Florida Consumer Advocate, Attorneys Concerned about Growing Use of Arbitration in Claims Disputes

Plaintiffs’ attorneys and Florida’s insurance consumer advocate are pushing back on insurers’ plans to require arbitration to settle more claims disputes. Some attorneys warned that the plans could lead to legal challenges and potentially more claims litigation.

“That’s going to be a real issue,” said Dan Rheaume, a trial attorney in Hollywood, Florida, who represents homeowners in claims disputes. “They’re taking away the insured’s day in court. There will be challenges to that.”

Rheaume was reacting to news that broke in early April that the Florida Office of Insurance Regulation had approved an endorsement filing by American Integrity Insurance Co. The insurer will offer premium discounts if homeowners agree to mediation or binding arbitration, for new policies starting April 22 and for renewals starting June 21.

Other insurance companies’ leaders have said their firms are now considering similar endorsements as a way to help reduce the extreme amount of claims litigation that has plagued the industry in Florida for the past few years. One carrier’s executives met on the plan right after word spread about American Integrity’s approval.

But arbitration may not be in the best interest of policyholders, said Tasha Carter, the insurance consumer advocate at the Florida Department of Financial Services.

“I definitely think more and more insurance companies moving to include a mandatory arbitration clause in homeowners policies should be a concern for policyholders,” Carter said. “Arbitration could put policyholders at a disadvantage.”

Non-litigation solutions can eliminate some of the legal protections consumers now enjoy, including the right to trial by judge or jury, and, in most cases, appeals to a higher court, she said.

Carter said her office plans to scrutinize similar endorsement requests that other insurers may file with OIR in coming months, and may submit comments.

Under American Integrity’s endorsement, if a homeowner initiates a dispute over the value of a claim, it should first go to mediation then to confidential, binding arbitration.