By Alan Daley, American Consumer Institute
A bill (SB 924) was introduced in the Florida Senate relating to third-party bad faith actions against insurers. SB 924 is a successor to a bill that was allowed to die last year. The bill is an attempt to quell ridiculous damage awards for so-called “bad faith” actions against insurers. Until the bill is enacted, the lack of meaningful standards for judging insurer’s actions allows continued misuse of bad faith claims.
SB 924 should preserve rights for restitution to those who have suffered meaningful damage. On the other hand, the bill should help prevent the use of fatuous assertions of “damage” that are used to bamboozle juries into granting oversized awards.
The bill does not address all of the problems Floridians experience with automobile insurance, but it would handle the parade of million-dollar “bad faith” lawsuits. The insistence on unbiased standards should bring justice and order to the mayhem and staunch the use of ludicrous foundations for “damage.” With fewer ridiculous damage claims, overall policy rates will be lower.
SB 924 will not settle the underlying litigation for damages suffered by the claimant, and some insureds will still choose to be underinsured. That choice of low coverage limits will leave them exposed to a possible excess judgement.
The current “totality of circumstances” standard for reaching a “bad faith” verdict is overly broad. It encourages the jury to include administrative errors, negligence and other actions that are irrelevant to a finding of “bad faith.” To support a “bad faith” verdict, SB 924 requires proof that the insurer acted with “reckless disregard” for insured’s rights, a much narrower standard than totality of circumstances. SB 924 also acknowledges that insured’s and claimant’s own actions can cause or magnify the damage they suffer. Underinsurance is not a fault of the insurer.
SB 924 provides far better guidance on what actions a jury should expected from a well-behaved insurer. It also obligates the insured and claimants to prove the standards are violated by the insurers’ misbehavior. No longer can the insurer be portrayed as profiteer needing the reproach of a painfully high financial penalty. The net result of the SB924 standards should be lawsuits that run more smoothly, with fewer surprises, and with a verdict and award driven less by emotions.
Under SB 924, insurers are not liable for a verdict of “bad faith” when the judge finds the insurer complies with all of its obligations and has, within 45 days of loss, made a settlement offer of full policy limits. The bill specifies obligations for an insurer, such as promptly settling claims when it could and should, alerting insureds on which coverages are used to settle claims, alerting insureds on probable outcome of litigation, alerting insureds on settlement opportunities, and on the possibilities of excess judgement. The insurer must alert the insured on how to avoid an excess judgement.
The Institute for Legal Reform reported that “Florida families pay about $4,400 a year for goods and services due to the state’s lawsuit climate.“ Under the legislative proposal, standards will be fair to all parties and benefit consumers who foot the bill for these extravagant settlements.
Floridians deserve better.
Alan Daley writes for the American Consumer Institute and lives in Florida. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.