On May 26, 2022, Senate Bill 2D (“S.B. 2D”) and Senate Bill 4D (“S.B. 4D”) became law. The stated purpose of S.B. 2D is to lower the costs for insurance companies in the hope that rates for homeowners will be lower. Also, S.B. 2D strengthens an insured’s ability to pursue claims of bad faith against insurance companies. Meanwhile, S.B. 4D focuses on increasing building safety, while also providing cost relief to certain individuals requiring roofing work.
What is the purpose of S.B. 2D and S.B. 4D?
S.B. 2D enacted “pro-consumer measures” in an attempt to bring down rising insurance costs, increase transparency of insurance claims, and crack down on frivolous lawsuits that drive up costs for all citizens. Some argue that, in reality, the bill gives insurance companies benefits with the future hope that insurance companies will reduce rates. The following provisions of S.B. 2D are relevant:
- Prohibiting insurance companies from denying coverage solely based upon the age of a roof if the roof is less than 15 years old or if the roof is determined to have at least 5 years of useful life remaining.
- Requiring insurance companies to provide policyholders with a reasonable explanation if they deny or partially deny a claim and provide consumers with greater access to information during the claim adjustment process.
- Creating a new standard for application of attorney fee multipliers which have been liberally applied, resulting in increased costs to consumers
- Limiting the assignment of attorney’s fees in property insurance cases, disincentivizing frivolous claims.
The goal for S.B. 4D is to increase the safety of condominiums and cooperative association buildings. Specific provisions include:
- Requiring inspections for all condominiums and cooperative buildings that are three stories or higher.
o For buildings within three miles of the coast, Phase 1 inspections must occur 25 years after initial occupancy and every 10 years after.
o For all other buildings, Phase 1 inspections must occur 30 years after initial occupancy and every 10 years after.
o If a Phase 1 inspection reveals substantial structural deterioration, a more intensive Phase 2 inspection is required.
- Requiring condominiums and cooperatives to conduct structural integrity reserve studies for buildings three stories or higher to ensure the funding necessary for future structural repairs is available and prohibits waiver of funding for certain structural reserves.
- Increasing transparency by requiring all structural inspections reports and reserve studies to be part of the associations’ official record and must be provided to potential purchasers of a unit.
How does S.B. 2D effect bad faith lawsuits against insurance companies?
Bad faith can occur when an insurance company attempts to misrepresent or mismanage a claim to minimize their ultimate payment amount. We deal with bad faith claims on behalf of our clients all the time, but S.B. 2D has changed how we need to approach these types of claims. The bill includes multiple provisions offering insurance companies a chance to “get off the hook” for acting in bad faith to lower their costs of litigation. Most importantly, S.B. 2D now requires that the claimant must also prove an insurer has breached the insurance contract to prevail in a bad faith lawsuit. This law applies to civil claims against insurers based upon:
- Not attempting to settle claims in good faith when it could and should have done so.
- Making claim payments without a statement stating the coverage under which the payments are being made.
- Failing to settle claims under one portion of coverage to influence settlement under other portions of the policy.
On the other hand, S.B. 2D does provide some relief to policyholders within the claims process. The law requires insurers to provide reasonable explanations for any denial or partial denial. Further, it requires insurers to conduct any physical inspection of a property related to a claim within 45 days of receiving proof of loss statements. S.B. 2D also requires insurers to notify policyholders of their right to a detailed report by the insurer’s adjuster, as well as requiring the report be provided within 7 days of the request or upon completion of the report. S.B. 2D specifies that insurers must provide a reasonable explanation of the claim decision in relation to the policy, facts, and law, as well as a reasonable explanation for any discrepancy of payment less than the adjuster’s estimate.
SB 4D’s Roof Replacement Exemption
An important provision within S.B. 4D deals with Florida Building Code requirements for roof construction. Currently, the Florida Building Code requires that when a roof or roof section is more than 25% damaged, the entire existing roofing system or roof section must be repaired or replaced. Under the new law, if a roof requiring repair or replacement was previously built, repaired, or replaced in compliance with the 2007 Florida Building Code, only the portion undergoing such work must be constructed in accordance with the Code. This is opposed to requiring the entire roof be repaired or replaced, which likely results in major financial relief for individuals in need of roofing work. This provision applies to all roofing systems or roofing sections, and is not limited to condominiums or cooperative buildings.
S.B. 2D changes how we approach bad faith lawsuits against insurance companies, which means that we will need to be more careful before expending the costs such a claim. On our end, we will need to identify a clear breach of an insurance contract before advising pursuit of a bad faith lawsuit against an insurance company. However, our insured clients should also be aware of their rights within the claims process.
Our clients should also be aware of S.B. 4D creating important changes in the building safety realm and, specifically, providing cost-savings exemptions for damaged roofs.
Bruce Loren and Saad Farooqi of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law, employment law, and complex commercial litigation. Mr. Farooqi focuses his practice in high-stakes business disputes. Mr. Loren has achieved the title of “Certified in Construction Law” by the Florida Bar, exemplifying the Bar’s recognition of this expertise. The firm’s construction clients include owners/developers, general contractors, specialty contractors in every trade, suppliers, and design professionals. Mr. Loren and Mr. Farooqi can be reached at [email protected] or [email protected] or 561-615-5701.