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Bad faith bill KO’d in House – ‘a solution in search of a problem’

Fri Feb 10th, 2012 on     Bad Faith Insurance,    

Insurance companies and business interests have suffered a blow early on in Florida’s legislative session. The House Civil Justice Committee voted recently to kill a bill that would have changed the rules for bad faith insurance litigation.

Proponents of the bill said the current law does not do enough to discourage bad faith lawsuits. In fact, they claimed, the law encourages lawsuits by providing an incentive for claimants not to settle. Opponents, however, said the bill was “a solution in search of a problem.” According to one plaintiffs advocate, there is no crisis in bad faith litigation, so there is no need to change the law.

The proposed bill added a notice provision to the current law. Before a claimant could file a bad faith lawsuit, he would have to give 60 days’ notice to the Florida Department of Financial Services and the insurance company of his intention to sue. During that 60 days, the insurer could pay damages or pay to the policy limit. The lawsuit would then be unnecessary.

Proponents explained that the cost of bad faith lawsuits is having a negative impact on small businesses. Insurance companies incur expenses in defending these suits and paying damages, and those costs are passed on to business customers. Small businesses are seeing their premiums increase as a result, they said.

Lawmakers who opposed the bill argued that insurance companies don’t need an additional 60 days; the waiting period is an incentive for companies not to settle promptly. For claimants, the waiting period could cause enough of a financial strain that they would accept lower settlements than they deserve just to avoid the delay.

This is not the end of all insurance-related efforts at the Legislature. We’ll keep an eye out for other issues and report back as they come up.

Source: Insurance Journal, “Florida Lawmakers Reject Bad-Faith Reform Bill,” Michael Adams, Jan. 27, 2012

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