TALLAHASSEE (News Service of Florida) — In a defeat for business groups and the insurance industry, a House panel Thursday narrowly rejected a bill that would add restrictions in “bad faith” legal fights.
The House Civil Justice Subcommittee voted 8-7 against HB 427, which was backed by groups such as the Florida Chamber of Commerce, Associated Industries of Florida and the National Federation of Independent Business — but was fought by plaintiffs’ attorneys.
Bad-faith lawsuits occur when insurance companies face allegations that they have not properly settled claims. Fred Cunningham, president of the Florida Justice Association trial lawyers’ group, said the state does not have a “crisis in the bad-faith world” that would justify the bill’s additional restrictions.
“This is a Draconian solution in search of a problem,’’ Cunningham told the subcommittee.
Business groups and the insurance industry contend that plaintiffs’ attorneys have found ways to game the legal system, leading to bad-faith cases that can result in large settlements.
“All we want out of this bill, all we’re looking for, is fair rules to play by,’’ said Richard Clark, who runs a Jacksonville janitorial company and is chairman of NFIB in Florida.
The bill drew opposition from Democratic and Republican lawmakers. Voting against it were Reps. Joseph Abruzzo, D-Wellington; Mack Bernard, D-West Palm Beach; Matt Gaetz, R-Fort Walton Beach; Shawn Harrison, R-Tampa; Marty Kiar, D-Davie; Jose Oliva, R-Miami Lakes; Darren Soto, D-Orlando; and Richard Steinberg, D-Miami Beach.
Supporting the bill were sponsor Kathleen Passidomo, R-Naples; subcommittee Chairman Eric Eisnaugle, R-Orlando; Rep. Bill Hager, R-Boca Raton; Rep. Larry Metz, Yalaha; Rep. Scott Plakon, R-Longwood; Rep. Kelli Stargel, R-Lakeland; and Rep. Mike Weinstein, R-Jacksonville.
After the vote, Gaetz offered a procedural move that could allow the bill to be heard again in the subcommittee. The Senate version of the bill (SB 1224) has not been considered in committees.
The bills would add restrictions in what are known as “third-party” bad faith cases. Such a case, for example, could start with an insurance-company policyholder getting sued by another person because of an injury. During a trial, the policyholder then could be found liable for money above the limits of the insurance policy.
If the policyholder or the injured person thinks the insurance company failed to properly settle the case, a bad-faith lawsuit could result to try to force the insurer to pay the damages.
The bills call for adding restrictions, such as a 60-day notice period before a bad-faith lawsuit could be filed. An insurer would be shielded from a bad-faith case if it decided during that period to pay the requested amount or the policy limits.
Opponents said, in part, that the changes would effectively give an incentive to insurance companies to deny claims and allow disputes to go to trial. Then, if a judgment exceeds policy limits, they could settle within the 60-day period without having to face the possibility of a bad-faith lawsuit.
Steinberg described such a scenario as a “get out of jail free card at the end.’’
“Frankly, I don’t see a time when an insurance company will not act in bad faith,’’ Kiar said.
But Passidomo disputed those arguments, saying plaintiffs’ attorneys could give notice of pursuing a bad-faith claim earlier in a dispute --- not just after a judgment. If that occurred, insurers would then have 60 days to respond and decide whether to settle.
Bill supporters say plaintiffs’ attorneys seize on issues in lawsuits to try to set up bad-faith cases. Joseph Kissane, a Jacksonville attorney who defends bad faith cases, said the amount of such litigation has increased and results in higher insurance premiums. He described the situation as a “silent tax on the citizens of Florida.’’