Cause-and-Effect, Lawyers, and Mass Murder (Part Two)

by Neil H. Buchanan

If so-called Kitchen Table Issues continue to have any political valence (and on most days, I honestly doubt that they do), certainly the costs of buying, maintaining, and insuring the abodes within which those kitchen tables are located ought to matter to politicians.  And in a way, Florida's Republicans proved that the cost of housing is still a big political issue by holding a special session last week to address their state's homeowners' insurance crisis.  Even though they have successfully shut down serious political competition in their state, Florida's ruling party felt the need to act in the face of a genuine crisis.

That is not to say that the all-culture-war-all-the-time mindset of the Republican Party (nationwide no less than in Florida) was not a big part of the story.  After all, while this very real pocketbook problem was festering, my state's governor and his party spent months bullying teachers and students, passing bigoted legislation, and ignoring a broader housing crisis that is only getting worse.  Even so, the problem finally became impossible to ignore, and because the regular legislative session had ended with no action on homeowners' insurance (but with lightning-fast action to punish Disney and to prevent professors from talking about "controversial" topics), the governor called a special session of the legislature to address this problem.

How big is the problem?  As a threshold matter, CBS News reported a month ago that "Florida is the least affordable place to live in the U.S."  That is largely about the prices of houses and rents on apartments, but every aspect of housing in the Sunshine State is a mess, certainly including homeowners' insurance.  As I wrote in Part One of this column last week, insurance rates here have skyrocketed in the last few years, with rates on my home in Gainesville more than doubling from 2019 to 2022.  My experience is hardly unusual, and compared to the rest of the country, it looks even worse, with Florida's average premium in 2021 being more than double the rest of the country's.

In today's column, I will summarize what the legislature did in its special session last week, tying that analysis to the questions that I raised in Part One regarding whether the standard blame-the-greedy-lawyers explanation -- which is often too-convenient nonsense -- might in this case have some measure of validity.

The good news is that the title of this two-part column -- "Cause-and-Effect, Lawyers, and Mass Murder" -- is not fully applicable to Part Two, because there is nothing in today's analysis that requires us to return to the analogy that I drew in Part One between excuses for gun violence and excuses for the insurance crisis.  Two days ago, I wrote a column specifically devoted to the gun crisis, and I am too emotionally spent to go back to that topic again today.

The bad news is more like weird/annoying news, which is that today's column in part takes us into the weeds of insurance law, including a bizarre costarring role for regulations regarding the age of roofs, of all things!  But if that is the bad news, I will gladly accept odd and boring over tragic and horrifying.

My framing of the arguments in Part One involved asking whether something that has not changed -- in this case, Florida's uniquely litigation-friendly legal system, which appears to have been the norm here for as long as anyone can remember -- can explain something that has recently changed.  That is, when my insurance agent told me that my rate from 2019 to 2020 had jumped by 13.2 percent because "Florida has greedy lawyers," my first thought was that this was clearly a logical error.  After all, Florida has had the same legal culture for decades, tolerating (and in some cases setting up clear incentives to intensify) aggressive plaintiffs' lawyering.  How could that ongoing fact explain the jump in 2020, to say nothing of the 38.3 and 34.9 percent increases in 2021 and 2022, respectively?

When it comes to understanding Florida politics, one particularly good source is Lizette Alvarez, a Miami-based Washington Post columnist whose analyses are reliably sensible.  The week before the legislature's special session, Alvarez wrote a helpful piece laying out the scope of the problem and the Republicans' political malpractice that brought us to the point where the state's backup public insurance fund has become the largest insurer in the state.

Yes, Florida's Republicans actually tolerate the continued existence of a nonprofit insurer, run by the state, funded by insurance premiums and tax dollars.  Again, that insurer was supposed to be a last-ditch outlet for people in dire straits, but it is now the biggest game in town.  Of course, it was badly underfunded and has no serious possibility of dealing with even a normal hurricane season without a big infusion of cash.  Who would have guessed that insurance is a public responsibility that affects everyone?

In any case, here is where the story takes a turn toward the bizarrely mundane.  Alvarez describes a delightfully awful legal scam:
The problem begins with unscrupulous roofers. They show up uninvited on doorsteps (one rang my doorbell last month) and offer owners a pitch: If a roof is 25 percent damaged — that’s when Florida coverage kicks in — they can wrangle you a free roof from your insurance company, even if a storm wasn’t the cause. 
All a homeowner needs to do is sign off on allowing contractors to collect directly from the insurance company. This allows corrupt roofers to overcharge companies for a roof that is being needlessly replaced. Roofers pocket the extra money, and homeowners get a new roof.  ...
Florida law allows plaintiff lawyers to be awarded 2 to 2½ times their usual hourly rate for property insurance lawsuits. Talk about a plum incentive for lawyers — it gives a whole new meaning to hanging out a shingle. 
Property insurers in Florida paid out $15 billion in claims costs between 2013 and 2020. Eight percent of the money went to consumers, and 71 percent went to lawyers. 
Even though I am deeply skeptical of blame-the-lawyers tropes, there is certainly no reason to doubt that a law could be written that would provide irresistible incentives to engage in perfectly legal scams.  If you give anyone the ability to earn double their usual salary, you should not be surprised when many people take up that option.  Lawyers have professional responsibilities, but nothing about this seems unethical.  At worst, the "greedy lawyers are the root cause" story would have to be based on a claim that they are preventing the legislature from writing better laws.  Some amount of that must surely be happening, but in the end, it is the legislature that writes the laws.
Again, however, nothing that Alvarez offers explains why there is suddenly a crisis.  She references averages, and she found data covering 2013 through 2020; but that is not the time frame of the crisis.  Almost as an afterthought, however, she offers a possible cause: "This contingency fee multiplier rate is supposed to be a seldom-used tool, but a 2017 Florida Supreme Court ruling made it routine. Now insurance companies often settle rather than take the potentially much more expensive risk of going to court."
Interestingly, the link embedded in the word "ruling" above takes the reader to a Jacksonville-based plaintiffs' attorney's blog, which does a good job of explaining why the state Supreme Court's ruling arguably aligns incentives such that attorneys will not refuse to take on meritorious claims that are risky and expensive to pursue.  Even so, we at least have a possible explanation that is not merely that lawyers in Florida have always been able to bring lawsuits.  Even if the blogger is correct that the Supreme Court's decision was wise, it certainly shifted costs onto insurers in a way that could be expected to result in higher premia.  That is not to say that it is a complete explanation, nor does it explain why it is playing out over several years rather than all in 2018, but it is better than the default explanations.

In any event, the state legislature did indeed hold a three-day special session last week, and it passed a law that the governor signed on May 26.  The Associated Press provided an excellent rundown of the special session and the new law, and the editors of The Tampa Bay Times offered an appropriately skeptical summary of the results.  (A big thank you goes out to my newest research assistant, University of Florida Law rising 2L Laura Chiu, for digging into this on short notice and sending me a summary along with sources.)

What happened?  Based on literally no expert testimony -- with even the state's insurance commissioner not weighing in, even though he was in the room where the Republicans were holding their proceedings -- the Republicans put on a band-aid that even they admitted might not have any impact for up to eighteen months.  Essentially, they threw money at the immediate problem, providing two billion dollars to subsidize insurers' losses, with the money available only if the insurers reduce homeowners' insurance rates (by how much?  enforced by whom?).

As the editors at The Times put it: "Lawmakers ... also don’t know how many companies would tap into the reinsurance program. Another unknown: How much do those lawsuits actually cost insurers?"  And to be clear, the Democrats in the legislature were completely shut out of the process, with the editors going on to note: "The legislation passed by the House and Senate, released less than 72 hours before the start of the special session, each received a single hearing, and Republican leaders entertained no serious debate or discussion about amending them."
Predictably, the legislation does limit attorneys' fees.  What about those nasty roofers?
The legislation forbids insurers from automatically denying coverage because of a roof’s age if the roof is less than 15 years old. Homeowners with roofs 15 years or older would be allowed to get an inspection before insurers deny them coverage. 
If an inspection shows that a roof has at least five years of life remaining, insurers can’t refuse to issue a policy only based on the roof’s age. If a roof is more than 25% damaged but already complies with the state’s 2007 building code, it would only have to be repaired instead of replaced under an exemption to the building code that the proposed legislation creates.
Seriously, when you woke up this morning, did you imagine that you would be thinking about roofs at any point in the day?  In any case, that all might be sensible, and the law "tightens anti-fraud provisions governing how contractors can solicit homeowners to make an insurance claim."
And on a completely different issue, the session produced another new law that requires condo associations to keep enough money on hand to pay for inspections of their properties, a provision passed in response to the Surfside condo collapse last year that killed 98 people.  But again, why was that not done on the first day of the regular legislative session after that tragedy?  Oh, right: don't say gay; Disney's too woke; professors shouldn't have tenure.  Silly us.
So, the Republican governor and his gerrymandered majorities in the state legislature ignored a problem for years, rushed through a bill based on virtually no data or expertise, threw money at the problem in a way that will most directly help insurers but not homeowners, and set it all up so that nothing will change for a year and a half (if it changes at all), yet still managed to do a few things that were probably not terrible ideas.  All in all, it was a better week than average in Tallahassee.

There are, then, life-and-death issues going on here.  Even so, for those readers who welcomed a respite from the unrelenting bad news in the land of the free and the home of mass shootings, I can only say: You're welcome.