The level of litigated claims is on the increase in Florida despite legislative efforts to stem the tide, leading Wesley Todd, CEO of CaseGlide to say the trend is “concerning”, after new litigated claims jumped 37% month-on-month in January 2022 for Florida’s largest P&C insurers.
Litigated claims and in particular assignment of benefits (AOB), has caused a significant amount of claims inflation to flow through reinsurance and insurance-linked securities (ILS) markets in recent years, meaning the industry watches this area of legal action closely in the state of Florida.
January 2022 saw a steep increase in litigated claims, the first month to do so for a while.
CaseGlide said that data from Florida’s largest P&C insurers shows the number of new litigated claims increased 37% from the prior month.
January marks the first significant increase in litigated P&C claims since an almost steady five-month decline from July 2021’s high of 6,663 new litigated claims.
All but one of the 17 largest P&C insurers in Florida showed a month-over-month increase in January, CaseGlide said.
However, more alarmingly, five insurers experienced more than 40% month-over-month increases, while just two showed a less than a 20% increase. One insurer reported a decline of 16% month-over-month.
Wesley Todd, CEO of CaseGlide commented on January’s litigated claims trends in Florida, “Although actual lawsuit volumes have decreased since Senate Bill 76 (SB76) became effective, Florida insurers’ litigation exposure is still concerning.
“January’s steep increase could be the result of a return to normalcy following the holidays, or it could be that claims are now flowing through SB76’s new process and into litigation. It bears mentioning that these numbers alone likely aren’t enough to assess the state of the market.
“Before initiating litigation, SB76 requires plaintiff’s attorneys to file pre-litigation notices. Should the notices be added to the lawsuits when calculating the total litigation? Based on our analysis, we think yes, for now.
“If you consider the total pre-suit notices and lawsuits, insurers may unfortunately still have a similar total exposure to what they had in 2020 when the legislature first started considering SB76.”
On assignment of benefits (AOB), AOB cases as a proportion of total new litigated cases in January declined slightly, falling to 31% from 33% in December.
But, for the second month in a row, AOB makes up more than 30% of new litigation and has been on the rise steadily from the low 17% to 20% figures that were registered in the first six months of 2021, CaseGlide highlights.
Miami-Dade County experienced the largest AOB issue again in January, at 23% of new litigated cases, with Broward County following at 17%, Hillsborough County at 7%, Palm Beach County at 6%, and Orange County at 6%.
“It’s still too early to tell if SB76 will lead to decreased litigation frequency and severity,” Todd explained. “Everyone is investing a lot into the new process to create a better insurance environment for all Floridians. As the data continues to develop, we will get a clearer picture.”
In January, CaseGlide said the top 10 AOB contractors in Florida represented 35% of all AOB-related new litigated claims, with the top contractor responsible for 12%. Both figures are up on December.
Better funded and resourced contractors are probably more equipped to navigate the legal environment and to continue pushing forward AOB claims.
Reinsurance and ILS interests would do well to watch this closely through 2022, in advance of the hurricane season, as any Florida storms and major losses affecting the state could see a resurgent wave of AOB cases and litigated claims, the data might suggest.
Litigation was a significant source of claims inflation and as a result loss amplification for reinsurance and ILS markets through the challenging hurricane seasons of 2017 and 2018.
These rising litigated claims figures and AOB cases will not give underwriters confidence that legislative efforts are going to stem this tide and may be yet another driver for a harder reinsurance renewal season in Florida in June.