyers and their associates have been abusing the system for years, contributing to why Floridians have some of the highest car insurance rates in the country. Legislators must come together and address the rampant fraud plaguing the system.
INFLATED AWARDS FOR MEDICAL EXPENSES
Plaintiffs’ lawyers have also long abused what are known as “letters of protection” to inflate medical expenses for the purpose of lawsuits. Letters of protection are agreements between a person who needs medical care, his or her lawyer, and a healthcare provider under which the healthcare provider agrees to not seek to collect a fee for medical treatment from the patient, but wait to collect out of an expected settlement or judgment. Letters of protection can serve a legitimate purpose when a person is uninsured and unable to pay for medical expenses. However, some Florida lawyers recommend that their clients not use their insurance to cover medical expenses, but rely on a letter of protection.
Under Florida law, at trial, jurors learn the initially invoiced amount of medical expenses, which is essentially a “sticker price” that is often three or more times the amount that is ultimately accepted by the healthcare provider as full payment. After a verdict, Florida law requires judges to adjust the award to reflect the actual amount of medical expenses paid and accepted, a process called a “set off.” Florida’s personal injury lawyers often use letters of protection to avoid this set off. By avoiding evidence of the actual value of medical treatment, there is no amount paid for a judge to set off the award.
This type of abuse benefits no one but the lawyers and the medical clinics that may be in cohorts with them. The lawyers get to inflate the damage award and collect a larger contingency fee. The medical provider gets paid a rate that is much higher than market value. The plaintiff, however, has these high rates taken from his or her share of the judgment, even if they would have been covered by insurance.
Legislation can ensure that jurors receive accurate information on the actual value of medical expenses and prohibit abuse of letters of protection. The legislature should also revisit the need to place reasonable constraints on subjective and unpredictable noneconomic damage awards, which are particularly important for preserving access to affordable medical care.