Florida Overhauls Civil Remedies and Insurer Bad Faith Claim Requirements

On March 24, 2023, Florida Governor Ron DeSantis signed House Bill 837 (“HB 837”) into law, representing a significant overhaul of the civil remedies statutory framework that increases protections for insurers operating in the state. The new law is effective immediately. The following alert briefly addresses some of the changes to Florida law.

Civil Law Remedies
The new law reduces the statute of limitations for general negligence claims from four years to two years. Accordingly, injured parties have a shorter time to commence an action to recover damages. The statute operates prospectively and will only affect negligence claims that arise after March 24, 2023.

Additionally, HB 837 modifies Florida’s comparative negligence paradigm, barring recovery to any claimant who is found to be more at fault for her injuries than the defendant (except in claims arising out of medical negligence). Previously, Florida used a “pure” contributory fault system whereby a plaintiff’s recovery would be reduced by the percentage of his liability. With this new modified comparative negligence, a plaintiff who is more than 50% at fault will be barred from recovering any damages. Wise defendants should assert a full battery of affirmative defenses to take advantage of the new statutory scheme.

The law also eliminates so-called “phantom damages” by limiting evidence juries hear to the actual amount of medical expenses paid, rather than the billed amount of medical service and medications which are often inflated amounts. The prohibition of “phantom damages” will decrease the total damages available to claimants.

Bad Faith Claims
Under Florida’s bad faith framework prior to HB 837, an insurer was obligated “to advise the insured of settlement opportunities, to advise the insured as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid same,” as well as investigate the matter to “give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” Boston Old Colony Ins. Co. v. Gutierrez, 386 So.2d 783, 785 (Fla. 1980). Given the liability risk, the threat of a bad faith claim had allowed plaintiffs’ counsel to garner a quicker settlement when requesting the policy limits or a lesser amount.

The new law provides that an insured must demonstrate good faith “in furnishing information regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim.” The failure to demonstrate good faith by the insured may result in a reduction of the amount of damages awarded against the insurer. Previously, bad faith litigation typically focused solely upon the conduct of insurers to show that they acted in good faith, but now, under HB 837, the insured’s conduct also will be considered in assessing damages. Importantly, the new law codifies Florida precedent that mere negligence or a simple mistake by an insurer alone does not constitute bad faith.

Where there are multiple insureds in a single action, an insurer can limit its exposure to the policy limit if it files an interpleader action to resolve how the policy limits are divided between the insureds, or, if all parties agree, the action can be resolved through arbitration. This newly codified defensive power allows insurers to act proactively to avoid bad faith claims when facing competing insureds and a low policy limit.

Additionally, “one-way attorneys’ fees” applied in Florida allowing an insured who prevailed in an action against an insurer to recover fees. The new law permits awarding attorney fees to an insured or beneficiary only when an insured is successful in a declaratory judgment action against an insurer after a total coverage denial of a claim.

HB 837 represents greater protections for insurers in Florida and subsequently, is likely to reduce needless litigation.

Disclaimer: This publication is made available for educational purposes only and is not intended as legal advice. If you have questions about any matters in this publication, please contact the authors directly. General inquiries may be directed to info@nullcondonlaw.com.