Few Florida airlines have filed for arbitration in 2022, but it’s coming, lawyers say

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After American Integrity Insurance Co. filed for binding arbitration for homeowners’ policies a year ago, many in the industry expected a wave of other insurers to follow suit as claims litigation costs in Florida continued to mount.

So far, however, that has not happened. An official with Citizens Property Insurance Corp., the state’s largest airline, said last week that the airline has no plans to seek a similar certification that would offer premium discounts if policyholders agree to arbitrate disputes rather than litigate them. And no other major Florida insurer appears to have asked the Florida Office of Insurance Regulation for approval of arbitration clauses.

Florida Senate Bill 2A, passed in December, may have eliminated much of the perceived need for ADR when it repealed unilateral attorneys’ fees and benefit assignment agreements, big drivers of tort litigation in the state.

But lawyers on both sides of the aisle said this week more arbitration clauses are to come — if not this year, then next, or in 2025. If the trend holds true, it will significantly change the way claims disputes are settled are changing and posing new problems for policyholders, lawyers, experts, judges and the arbitrators themselves.


“I expect more and more insurance carriers will go to binding arbitration,” said John Riordan of West Palm Beach, insurance defense attorney at law firm Kelley Kronenberg. He was speaking at the Windstorm Insurance Network conference in Orlando on Tuesday. “Porters like it.”

South Florida plaintiffs’ attorney Dan Rheaume agreed, but argued that outside of the courtroom, the system will favor insurance companies. Thanks to the confidentiality clauses likely to be included in the policy wording, the arbitration process will not allow insureds to appeal or even complain about a decision.

“Arbitrations have had a very low success rate for plaintiffs,” he said.

A 2019 report by the American Association of Justice found that only about 6% of plaintiffs walked out of an arbitration with money. In 2022, the association found that the win rate in arbitrations against banks and financial services companies was only 1.8%.

The reports examined enforced arbitration, which is often required by large retailers, mobile phone companies, banks and some employers before consumers can buy their products or work with the company. American Integrity certification is voluntary.


Critics said insurance companies are probably better prepared than the average homeowner or small business owner. For example, a contractor facing arbitration over a denial of a business interruption claim may not have a chartered accountant willing to testify in arbitration about exact business losses, an attorney said. A distraught owner may play well with a jury, but an arbiter may want to see actual loss calculations.

And policyholders may give little thought to the consequences of arbitration once they’re offered a premium discount, especially at a time when Florida consumers are seeing premiums rising, Rheaume said.

Non-binding arbitration has long been used in Florida. However, some lawyers have called it a waste of time, as unfavorable decisions are often taken to court anyway. Riordan expects non-binding reviews to be phased out over the coming years. But experience has given participants an idea of ​​what to expect as more insurers move to binding arbitration.

The outcome can also depend largely on who the referee is, Rheaume and Riordan agreed. Many dedicated arbitrators may be unfamiliar with insurance law, which can be detrimental to both sides. Some may admit experts, some may not. Florida law requires only that arbitrators be licensed attorneys with at least two years’ experience.

“You have to find the right referee,” Riordan said.

A better system could be to require a squad of three arbitrators to decide disputes over claims, said a lawyer present at the conference session.

The American integrity pledge, approved by the OIR in February 2022, is considered well-written and a type of model for other airlines to follow, lawyers said. Tampa-based American Integrity held nearly 3% of Florida’s homeowners’ insurance market as of 2021, and its aggressive market actions have been closely watched by other airlines.

Senate Bill 2A, last month’s reform measure, essentially codified portions of the insurer’s arbitration clause and now requires that offers of arbitration meet certain requirements:

  • The policy must offer the policyholder a premium rebate or premium credit in exchange for agreeing to binding arbitration.
  • The arbitration requirements must be set out in a separate supplement accompanying the policy and the policyholder must sign a form electing to accept arbitration.
  • The form must explain the rights that the policyholder is waiving, including the right to a jury trial.
  • Before any arbitration begins, the parties must first attempt to resolve the dispute through non-binding mediation, as defined by state law. The Florida Department of Financial Services offers an insurance dispute mediation service.

The question that remains to be clarified is whether bad faith claims against insurers can be covered by arbitration. Riordan said that historically, arbitration clauses do not involve non-contractual matters. But Rheaume said that doesn’t mean some insurers won’t try to mandate good faith cases to be decided out of court in the near future.

“It’s going to take a lot of litigation to settle all of this,” Rheaume said. “There will be a lot of growing pains.”

Bad faith claims have been a costly thorn in insurers’ side for years, and many have said that until recently, Florida law made it too easy for plaintiffs’ attorneys to file bad faith claims, even when the claims were paid. Lawmakers addressed this in December, raising the bar and requiring that breach of contract be proven before a bad faith tribunal can be brought.

However, if these types of claims are not addressed in arbitration clauses, it is possible for plaintiffs’ attorneys to lose a case in arbitration and then file a bad faith suit in a district court. “Well, you can try that,” Riordan said.

He pointed out that his firm had seen some of the first policyholder complaints about American Integrity’s arbitration clauses, suggesting that the policyholder had not read or understood the insurance contract. It could take two years for these cases to be resolved.

Courts have generally found, over the years, that arbitration is acceptable in business contracts. In just one interstate commerce case, according to the American Bar Association Journal, the US Supreme Court has found that compulsory arbitration is not appropriate.

Arbitration clauses will no doubt help Florida insurers avoid massive jury decisions, years of costly appeals, and onerous class-action lawsuits. The American integrity model requires each side to pay its own attorneys’ fees and costs, including expert witness fees, which can be substantial and a deterrent to plaintiffs.

This model also requires the insurance carrier to pay for the arbitrator. This, of course, raises questions of bias. How impartial will an arbitrator be if he or she is being paid by the insurer and wants to continue hearing claims, an attorney asked at the Windstorm conference session.

Further questions have arisen: According to which civil law procedural rules are proceeded in an arbitration? American Integrity dictates that the Florida Code of Civil Procedure and Florida’s Revised Arbitration Code should be followed. But other insurers based in other states may require arbitrations to be heard under New York rules, for example, or in other states — a disadvantage for Florida policyholders, Rheaume and others said.

“American Integrity’s support is pretty good. It has very few ambiguities,” Rheaume said. “But other airlines may not be going in a similar direction.”

Carrier Florida


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