Florida’s Tort Reform: Pivotal Changes and Impact on Litigation
On March 24, 2023, Governor Ron DeSantis signed HB 837 into law bringing about the most significant tort reform to the state of Florida in two decades. According to the Office of Governor Ron DeSantis, the purpose of HB 837 is to “decrease frivolous lawsuits and prevent predatory practices of trial attorneys who prey on hardworking Floridians.” The sweeping tort reform package amends Florida's comparative fault statute, reduces the statute of limitations for negligence claims, mandates transparency and disclosure of medical damages, prohibits phantom damages, adopts the lodestar approach for determining attorney's fees, modifies one-way attorney's fees, and modifies apportionment of fault in premises liability actions involving criminal acts of third parties.
The bill took effect immediately upon being signed into law on March 24, 2023, and applies to causes of action filed thereafter. However, the provision reducing the statute of limitations on negligence actions from four years to two years applies only to causes of action that accrue after the effective date. Consequently, the statute of limitations for a cause of action for negligence that accrued before the act came into effect remains four years, even if suit is filed after March 24, 2023. The act also states that it does not "impair any right under an insurance contract" in effect on or before March 24, 2023. Hoping to avoid the effects of tort reform, approximately 82,000 civil actions were filed in Florida state courts in the weeks preceding HB 837 being signed into law—seven times the monthly average. There will likely be a period of time in which defense firms and insurers will be handling two distinct camps of lawsuits requiring different approaches to litigation—those cases predating tort reform and those being litigated under the new law in effect.
Modified Comparative Fault
At the forefront of HB 837 is an amendment altering Florida's pure comparative negligence rule which allowed a plaintiff to recover even if they are primarily at fault for the incident. Florida will join the 23 other states who have gone to the "more than 50 percent" modified comparative negligence approach. If a plaintiff is found to be more than 50 percent at fault—meaning more culpable than not—the plaintiff is barred from recovery. If the plaintiff is found 50 percent or less at fault, the plaintiff may recover, but the award will be reduced by the plaintiff's proportionate fault.
Two-Year Statute of Limitations on Negligence Actions
The statute of limitations for general negligence claims is reduced from four years to two years. A plaintiff who fails to file a lawsuit within two years of the incident giving rise to the legal action will generally be barred from filing suit. The four-year statute of limitations still applies to an action accruing before the effective date of March 24, 2023, and actions (even if negligence is alleged) founded on the design, planning, or construction of an improvement to real property.
Transparency in Damages
HB 837 prescribes that there is no attorney-client privilege when a communication is relevant to the lawyer's act of referring the client for treatment by a health care provider, overturning Worley v. Central Florida YMCA, 228 So. 3d 18 (Fla. 2017). The bill also requires disclosure when a claimant treats under a letter of protection, and limits evidence of medical costs to the "amount actually paid, regardless of the source of payment."
In Worley, the Florida Supreme Court held that a party having been referred to a physician for treatment by his or her attorney implicates a protected confidential communication between the attorney and the client. Worley has been used by personal injury plaintiffs, by and through their attorneys, to avoid disclosure of the referral relationship between the plaintiff’s attorneys and the physicians to whom the attorneys refer their clients. Plaintiff's attorneys often have a network of medical professionals to whom they regularly refer personal injury clients for treatment. These physicians typically treat under letters of protection and serve as the plaintiff's key witnesses at trial on causation and damages, often referred to as "hybrid expert" witnesses. A substantial portion of their practice may derive from the referral relationship with a plaintiff's law firm, which under Worley was not discoverable or admissible for impeachment purposes. While plaintiffs were permitted to discover and impeach a defendant's experts with evidence of financial bias premised on the retention history between the experts, the defendant's attorney and any insurance carrier involved in the litigation, Worley prohibited the defendant from discovering the same information from the plaintiff’s treating physicians. By overturning Worley, the financial relationship between a plaintiff's treating physician and attorney is now discoverable and admissible for impeachment, mending the evidentiary imbalance between the plaintiff and defense with respect to experts and the attorneys who retained them.
In the same vein, HB 837 requires disclosure of letters of protection. Letter of protection means “any arrangement by which a health care provider renders treatment in exchange for a promise of payment for the claimant's medical expenses from any judgment or settlement of a personal injury or wrongful death action.” § 768.0427(1)(d), Fla. Stat. When a plaintiff treats under a letter of protection, the treating physician's payment for medical services becomes contingent upon the outcome of litigation in the form of a litigation lien. In other words, treaters agree to defer collection until litigation concludes with balances to be satisfied from the proceeds of an award or settlement. Should there be a defense verdict or proceeds insufficient to satisfy the outstanding balance, treaters who charge under a letter of protection typically include language in the letter that allows the treater to collect on the debt from the plaintiff personally. However, in practice, any deficit that could be indebted to the plaintiff personally is typically written off as uncollectable. Thus, a provider treating a plaintiff under a letter of protection commonly has a financial interest in the outcome of the litigation as he or she may not be paid for the medical treatment provided unless the plaintiff prevails. A byproduct of letters of protection is the increase in special damages overall, given that the charges by providers under a letter of protection are several times higher than those charged by a medical provider for the same treatment when billed through insurance under pre-negotiated contractual rates. This dynamic has historically resulted in increased verdict awards, which in turn have increased the settlement values of cases as a whole.
As a result of HB 837, when a letter of protection is used, the plaintiff is required to disclose: (a) a copy of the letter of protection; (b) all billing for the plaintiff's medical expenses, itemized and coded according to the applicable CPT or HCPCS in effect; (c) whether a provider sells the accounts receivable to a third party, the name of the third party, and the dollar amount for which the third party purchased such accounts; (d) whether the plaintiff had health care coverage at the time of treatment was rendered and the identity of the health care coverage provider; and, (e) whether and by whom the plaintiff was referred for treatment under a letter of protection.
HB 837 prohibits damages from including inflated costs exceeding the amount actually paid for past treatment or the amount necessary to satisfy charges for unpaid medical services. If a plaintiff has insurance but opts to use a letter of protection, only the amount the health care coverage would pay (in addition to the plaintiff's portion of the expense) under the contract is admissible at trial. Effectively, plaintiffs are limited to seeking compensation for medical damages only to the extent necessary to satisfy costs actually incurred. Phantom damages are no longer recoverable.
Premises Liability: Criminal Acts of Third Parties
In an action brought against a commercial or real property owner by a claimant injured by the criminal acts of a third party while lawfully on the property, the jury must consider the fault of all persons contributing to the injury, including the criminal tortfeasor whether a party to the action or not. Before this amendment, juries in premises liability actions were precluded from considering and apportioning fault to the criminal individual who directly caused the plaintiff's injury. Now, in determining liability for alleged negligence against a premises owner for failing to implement sufficient crime deterrence measures, a jury must also factor the independent criminal actions of non-parties over whom the premises owner exercises no dominion or control.
Premises Liability: Presumption Against Negligence for Criminal Acts of Third Parties
HB 837 creates a presumption against liability for multi-family residential property owners for the criminal acts of third parties. To qualify for the presumption, the owner must (1) have a "crime prevention through environmental design" completed for the property; (2) provide crime deterrence and safety training to its employees; and (3) substantially implement the following physical security measures:
- A security camera system at points of entry and exit that records and maintains footage for at least 30 days. The goal of this precaution is to assist in offender identification and apprehension.
- A lighted parking lot that provides light from dusk until dawn.
- Lighting in walkways, laundry rooms, common areas and porches from dusk until dawn.
- A deadbolt measuring at least one inch in each dwelling unit door.
- A locking device on each window and each exterior sliding door, and another on other doors not used for community purposes.
- Locked gates with key or fob access along pool fence areas.
- A peephole or door viewer on each dwelling unit door that does not include a window or that does not have a window next to the door.
It is the property owner's burden to show compliance with the requirements to qualify for this presumption against negligence.
Bad Faith Claims
The bad faith framework is modified to clarify that mere negligence alone is insufficient to constitute bad faith. An action for bad faith (statutory or common law) may not proceed if the insurer tenders (the lesser of) the amount demanded or the policy limits within 90 days after receiving notice of a claim accompanied with sufficient evidence to support the amount of the claim. If the amount is not tendered, the fact that the insurer could have tendered that amount, but did not, is inadmissible in an action to establish bad faith. The insured and the claimant have a statutory duty to act in good faith in furnishing information about the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim. In an action for bad faith against an insurer, if a jury finds either the claimant or insurer did not act in good faith, the jury may reasonably reduce the damages awarded against the insurer. Where there are multiple claims arising out of the same occurrence and the total of all claims may exceed the available policy limits, the insurer has 90 days to make one of the following options to avoid bad faith liability in excess of policy limits: (1) the insurer may file an interpleader action (in which case if the claims are in excess of the limits, the claimants are entitled to a prorated share of the limits as determined by the trier of fact); or (2) the insurer and claimants can agree to binding arbitration, with the insurer making the policy limits available to the competing claimants in arbitration.
HB 837 adopts a presumption that, in determining an award of attorney’s fees, the Lodestar method is sufficient and reasonable. Previously, Florida courts could award contingency fee multipliers based on factors such as market conditions, whether the attorney mitigated risk of nonpayment, the likelihood of success, amount in controversy, results obtained, and the type of attorney-client fee arrangement. The Lodestar method, favored by the federal courts, calculates the reasonable hourly rate multiplied by the reasonable number of hours expended. Florida's "strong presumption" may only be overcome in rare and exceptional circumstances with evidence that competent counsel could not otherwise be retained. By adopting the Lodestar method, the Florida legislature puts an end to contingency fee multipliers and prescribes a uniform methodology for determining fee awards.
One-Way Fees Against Insurers Modified
One-way attorney’s fees provisions in which insurers are required to pay a prevailing plaintiff’s attorney’s fees are significantly modified by HB 837. There is no entitlement to fees unless the insurer issued a total coverage denial of a claim (defending under reservation of rights is not deemed a coverage denial) and a declaratory judgment is rendered in favor of the insured. Only the insured, omnibus insured or named beneficiary may recover fees—the right cannot be assigned to any other parties, including the third-party claimant.