Florida Enacts Major Tort Reform and Bad-Faith Insurance Claim Legislation
- Florida has enacted sweeping changes to its negligence liability system by replacing its pure comparative negligence system with a modified comparative negligence system and shortening the statute of limitations in general negligence actions from four to two years.
- The state has amended the standard for bad-faith insurance claims, outlined the evidence that a factfinder calculating medical damages in personal injury or wrongful death actions must consider, and mandated new disclosures about letters of protection used to obtain medical treatment.
- In addition, Florida has limited the use of contingency-fee multipliers when calculating attorneys' fees and modified premises liability law as it relates to negligent security claims.
Florida Gov. Ron DeSantis signed a far-reaching tort reform bill, numbered CS/CS/HB 837 (HB 837), into law on March 24, 2023. A rush to the courthouse with negligence lawsuits in advance of its effective date on the same day suggests that HB 837 will curtail the overall tort liability confronted by all kinds of companies operating in Florida.
The bill replaces Florida's system of pure comparative negligence with a modified comparative negligence regime, shortens the statute of limitations for general negligence actions from four years to two, amends the standard for bad-faith insurance claims, outlines the evidence that a factfinder calculating medical damages in personal injury or wrongful death actions should consider, requires new disclosures about letters of protection used to obtain medical treatment, limits the use of contingency-fee multipliers when calculating attorneys' fees, and replaces joint and several liability with comparative negligence in certain negligent security cases.
Modified Comparative Negligence Becomes Law
With narrow exceptions, states across the country use one of three negligence liability systems: 1) contributory negligence, 2) pure comparative negligence or 3) modified comparative negligence. Until March 24, 2023, Florida had primarily a pure comparative negligence liability system. Plaintiffs could recover in proportion to the defendants' percentage of responsibility for the plaintiff's injuries regardless of the plaintiff's liability. So, if a defendant was 40 percent responsible for the plaintiff's injuries, the plaintiff could recover 40 percent of the damages associated with the injury against that defendant, even if the plaintiff was 60 percent liable. The plaintiff had four years to file a negligence lawsuit.
On March 24, 2023, Florida replaced its pure comparative negligence system with a modified comparative negligence system. Under this system, a plaintiff can recover in proportion to the defendants' percentage of responsibility only if the plaintiff's own share of responsibility is 50 percent or less. If a plaintiff bears more than 50 percent liability, the plaintiff cannot recover from the defendant. Moreover, the plaintiff must file a negligence action in two years instead of four years. However, personal injury and wrongful death claims arising out of medical negligence are still subject to the pure comparative negligence standard. The statute of limitations for these claims, which was two years already, is unchanged.
Bad-Faith Insurance Claims and Fee Awards Are Modified
HB 837 also made changes to bad-faith insurer liability and repealed several sections relating to the recovery of attorneys' fees and costs by the insured. First, HB 837 clarifies that negligence alone is insufficient to constitute insurance bad faith. The act also imposes on insureds and those representing them a duty to act in good faith when furnishing information regarding the claim, making demands of an insurer, setting deadlines and attempting to settle a claim. Under the new law, the factfinder is able to consider any bad-faith conduct of the insured in assessing damages.
HB 837 creates a safe harbor from bad-faith liability if a liability insurer tenders the lesser of the policy limits or the amount demanded by the claimant within 90 days after receiving actual notice of a claim accompanied by sufficient evidence to support its amount. The existence of this safe harbor (and any refusal of an insurer to come within its reach) is not admissible to support an allegation of an insurer's bad faith. The bill tolls the statute of limitations to allow a plaintiff to bring a claim if payment is still refused after 90 days. The law provides similar safe harbors for insurers facing competing claims from multiple third parties arising from a single occurrence that, in total, exceeds policy limits. Under these safe harbors, an insurer can avoid bad-faith liability by making use of interpleader or arbitration procedures set forth in the bill.
The bill also repeals sections of the Florida Statutes that previously allowed insureds to recover attorneys' fees when prevailing in certain insurance coverage disputes. Going forward, insureds, omnibus insureds and named beneficiaries will be able to recover attorneys' fees only in actions for declaratory relief to determine insurance coverage after an insurer has totally denied coverage for a claim unless another basis for fees exists. This limited right to attorneys' fees, however, does not apply to any action arising under a residential or commercial property insurance policy.
LOP Disclosures Are Required
HB 837 also requires disclosures concerning the use of letters of protection (LOP) to obtain medical treatment. A LOP is a mechanism by which a plaintiff's medical provider agrees to suspend efforts to collect past medical bills in exchange for a right to payment from any recovery made by the plaintiff in litigation. Under the new Section 768.0427, Florida Statutes, a plaintiff using a LOP must disclose:
- a copy of the LOP
- all billings for the rendered medical expenses, with particular coding as applicable that allows for comparison of the medical expense to other providers or facilities
- the name of any third party that has received the right to payment for the services and the dollar amount paid for the purchase of this right
- any healthcare coverage that the plaintiff had at the time of treatment
- anyone who may have referred the plaintiff for treatment under a LOP
Significantly, on this last disclosure, the newly created section voids any attorney-client privilege over communications relevant to a lawyer's act of referring the client for treatment.
Evidence to Prove Medical Damages Are Outlined
HB 837 also creates a new section of Chapter 768, Florida Statutes, which outlines the evidence that a factfinder calculating medical damages in personal injury or wrongful death actions must consider. The Legislature's purpose, according to legislative staff analysis, is to capture the "usual and customary" amount of the cost of the healthcare at issue in each plaintiff's situation. First, factfinders must consider evidence of the amount already paid for past medical treatment or services, regardless of the source of payment. Second, for medical treatment or services that have been performed but not yet paid for, factfinders must consider evidence of damages in amounts that vary according to whether the plaintiff has private insurance, Medicare or Medicaid, or obtained the services through use of a LOP. The act implements a similar framework for evidence of costs of future medical treatment. Importantly, the act also states that the factfinder must consider any evidence of reasonable amounts billed to the claimant for medically necessary treatment or services.
In addition to changes to the type of evidence that should be considered in cases involving medical damages, the bill prescribes guidance for the calculation of those medical damages. Specifically, the bill prohibits an award of medical damages from exceeding the total of the amount actually paid by or on behalf of the plaintiff to the healthcare provider, the amount of charges for medical services that are owed at the time of trial and the amount of charges for any reasonable and necessary future medical treatment.
Use of Contingency-Fee Multipliers Are Limited
HB 837 also makes changes to the law governing the calculation of attorneys' fees. As background, under the "lodestar method" of calculating attorneys' fees, a court will determine the number of hours reasonably expended by an attorney on the case and a reasonable hour rate. The court will then multiply these values to arrive at a "lodestar" amount for assessing attorneys' fees. Florida law also previously allowed for adjustments to the lodestar amount in contingency fee cases by a "multiplier" such as 1.5 or 2 based on certain factors to account for the risk of nonpayment.
HB 837 changes this legal framework by adding a statute directing that "[i]n any action in which attorney fees are determined or awarded by the court, there is a strong presumption that a lodestar fee is sufficient and reasonable." Under the new law, this presumption "may be overcome only in a rare and exceptional circumstance with evidence that competent counsel could not otherwise be retained." The law thus makes the lodestar amount the presumptive fee absent exceptional circumstances.
Premises Liability Law Is Modified Related to Certain Negligent Security Claims
Finally, HB 837 modifies premises liability law. The act creates a "presumption against liability" for negligent security claims against owners and operators of "multifamily residential property," such as an apartment or condominium community, where the owner or operator has implemented certain security measures on its property. The bill also creates a new section of the Florida Statutes that replaces joint and several liability with comparative negligence in certain negligent security lawsuits involving injury from a third party's criminal act on commercial or real property.
HB 837 Is Effective Now But Largely Applies to Causes of Action Filed After the Effective Date
HB 837 took effect upon becoming law, but many of the changes will apply only to causes of action filed after the effective date. The change to the statute of limitations for negligence actions applies to causes of action accruing after the effective date. With respect to insurance contracts, HB 837 may not be interpreted to impair rights under insurance contracts arising before the effective date, and the legislative changes will apply to insurance contracts issued or renewed after the effective date of the act.
For more information about HB 837 and its sweeping changes to Florida negligence liability, insurance and other laws, please contact the authors.
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