Takeaways:
- Florida tort reform law fails to decrease lawsuits
- Rise in unpaid claims drives more policyholders to sue
- Florida claims denials and lawsuits far higher than rest of the U.S.
Florida's 2022 tort reform law aimed at reducing lawsuits against home insurers for unpaid claims had the opposite effect, according to a
In 2024, the first full year that the law was in effect, the percentage of claims closed without payment rose to 46.7%. In 2022, the last full year before the law took effect, the figure was 40%. Lawsuits as a percentage of all closed claims rose from 5% in 2022 to 6.2% in 2024. Lawsuits as a percentage of claims closed without payment rose from 12.4% in 2022 to 12.9% in 2024.
The 17% increase in claims closed without payment happened because insurers in the state closed claims more aggressively under the new law, said Martin D. Weiss, founder of Weiss Ratings. The data he used in the analysis came from the National Association of Insurance Commissioners (NAIC) Market Conduct Annual Statement (MCAS) published on July 1.
"It's a shock, because the state, the lawyers, the large insurance companies, even people on the side of consumers expected that with tort reform, it's going to be a lot harder for consumers to sue," Weiss said in a webcast hosted by the Insurance Fairness Project on September 11. "People sued more than they did before tort reform."
Weiss' report links the increase in lawsuits to insurers more aggressively denying claims or closing claims without payment, because the insurers thought Florida tort reform would make it more difficult to sue.
"Are these frivolous lawsuits like the insurance companies keep saying? Of course not. Why in the world would the people in Florida be 12 times more prone to filing frivolous lawsuits than the people in Georgia or New York, or any other state?" Weiss said. "We're just ordinary people trying to get our money for our claims paid. That's it. The idea that in Florida, everyone's filing privileged lawsuits, and we're the bad guys, is just ridiculous."
Twenty-six U.S. states have a percentage of claims closed without payment below 1%, 19 U.S. states have a percentage less than 2%, and three other states are below 3%, according to the NAIC MCAS data. New York and North Dakota had no data available, and Puerto Rico had 5.6% of claims closed without payment.
The U.S. average for claims closed without payment dropped from 1.4% in 2022 to 1.1% in 2024, "almost entirely without tort reform," the Weiss report stated. Florida is a "sick market" for consumers and insurers because of tort reform and other issues, the report added. Underpayment of claims, delayed claims payments and undercapitalized new smaller insurers also contribute to an unhealthy market, according to Weiss.
