Will Florida’s Sweeping Tort Reform Provide Relief for Companies from Rising General Liability Costs? 4 Ways HB 837 Could Reduce Premiums and Improve Coverage Availability

For years, companies doing business in Florida have experienced dramatic increases in their premiums, and in some cases non-renewal notices, for their general liability insurance. A primary driver of these increases was Florida’s plaintiff-friendly tort laws that led to claim settlements and jury awards well above the national average for similar claims. The risk climate finally reached a point where many major commercial insurers were reluctant to underwrite general liability insurance policies in the state. If they did, the premiums were very costly. 

This environment may change significantly after the state legislature enacted sweeping new changes to its negligence liability laws. Could this be the relief that Florida businesses have been looking for?

4 Ways HB 837 Could Benefit Florida Businesses

On March 24, 2023, Florida Governor Ron DeSantis signed HB 837 into law, ushering in dramatic changes that are expected to have a significant impact on the frequency and severity of negligence liability claims throughout the state. The law’s provisions are far reaching and could serve as a panacea for Florida business owners and operators that have faced a challenging insurance market. The four most noteworthy provisions reveal the potential impact on liability claims in the state and the resulting benefits for businesses covered by general liability insurance.

1. Reduced Statute of Limitations for Most Negligence Claims

The law’s most straightforward change reduces the statute of limitations for bringing a general negligence lawsuit from four years to two years. The two-year statute of limitation clock begins with claims that accrue after the law’s effective date. For claims that accrued before the law’s enactment, the four-year statute still applies.

Impact: The reduced timeframe for filing a lawsuit could benefit Florida business owners and operators in two ways. First, it could result in fewer liability claims and lawsuits, especially in cases where a plaintiff drags their feet and doesn’t consult an attorney soon after the alleged incident. Now, if a plaintiff fails to bring their lawsuit within two years, rather than four, they will be forever time barred from pursuing a legal action. Second, if the party involved in an alleged incident doesn’t file a lawsuit within the two-year window, the business will see its liability claim exposure drop at that point—two years sooner than under the old laws. The previous four-year statute required insurers to carry reserves for longer periods on the insured’s loss run reports, increasing aggregate loss reserve exposure and impacting premium. With the reduced statute of limitations period, insurers can now maintain loss reserves for a shorter period of time, thereby reducing the total loss reserves. Since loss reserves impact insurance rates, Florida business owners and operators could see lower general liability premiums. 

2. Shift to a Modified Comparative Negligence Standard

Another significant and potentially impactful change is Florida’s adoption of a modified comparative negligence liability standard, replacing the long-standing pure comparative negligence system. Under the old standard, if a person or business was found liable for committing a wrongful act that caused harm to another, they could still conceivably recover a portion of the damages, even though they were found primarily culpable. 

For example, a person was involved in a car accident with the driver of a business van and filed suit against the driver’s company. Even if the jury assigned 20% of the liability to the defendant (the company with the business van) and 80% of the liability to the plaintiff (the driver filing suit), the plaintiff could still recover 20% of the damages awarded. 

Now, that same plaintiff would need to convince a jury (in a jury trial) or judge (in a bench trial) that they were less than 50% liable for the accident in order to receive any damages. If they succeeded in proving their liability was less than 50%, they could recover the proportional amount of the damages. If the plaintiff is not able to satisfy this 50% liability threshold, they are barred from recovery.

Impact: This law may limit the number of questionable liability claims both plaintiffs and their attorneys are willing to pursue to trial. Since attorney fees are often funded by the judgement awarded at trial, the fact that they may not be able to recover any money if their client is found more than 50% liable could give some attorneys pause. As a result, we may see more Florida general liability claims resolved before trial and at a lower settlement amount. While this law may reduce claims that go to trial, and help to reduce the value of claims overall, it will likely not impact the number of claims filed. Nonetheless, lower general liability claim values would have a positive impact on a Florida business’s loss ratio, a heavily weighted factor in determining premiums.

3. More Stringent Evidence to Prove Medical Damages  

One of the main drivers of Florida’s excessive liability awards and settlements was the high medical care costs that plaintiffs can claim as damages. Before the recent law’s passage, a plaintiff could introduce past medical bills as evidence of their out-of-pocket costs, without disclosing whether an insurer or other third party had paid any portion of those bills. Now, the law requires the jury or judge to review evidence of the amount actually paid for past medical treatment, including amounts paid by a third party. 

The law also adopted a construct for scheduled medical treatment that hasn’t been performed yet and future medical treatment proposed over the person’s lifetime. And the jury or judge must consider medical care costs that might vary based on whether the plaintiff has commercial insurance, is covered under Medicare or Medicaid, or has benefited from a letter of protection (LOP). This new framework gives the judge or jury the opportunity to review the medical damage costs through multiple sources when determining a fair and reasonable award.

Impact: Over the years, healthcare providers have increased their medical service costs well beyond the rates paid by commercial insurers that negotiate lower fees or government-mandated Medicaid and Medicare rates. Regardless of whether their medical treatment costs were covered by insurers or other third-party payors, partially or in full, plaintiffs were permitted to submit the full, unadjusted invoice and seek recovery for the total amount—resulting in bloated jury awards and settlements. Florida’s latest law limits the total amount of medical costs a plaintiff can recover, reducing the claim settlement or award. These reductions should decrease claim values and help combat the high claim increases witnessed in recent years.

4. Premises Liability Modified

HB 837 modifies premises liability for claims of negligent security that involve criminal acts by third parties that occur on commercial properties—for example, an assault that happens on an apartment building’s grounds. Specifically, the law creates a “presumption against liability” for owners and operators of multi-family residential property, such as apartment buildings and condominiums. To take advantage of this presumption, property owners are required to implement the security measures outlined in the legislation. For negligence security lawsuits, the new law replaces joint and several liability (in which liability responsibility is shared by multiple parties) with comparative negligence.

Impact: Under the new law, if the jury (in a jury trial) or judge (in a bench trial) determines that a third party’s criminal act represents more than 50% of the cause of the plaintiff’s injuries, and the property owner’s liability is less than 50% of the cause, the plaintiff cannot recover any damages from the property owner. Now, the facts of the case will prove crucial in determining liability, potentially leading to fewer claims with lower values.

Conclusion

The full scope of the law’s impact on the Florida liability insurance market remains to be seen. Meanwhile, it was reported that Florida plaintiff attorneys rushed to the courthouse ahead of the bill being signed, filing an estimated 70,000 lawsuits in the weeks leading up to its passage. Time will tell whether these tort reform efforts will have a meaningful impact on liability claim frequency and severity. But at first blush, the new law appears to offer a much-needed reprieve to Florida business owners.