Florida Senate Judiciary Committee Hears Presentations on Insurance Fraud and Abusive Litigation

By Wes Strickland and Michael Billmeier

On February 1, 2021, the Florida Senate Committee on Judiciary heard presentations from Emily Leventhal of the Legislature’s Office of Program Policy and Government Accountability and retired judge Greg Holder. Both presenters told the committee that attorney fee reform could be an important tool in improving the insurance litigation environment in Florida.

Emily Leventhal said the Legislature’s Office of Program Policy and Government Accountability conducted a review of the process of how insurance fraud is reported to the Department of Financial Services (“DFS”) and ultimately prosecuted by the state. She said a final report would be presented to the Legislature in the coming weeks.

Leventhal first explained the fraud reporting and investigation process at the DFS. She said that most instances of possible insurance fraud are reported to the DFS by insurance company special investigative units. Once a referral is received, the DFS staff reviews it and either opens an investigation or closes the case. If a case warrants further investigation, DFS investigators conduct the necessary fieldwork and either close the case or present the case to a state attorney for prosecution. Although the DFS policy is to refer a case for prosecution or close the case within 180 days, the DFS often exceeds that timeline. DFS reports that it has issues recruiting and retaining investigators because salaries are not competitive with salaries offered by other law enforcement agencies.

Leventhal provided statistics related to DFS fraud referrals. During the six-year referral period:

• 8,328 referrals were submitted to DFS.
• 1,367 referrals were assigned as a case or consolidated with an existing case.
• 979 fraud cases were initiated.

During a three-year time period, 469 cases were initiated by the DFS, 129 were presented to prosecutors, 104 cases resulted in charges being filed, and 97 cases resulted in successful prosecutions.

Leventhal suggested the Legislature consider the following options to deal with insurance fraud:

• Require insurance companies to provide additional information in fraud referrals to the DFS.
• Give the DFS greater capacity to audit insurance company investigative units.
• Modify the Anti-Fraud Reward Program to encourage more reporting of insurance fraud.
• Modify fee provisions for attorneys to reduce litigation.
• Modify assignment of benefits guidelines for auto glass insurance policies.
• Reduce the time limit for reporting hurricane or windstorm claims.

Retired judge Greg Holder told the committee that the state’s attorney fee laws have created significant issues related to insurance litigation. Holder served as county and circuit judge for 26 years and presided over thousands of cases. He cited the contingency fee multiplier as an example of the state’s attorney fee problem. He said there is usually not a need for fee multipliers in insurance litigation because there are attorneys willing to represent consumers in such cases. He said insurance companies are reluctant to proceed to trial in meritorious cases due to the risk of being required to pay a multiplied fee if they do not prevail.

Holder also said there are numerous examples of multiple insurance claims being made on the same property. He cited an example where the same property had a lawsuit related to water claim, a lawsuit related to an assignment of benefits claim, and a lawsuit related to a claim of damage to a bathroom. The filing of multiple cases can lead to increased attorney fees in resolving the cases. It can also lead to conflicting rulings by different judges hearing the different cases.

Holder suggested the committee consider litigation reform such as limiting the use of contingency fee multipliers, reforming Florida’s attorney fee statute, and amending the offer of judgment statutes to allow an offer that covers only the amount of a claim and does not include attorney fees.