Lawsuits against insurers in
Insurers say the declines have reduced costs and helped them to reduce or stabilize rates charged to policyholders.
Attorneys who represent insurance customers counter that the reforms made it more costly for policyholders to challenge insurers and left many with no recourse when their insurer denies or underpays claims.
For the second straight year, the number of lawsuits filed against insurers during the first three quarters declined by 23.8% — from 36,639 to 27,923 — compared to the same period last year, according to data compiled from public records by
That followed a 23.9% decline between the first three quarters of 2022 and 2023 and a 23.4% decline over the same time span in 2021 and 2022, the data shows. Since 2021, the number of lawsuits filed over the first three quarters declined from 67,788 to 27,923 — a 58.8% decline.
The trend accelerated during the third quarter of 2024: The number of lawsuits filed declined by 30% compared to the third quarter of 2023.
Notices of Intent to Litigate, a pre-suit notification that attorneys have been required to file since 2021, dropped from 57,000 during the first three quarters of 2023 to 37,003 over the same period of 2024, potentially signaling a further drop in litigation next year.
Several insurance experts said that the absence of a major hurricane striking a highly populated part of
“Yeah, it’s a combination,” said Ernie Garatiex, CEO of
Disputes over claims from those three hurricanes could push the number of lawsuits back up next year, experts said.
But they attribute the steady decline in lawsuits over several years to the reforms of 2022, which, among other changes, repealed a longstanding law that entitled policyholders to recover attorneys fees if successful in a lawsuit.
Attorneys: Reforms hurt policyholder recourse
In pushing for the 2022 reforms, insurers argued that the so-called “one-way attorney fee” provisions encouraged attorneys for policyholders to file excessive lawsuits over small claims. They had little to lose, insurers said, because attorneys knew they could collect fees that far exceeded the value of the disputed claim if the insurer agreed to resolve the case by paying any amount over its initial settlement offer.
Plaintiffs attorneys who were asked about the reasons for the decline in litigation said that the repeal hurt policyholders by requiring them to either pay for legal representation out of their own pocket or agree to pay a percentage, often 30% to 40%, of whatever they recover for their claim.
As a result,
Because insurers know this, they are more likely to deny or underpay valid claims, he said, “leaving policyholders with no recourse.”
Duboff added, “Policyholders are afraid, because attorneys forewarn them that not only must they pay their own attorneys fees, but in some circumstances where there is a statutory ‘Proposal for Settlement’ they may be responsible to pay the insurance company’s attorneys fees.”
Insurers: You can fight us in other ways
Insurers say that litigation isn’t the only way that policyholders can dispute claims decisions.
Some companies require policyholders to submit disputes to the
Other insurers require disputes over claim amounts to be resolved through an appraiser process. This involves insurers and policyholders hiring their own appraisers who each develop their own estimates of the claim cost. Duboff says policyholders are required to hire their own appraiser and pay half of the cost of an umpire if the two sides disagree.
Some insurers offer rate discounts to policyholders who agree to forego their right to sue and instead enter a quasi-judicial process called arbitration. While appraisal focuses on the value of the claim, arbitration aims to settle all matters in dispute, including whether a loss is covered.
But arbitration offers policyholders little advantage over a lawsuit if they decide they need to hire an attorney to represent them in the process.
Since the reforms were enacted, “insurance rates have continued to skyrocket while insurance companies have been emboldened to unfairly deny claims,” Gonzalez said.
Friedlander points out that despite the decline in lawsuits, plenty of attorneys remain eager to help policyholders take on their insurance companies. “Billboard attorneys have not slowed down their aggressive marketing tactics to prompt consumers to ‘call us first’ before trying to settle a claim with their carrier,” he said.
A ‘true test’ ahead
Premiums will decrease, hold steady or increase depending on what reinsurers — companies that provide insurance to insurers — charge next year after looking at claims and litigation from this year’s storms, Garatiex said.
A few years ago, reinsurers hiked rates and offered less coverage after litigation drove losses from 2017’s Hurricane Irma and 2022’s Hurricane Ian higher than their catastrophe loss models had predicted, he said.
He said the industry will learn whether the reforms “will hold” as lawsuits roll in over this year’s storms.
Hurricane Milton, in particular, has the potential to generate disputes over whether damage was caused by storm surge, which property insurance does not cover, or wind-driven rain, which it does cover.
“Milton will be the true test, in my opinion, of the reform and whether it really makes a difference when it comes to frivolous lawsuits and litigation in general,” he said.
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Clinton Mora is a reporter for Trending Insurance News. He has previously worked for the Forbes. As a contributor to Trending Insurance News, Clinton covers emerging a wide range of property and casualty insurance related stories.