Part II: The Shift in Florida Insurance Litigation with the End of One-Way Attorneys’ Fees

On March 24, 2023, Florida Governor Ron DeSantis signed HB 837 into law.  HB 837 is one of the most significant tort reform bills to make its way through the Florida Legislature to date, which caused significant changes to Florida’s bad faith insurance framework and made additional changes to Florida’s one-way attorney fee provisions for insurance cases, among other significant changes.  This blog discusses the changes to one-way attorneys’ fees in property insurance litigation caused by HB 837.

Senate Bill 2A – Limited One-Way Attorneys’ Fees in Property Insurance Claims

To fully comprehend the limitation of one-way attorneys’ fees in insurance litigation, it is essential to look back at a previous legislation that initiated changes in December 2022.  In December 2022, the Florida Legislature took an initial step towards limiting one-way attorneys’ fees in property insurance claims by enacting Senate Bill 2A.

Senate Bill 2A aimed to address the issue of fee-shifting in the property insurance context. It primarily targeted the recovery of attorneys’ fees against insurers by amending Sections 627.428 and 626.9373, Florida Statutes to state that “there is no right to attorney fees” in a suit arising under a residential or commercial property insurance policy. Furthermore, the bill removed references to attorneys’ fees from the pre-suit notice provision found in Florida Statutes § 627.70152, effectively eliminating its use as a fee-shifting mechanism.

HB837 – Taking a Step Further

While Senate Bill 2A marked an important milestone in addressing attorney fee-shifting, HB837 took a more comprehensive approach to this issue. The new legislation not only limited fee-shifting in the property insurance context, but also extended these limitations to the liability insurance context. Florida Statutes Sections 627.428 and 626.9373, which had allowed the recovery of attorney fees against insurers in certain situations, were entirely repealed by HB837.

Attorney Fee Awards in Declaratory Relief Actions

One of the critical provisions of HB837 is the creation of Florida Statutes § 86.121, which re-inserted one-way attorneys’ fees for certain declaratory relief actions to determine insurance coverage. However, one-way attorneys’ fees are only permitted in cases where an insurer has made a “total coverage denial” of the claim.

If a court enters a declaratory judgment in favor of the insured under such circumstances, the court is mandated to award reasonable attorneys’ fees to the insured. It is important to note that this right to attorneys’ fees under this provision cannot be transferred or assigned to parties other than the named insured, omnibus insured, or beneficiary, and the provision does not apply to any action arising under a residential or commercial property insurance policy.

Computation of Attorney’s Fees: Presumption That Lodestar Fee is Sufficient and Reasonable

HB837 also introduces changes to the calculation of attorneys’ fees through an amendment to Florida Statute § 57.104. The reform creates a “rebuttable presumption” in favor of the lodestar fee method. The lodestar fee is calculated by multiplying the number of attorney hours reasonably expended on a matter by a reasonable hourly rate.

The presumption holds that the lodestar fee is sufficient and reasonable for determining attorneys’ fees in any action where the court is responsible for determining or awarding such fees. The court will only deviate from the lodestar fee in “rare and exceptional circumstances,” with the presentation of compelling evidence that competent counsel could not be otherwise retained.

Additionally, HB837 stipulates that attorney fee multipliers will now be the exception rather than the rule in cases where attorney’s fees may be recovered. This change aims to bring more predictability and fairness to attorneys’ fee awards.

Conclusion

Florida’s new tort reform, HB 837, as well as Senate Bill 2A, caused significant changes to the recovery of attorneys’ fees in property insurance causes. These changes are expected to reduce frivolous lawsuits, streamline the litigation process, and ultimately benefit both insurers and insured parties involved in property insurance claims. As the reform takes effect, it will be essential for attorneys and insurance companies to adapt to these new provisions to navigate property insurance disputes effectively.