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As reported today on the Brain and Spinal Cord Blog, tomorrow morning the Florida Legislature’s House Civil Justice Sub-Committee is scheduled to take up a Bill that will give Insurance Companies protection against suits by their customers when they act in bad faith in handling claims.

The Big Insurance lobby horde has been clamoring for a bad faith bill for years.  And for good reason.  First, the lobbyists are paid incredibly well for the effort — millions of dollars in lobby fees and campaign contributions every year.  For years.

But second, is that the insurance industry hates, and I mean HATES, being exposed to bad faith claims.  And for good reason.  Why?  Because regular people despise it when insurance companies treat their policy holders badly, or act in “bad faith.”   “Bad faith” is legalese for “failing to settle claims when they can, and should, under the circumstances.”  Seriously; that’s actually the definition  under current Florida law.

So what happens when insurance companies treat their policy holders badly by not settling a claim filed by another person?  Typically the policy holder is exposed to what’s called an ‘excess verdict.’

Here’s how it works:  let’s say there is a taxi cab company in Orlando who has a fleet of cabs.  All of the cabs have insurance with Giant Insurance Conglomerate, or “GIC” for short.  One day a cab driver is drunk and plows into a family minding their own business, crossing the street to on their way to visit Disney.  Their three children are catastrophically injured, and will require, say, ten millions of dollars in future medical care (think dozens of surgeries, round the clock care, respirators, therapy, etc…).

The problem for the taxi company?  They only have 5 million in coverage for ten million in exposure.

But Family needs care immediately and offers to take the 5 million if they can get it early in the case so they can pay for the kids’ care and help cover the Family’s lost wages since Dad and Mom have to stay at the hospital and help the children get through surgeries and rehab.  Family tells the insurance company “pay the full policy limits now so we can get some money now, and we’ll give the taxi company a full release.”

Here’s the rub: Giant Insurance Company doesn’t pay.  They sit on the policy money.  5 million earns a lot of interest every day.  If you delay paying for 6 months or a year?  You save yourself a few nickles.  Or in this case, a lot of nickles.   Seriously, this actually happens.

Family has to file suit against the taxi company.  Both sides lawyer up.  Money is spent.  Depositions are taken.  Finally, ten months go by and Giant Insurance Company finally sends the 5 million dollar policy check to the Family.  But now the Family is pissed.  They have gotten through the worst of the surgeries and have figured out a way to deal with the financial crisis created by their children’s catastrophic injuries.  And they are angry that the carrier delayed when everyone on both sides of the case knew that the case value was way more than the 5 million dollar policy.

So the Family sends the check back to the insurance company and asks the judge for a trial date.  And the case goes to trial.  As everyone expected, the jury finds that the Family has 10 million in future medical expenses and renders a verdict in that amount.

And here’s where it gets messy: because the Family really needs the money to take care of their children — the “levy and execute” against the taxi company.  “Levy and execute” means that they take the judgment and get the Sheriff to take the taxi cab company’s stuff.  Literally go and pick it up to sell.  And not just the cabs; they take receivables.  And bank accounts.  And furniture.  And everything.

With all of their stuff gone, taxi cab company goes out of business.  The ‘excess verdict’ — the 5 million dollars over their policy — wipes them out.  Meanwhile, the insurance company sends their 5 million dollar policy to the Family and wants to walk away.

Except they can’t under current Florida law.  Because current Florida law allows the Taxi company to take their carrier to task for having acted in bad faith — for failing to settle the Family’s claim for the policy limits when they could have and should have under the circumstances.

At least for today.

Representative Kathleen Passidomo, who is actually a lawyer, has filed a bill at the request of Big Insurance to take away the rights of small businesses to bring bad faith actions against their own insurance companies.  Under her bill, insurance companies will be allowed to act in bad faith unless and until a ‘civil remedy notice’ (which is a specific form that has to be filed out in a very specific way and sent to a very specific list of people and entities to be valid) was filed, calling the company out for bad faith.  At that point, if the insurance company offers its policy limits, it will have complete immunity for damages that have been caused to its customer.

Might sound reasonable, right?  The insurance lobby boys certainly say it is.  Well, not if you’re the taxi cab company that gets hit with the excess verdict.  While the Giant Insurance Company will get immunity under Passidomo’s bill, the taxi cab company will be still left holding the bag for the excess verdict.  Crazy.

Especially crazy in light of today’s economy.  With a legislature and Governor who profess to be “pro business” and “pro jobs” this bill is the ultimate example of political hypocrisy.  Sure the Passidomo bill is good for some businesses; the big carriers.  For the rest of the businesses in Florida?  The taxi cab companies, the restaurants, the myriad of other companies that create jobs outside of either the legislative lobby or insurance industries?  Not so much.

The Passidomo bill is bad for everyone in Florida — businesses and families alike — with the exception of the insurance industry.  Carriers must have incentives to continue to fairly and timely pay claims.  If the Passidomo bill passes, this basic concept of fairness in claims handling will be turned on its head.  Hopefully this bill will die in Chairman Eisnaugle’s committee tomorrow and won’t be heard from again.

All Floridians should watch the vote tomorrow, and see which way Representative Eric Eisnaugle, Representative Clay Ford, Representative Richard Steinberg, Representative Bernard Mack, Representative Matt Gaetz, Representative Bill Hager, Representative Shawn Harrison, Representative Marty Kiar, Representative Larry Metz, Representative Darren Soto, Representative Cynthia Stafford, Representative Kelli Stargel, Representative Greg Steube and Representative Michael Weinstein vote on this very very bad bill.

At the present time it’s unclear what will happen with tomorrow’s vote.  However one thing is for sure: if this ridiculous bill does pass, the taxi cab companies and families of Florida will be very very angry next November.