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Orlando Sentinel

Orlando contractor sues state over property-insurance reforms

By Jim Saunders - News Service of Florida
May 31, 2022 at 6:02 pm

TALLAHASSEE — Less than a week after Florida lawmakers rushed to make property-insurance changes, a contractors group Tuesday filed a constitutional challenge that targets a new restriction on attorney fees in lawsuits against insurance companies.

The Restoration Association of Florida and Air Quality Assessors LLC, an Orlando firm that does work such as mold testing and leak detection, filed the lawsuit in Leon County circuit court.

It came after lawmakers last week passed a measure (SB 2-D) to try to bolster a troubled property-insurance market that has led to homeowners losing coverage and seeing spiraling premiums. Lawmakers gave final approval to the bill on Wednesday, and Gov. Ron DeSantis signed it on Thursday.

Insurers have long blamed litigation and attorney fees for driving up costs. The new law took a series of steps to try to address those issues, but the constitutional challenge focuses on part of the measure that deals with what is known as “assignment of benefits.”

In assignment of benefits, homeowners sign over their insurance claims to contractors, who then seek payment from insurance companies — often spurring lawsuits about claims and payments.

Contractors in the past have been able to recover their attorney fees from insurers if they are successful in the lawsuits, a concept known as “prevailing party fees.” But the new law stripped contractors of being able to recover prevailing-party fees when they are assigned benefits.

Homeowners can still recover prevailing-party fees if they file lawsuits directly against insurers, but the contractors cannot. The lawsuit alleges that the change violates equal-protection and due-process rights and denies contractors access to courts.

“Claims submitted to insurers for work performed by contractors under an AOB (assignment of benefit) are generally not large in monetary amount,” the lawsuit said. “When the insurer delays, underpays or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed. Without the corresponding right to recover prevailing party fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court.”

The lawsuit said invoices for work done by Air Quality Assessors and many other members of the association often total $2,500 to $3,000.

“The inability to recover prevailing party attorneys’ fees will effectively shut the courthouse door to plaintiffs because it will be cost-prohibitive to pay an attorney for these types of small claims,” the lawsuit said.

But William Large, president of the Florida Justice Reform Institute, a business-backed group that lobbies to reduce litigation, said in a statement after the law passed that “property insurance lawsuits have exploded over the last several years, overwhelming Florida’s insurance market.”

“Senate Bill 2-D contains significant litigation reforms and gets to the heart of escalating rates and limited coverage — lawsuit abuse,” Large said.