know about this Judge launches challenge of part of the insurance law
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A Leon County circuit judge has rejected a challenge by contractors to a new property insurance law that restricted attorneys’ fees in insurance disputes.
Judge J. Lee Marsh issued an order Monday dismissing a constitutional challenge filed in May by the Florida Restoration Association and Air Quality Assessors, LLC, an Orlando firm that does jobs like mold testing and leak detection.
The challenge centered on part of a law passed during a special legislative session in May that Gov. Ron DeSantis called to address massive problems in Florida’s property insurance market. The lawsuit named Melanie Griffin, secretary of the Florida Department of Business and Professional Regulation, and Donald Shaw, executive director of the state’s Construction Industry Licensing Board, as defendants because they have disciplinary and regulatory authority over contractors.
Marsh’s order did not directly address the constitutionality of the law, but it did dismiss the case because it said that Griffin and Shaw were not “proper defendants”, in part because they were not in charge of enforcing the law.
The insurance industry has long blamed litigation and attorney fees for driving up costs. The new law took a number of steps to try to address those issues, but the challenge centered around part of the measure that deals with what is known as “benefit assignment.”
In assignment of benefits, homeowners assign their insurance claims to contractors, who then seek payment from insurance companies, often leading to lawsuits over claims and payments.
Contractors in the past have been able to recover their attorneys’ fees from insurers if they were successful in lawsuits, a concept known as “prevailing party fees.” But the new law (SB 2-D) stripped contractors of the ability to recover fees from the prevailing party when benefits are awarded.
Homeowners can still recover fees from the prevailing party if they file claims directly against insurers, but contractors cannot. The lawsuit alleged that the change violates equal protection and due process rights and denies contractors access to the courts.
“When an insurer delays, underpays, or does not pay a claim at all, contractors are forced to bring an action against the insurer to recover the full amount owed for work performed,” attorneys for the Restoration Association of Florida wrote. and Air Quality Assessors. in an Aug. 4 response to the state’s motion to dismiss the case. “Without the corresponding right to recover attorneys’ fees, SB 2-D makes it economically infeasible for the contractor to pursue its legal rights and remedies in court and thus effectively nullifies the AOB (Assignment of Benefits) , leaving the assignee (the contractor) holding the bag.
But in seeking dismissal, attorneys for the state focused on questions such as whether Griffin and Shaw were the right defendants. In the July 13 motion to dismiss, for example, the attorneys wrote that the law “does not charge the secretary or chief executive officer to enforce its provisions” and does not involve their “specific responsibilities.”
“In other words, does the secretary or CEO have specific responsibilities related to property insurance or awarding attorneys’ fees in insurance litigation? They clearly do not,” attorneys for the state wrote.
In an indication of interest in the lawsuit, the state-backed Citizens Property Insurance Corp., Security First Insurance Co., Tower Hill Signature Insurance Co. and US Coastal Property & Casualty Insurance Co. formally stepped in to help uphold the law.
The Florida Restoration Association and Florida Premier Roofing LLC also have a pending challenge in Leon County Circuit Court to another law (SB 4-D) passed during the special session.
Florida’s property insurance market has been in turmoil as insurers have lost customers and sought large rate increases due to financial losses. Five property insurers have been declared insolvent since February, and the policies have reached Ciudadanos, which was created by the state as an insurer of last resort.
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