House Panel Rejects ‘Bad-Faith’ Insurance Reform Bill

By KENRIC WARD

January 25, 2012 – 6:00pm

A “simple” bad-faith insurance bill bogged down in complex legal arguments Thursday and failed to clear the House Civil Justice Subcommittee.

House Bill 427 set a 60-day time limit for insurers to resolve third-party claims.

Rep. Kathleen Passidomo, R-Naples, said her bill would have a “positive impact for small businesses by reducing ‘long-winded’ [court] cases.”

But the measure, a simplified version of a reform bill introduced last session, ran into heavy skepticism from Democrats and Republicans on the panel.

Rep. Matt Gaetz, R-Shalimar, noted that only three bad-faith cases had prevailed at trial against insurance companies in the past three years in Florida. Two of the cases were against one firm, Nationwide Insurance.

“That seems to be a weak predicate for this bill,” Gaetz said.

Fred Cunningham, of the Florida Justice Association, called HB 427 “a draconian solution in search of a problem.”

Passidomo responded that Florida has developed a reputation as a “haven” for bad-faith lawsuits, with the state accounting for 20 percent of the country’s bad-faith insurance claims from 2004-2008.

Former state Supreme Court Justice Charles Wells, speaking on behalf of the National Federation of Independent Businesses, warned, “We are headed for unaffordable liability insurance. The current law forces almost every claim into litigation. Only attorneys benefit.”

On the eve of Thursday’s hearing, reform proponents circulated a poll that showed 85 percent of small-business owners agreeing with the statement: “There are too many lawsuits in Florida, and our elected leaders should work to reduce the number of lawsuits.”

Some 73 percent of the respondents agreed that the Florida lawsuit system is among the worst in the country.” The survey by Public Opinion Strategies was conducted in December and January.

It is an undeniable fact that bad-faith judgments against insurers drive up premium costs for all insureds,” said William Large, president of the Justice Reform Institute.

Explaining one facet of the problem, Large likened liability insurance to a pool of money, with the pool filled by premiums and drained by claims.

“When an insured purchases and pays premiums on $10,000 of insurance, but the insurer pays $5 million in claims, someone has to fill up the pool. Initially, this amount may come out of an insurers profits, but eventually small businesses are the ones whose premiums are increased,” Large said.

Despite a parade of insurance executives testifying in favor of Passidomo’s bill, critics chipped away at whatever support she might have had going into Thursday’s hearing.

In the end, Rep. Larry Metz, R-Eustis, acknowledged, “The bill is not as good as it could be, and not as bad as opponents say it is.”

A companion measure — SB 1224 — by Sen. Steve Oelrich, R-Gainesville, is pending in the Senate. But with Passidomo’s bill sidelined, SB 1224 is unlikely to get a hearing.

Bill Herrle, head of the Florida chapter of NFIB, told Sunshine State News that reform proponents will push ahead with reform legislation — if not this year, then next.

The overarching goal, Herrle said, is to “take away lawyers’ disincentive to settle [cases]. We closed the door on joint and several liability last time. This is the personal-injury lawyers’ new avenue to deep pockets.”

“We’re not giving up. This issue is only growing,” Herrle said.

Contact Kenric Ward at [email protected] or at (772) 801-5341.

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