Policy changes approved by state insurance commissioner violate policyholders’ rights, lawsuit says

It was filed as the state Legislature prepares to convene for a special session next week to look at ways to stabilize Florida’s property insurance market. While the market is always challenged by hurricanes and severe weather, insurers say it is also cracking under the weight of abusive claims and lawsuits by a well-organized cabal of restoration contractors and their attorneys.

The suit names as defendants Altmaier, Heritage Property & Casualty Insurance Co. and American Integrity Insurance of Florida, both based in Tampa.

According to the lawsuit, American Heritage sought and received approval for a policy change that requires policyholders or any third party to whom they assign the benefits of their claim to agree to take any dispute to mediation and arbitration instead of a court. If the policyholder or assignee hires an attorney to represent them during this process, the insurer would not be obligated to pay for that attorney’s fees, even if the policyholder or assignee prevails.

That change took effect on Jan. 1 for new policies and March 1 for renewing policies.

Heritage’s change, which took effect on May 1 for new and renewing policies, require the insurer’s approval before a policyholder can assign benefits of their policy to a repair contractor. Heritage would not be responsible for reimbursing the policyholder for any work performed without its approval.

Heritage policies already give the company the right to select companies that belong to its “Rapid Response Team” contractor network. The new requirement, according to the suit, would also extend to emergency repair work that homeowners are required to perform immediately after a loss occurs, including by a hurricane or other emergency, to prevent further damage, the suit states.

The changes violate guarantees of policyholders’ rights guaranteed by state law and Florida’s constitution, the suit charges. They include the right to be compensated for legal fees incurred in a successful challenge to an insurer in a claim dispute, and the right to assign claim benefits to a third party.

The lawsuit seeks an injunction declaring the policy changes invalid so that repair contractors may “continue to work with homeowners to perform necessary repairs or inspection services.”

Neither Heritage nor Altmaier’s office responded to requests for comment about the lawsuit. An American Integrity official said Tuesday afternoon that the company was still studying the complaint.

The lawsuit comes a day before Gov. Ron DeSantis and top legislative leaders are expected to file a bill that would impose restrictions on contractor lawsuits against insurers and their attorneys’ abilities to collect legal fees when and if they settle.

Insurers are hoping that the bills, to be debated during a special legislative session on insurance reform beginning May 23, address what they say are continued abuses of claims assignments, particularly by water restoration companies and roof repair companies.

Insurers blame excessive claims and lawsuits for several years of collective underwriting losses that have resulted in cancellation of hundreds of thousands of homeowner policies and steep rate increases for those not cancelled.

Insurers say that loopholes in state laws and court rulings have turned Florida’s insurance market into a “litigation market” by emboldening contractors and their attorneys to bombard them with frivolous claims and excessive lawsuits. Attorneys in particular are incentivized to sue insurers because they can recover legal fees worth many times what policyholders get to repair damage.

As a result, insurers say, litigation rates and expenses are far higher in Florida than the rest of the nation.

In 2019, Florida generated 8% of all property insurance claims and 76% of lawsuits in the U.S., according to the office’s analysis of data collected by the National Association of Insurance Commissioners.

A separate analysis, commissioned by a political action committee seeking insurance reforms, found that $645 of Floridians’ average insurance bill went to legal fees in 2019. Of $15 billion that went to litigated claims since 2015, only 8% went to policyholders while plaintiffs attorneys got 71% and insurers spent 21% on defense attorneys, the analysis found.

Co-plaintiff Quality Air Assessors has filed 4,679 lawsuits since January 1, 2015, state records show. Of those, more than 4,200 were filed under the name of its parent company, The Kidwell Group LLC.

In a news release about the lawsuit on Tuesday, Richie Kidwell said that Altmaier has been allowing insurers to “mount as many barriers as possible to homeowners receiving the proceeds of their policies for lawful claims” while “grabbing every dollar they can from consumers and then doing everything they can to keep that money for themselves, rather than [reduce] rates for their customers.”

Yet, Paul Handerhan, president of the consumer-focused Federal Association for Insurance Reform, said abuses of claims assignments “continue to be the leading driver of fraud and hyper-solicitation schemes deployed by a small group of bad actors enriching themselves at the expense of Florida’s consumers.”

The legislature, he said, would be wise to ban claims assignments altogether. “Stop the unwarranted claims from being filed in the first place and you will not have to worry about how to adjudicate them.” he said.