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Property Casualty 360

Proposed Florida law would aid insurance companies, cut attorney fees

Reactions to the new bill reveal a sharp divide between homeowners' attorneys and insurance companies.
By Raychel Lean | January 23, 2020 at 12:00 AM | The original version of this story was published on Daily Business Review

Double dipping

Insurance companies claim property insurance lawyers have been “double-dipping”
 by  applying fee multipliers in too many cases, while lawyers claim the multiplier
 measure is there for a good reason. (Photo: BeeBright/Shutterstock)

A bill working its way through the Florida Legislature would curb the use of attorney-fee multipliers — bad news for plaintiffs counsel who represent clients on a contingency basis, but a boon for the insurance industry, which claims attorneys often charge three times their hourly rate for routine property cases.

Senate Bill 914 has jumped its first hurdle, gaining approval from the Florida Senate Committee on Banking and Insurance. It reflects a conflict between attorneys — who say the proposed law would prevent homeowners from suing insurers — and insurers, who say some lawyers take advantage by tripling their fees for routine cases.

Fee multipliers are meant to protect homeowners who can’t afford to bring suit unless attorneys agree to take on difficult and high-risk litigation on a contingency basis. Lawyers bear the cost of the litigation, but if they win, their clients could apply a contingency risk multiplier.

The proposed law would prevent this.

The bill by Republican Sen. Jeff Brandes would cap attorney fees for plaintiffs. It would award fees through the lodestar method, which multiplies a reasonable hourly rate by the number of hours attorneys worked.

Tallahassee attorney Michael Carlson agrees it should be more difficult for plaintiff counsel to seek fee multipliers.

“It is too common now, throughout Florida, for courts to award a fee multiplier on what we would call a relatively simple case,” said Carlson, who represents insurance companies and is president and CEO of the Personal Insurance Federation of Florida.

Critics suggest fee multipliers were meant to have a narrow scope. They say the measure was introduced decades ago to encourage attorneys to take on complex or controversial federal civil rights and environmental torts cases because potential clients were struggling to find representation. The U.S. Supreme Court eventually limited its use, they argue. And in the 1992 case City of Burlington v. Dague, former Justice Antonin Scalia wrote a majority opinion rejecting the contingency fee model.

Carlson claims multipliers are no longer necessary for property insurance cases in Florida because there’s no shortage of competent counsel.

“If you have a tree fall on your roof, and you have a dispute with your insurance company over that tree having fallen on your roof and you need to hire a lawyer anywhere in Florida, you will not have a problem,” he said.

‘Army’ of lobbyists?

Plaintiffs attorney William F. “Chip” Merlin of the Merlin Law Group in Tampa argued against the bill at Tuesday’s hearing, claiming that although it was “well-intentioned,” it will hurt some policyholders who won’t be able to find competent lawyers to handle declined insurance claims.

“The insurance companies do not ever want to be held accountable for wrongfully denied claims and claims that they are slow to be paid, and certainly do not like to be sued at all, even if their competitors are committing illegal actions,” Merlin said. “So there is always an army of insurance lobbyists claiming that a new crisis exists to reduce policyholder rights or make it easier to skirt consumer protection laws and regulations.”

Merlin notes that while insurance companies have teams of lobbyists, policyholders “have jobs and are working on their own life, and simply do not show up in Tallahassee.”

“People do not buy insurance to have their claims turn into lawsuits,” Merlin said. “They just want to be paid fairly.”

In most instances, Merlin claims policyholder’s attorneys don’t get a multiplier but says in certain small cases where upfront costs outweigh the amount in controversy there’s no other incentive for attorneys to take them.

William Large of the Florida Justice Reform Institute stressed the personal injury field has survived without fee multipliers and claims there’s already “an extraordinary advantage” under Florida’s one-way attorney fee statute, allowing recovery for plaintiffs who prevail against their insurer.

“That is fair,” Large said. “That’s a real incentive for insurance companies to make sure they’re settling cases appropriately for insureds. But then to get a multiple on top of that isn’t fair, so we’re trying to make sure that the multiplier is not used except in the most extraordinary and exceptional circumstances.”

However, a 2019 law has already restricted the use of assignment-of-benefit agreements, which allow policyholders to sign over their insurance rights to contractors — some of whom claim would give homeowners “the monumentally short end of the stick.”

Carlson said he sees this bill as restoring the law to its original purpose and claims its passage could reduce insurance rates for consumers.

“The lawyers are making their hourly rate, they’re getting paid for representing their client when they win,” Carlson said. “What’s become much more commonplace in the 2017 period forward is lawyers in these same cases, when they win and they’re having their lodestar amount calculated, they ask for a separate amount as well.”

He points to a 2017 Florida Supreme Court case, Joyce v. Federated National Insurance Co., which made it easier to obtain fee multipliers. In it, Justice Charles Canady wrote a dissent that said the court had overreached because the fee multiplier should only be used in rare circumstances.

But as Merlin sees it, the focus should be on the fact that policyholders are having to sue their insurers in the first place.

“The insurance lobby points to a few cases about how much the winning policyholder attorney made, rather than talk about why the claim should never have been denied in the first place, and that the insurance companies’ attorneys fought and fought the payment to the policyholder because that is the only way a case can generate large fees,” Merlin said. “Instead, they fight with their own attorneys who are paid on an hourly basis, win or lose, often to wear down the policyholder.”

The bill still has a way to go until it lands on Gov. Ron DeSantis’ desk, having only gone before one committee in the Senate. The bill will go to two more committees before going before the full Senate, then the House of Representatives.