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Insurance Business

Allstate, Progressive, State Farm group calls out law firms driving up insurance costs

 by Lyle Adriano 24 Sep 2018

With small claims cases in Florida spiraling out of control, a group of insurers is looking to confront the law firms who are thought to be contributing to the rise of insurance costs in the state.

In 2016, Volusia County, FL had fewer than 4,500 small claims lawsuits. However, in 2017, that number more than doubled to a staggering 12,000.  Another county, Flagler, reported similarly significant increases in claims between 2016 and 2017.

Daytona Beach News-Journal reported that one local law firm is responsible for more than half of the small claims cases (and most of the cases involve PIP claims) in both counties: Simoes Davila.

In 2016, Simoes Davila filed 257 small claims cases in Volusia County. The following year, the firm filed 8,404. As of August this year, the firm had been responsible for 3,497 Volusia cases – representing 56% of all the small claims cases filed in the county.

Insurance industry experts warn that the surge is part of a statewide trend driven by lawyers who are looking to make high-volume business out of filing claims involving motorists in personal injury protection (PIP) – a program under Florida’s no-fault insurance statute that provides coverage of up to $10,000.

Data from the Florida Justice Reform Institute revealed that PIP lawsuits across the state spiked nearly 50% to a record high of over 60,000 in 2017. Lawyers can earn thousands of dollars in fees in cases over disputes worth just hundreds of dollars, experts cautioned.

In many of the cases, the attorneys were not even working on behalf of the clients, but for medical providers instead. This is due to the much-contested “assignment of benefits“ practice, wherein accident victims can sign over their claim to repayment to their healthcare provider, inviting the risk of medical price gouging.

State law also provides for a system called “one-way attorney’s fees,” which means if an insurance company loses a lawsuit or settles for unfavorable terms, it must pay the medical provider’s attorney’s fees. However, if the medical provider loses, it does not have to pay for the insurance company’s fees.

Michael Carlson, the president of the Personal Insurance Federation of Florida, pointed out that all these factors have empowered law firms across the state to sue insurers over even over the smallest of amounts medical providers claim they are owed.

“There’s a whole cottage industry of law firms that have sprung up over several decades,” Carlson said, whose organization represents insurers such as State Farm, Progressive, Allstate and Farmers. “Their whole practice is not representing the consumer who has been hurt in a car accident. They are representing the medical provider who has provided some medical service to the consumer.”