Recent regulatory reports on the insolvency of Florida property insurers have raised eyebrows for not directly addressing a major concern – claims litigation. Despite years of complaints from insurers and lawmakers about the detrimental effects of excessive claims lawsuits on the industry, the reports seem to downplay the role of litigation in causing financial troubles for insurers.

The 2022 Annual Report by the Florida Department of Financial Services’ Division of Rehabilitation and Liquidation highlights several factors contributing to insolvencies. Surprisingly, claims litigation, which has been widely regarded as the leading cause of insurers’ financial difficulties, is conspicuously absent from the list. Instead, the report points to inadequate capitalization, improper management, insufficient claim reserves, rapid premium growth, inappropriate transactions with affiliates, inadequate premium rates, natural disasters, catastrophic losses, change in business conditions, and reinsurance market issues.

Advocates for homeowners and policyholders are puzzled by the omission and raise questions about its accuracy. Gina Clausen Lozier, a plaintiffs’ attorney from south Florida, finds it ridiculous that litigation is not at the top of the list given the ongoing concerns about its impact on the industry.

Some believe that the focus on claims litigation is a diversion tactic, with the actual blame lying with insurance company leadership and corporate mismanagement. The American Policyholder Association, a non-profit group advocating for investigations into insurers’ claims practices, argues that finger-pointing at consumer fraud and excessive litigation is meant to shift attention away from internal issues. According to their executive director, Doug Quinn, failing at business is an inside job.

However, a Department of Financial Services official asserts that claims litigation is indeed a factor behind the listed insolvency factors. While it may not be explicitly mentioned on the report’s page, the official points out that 79% of the nation’s homeowners insurance lawsuits were filed in Florida during the period covered by the reports, contributing to factors such as asset deterioration, insufficient claims reserves, inadequate premium rates, reinsurance market issues, and changing business conditions.

The rising reinsurance prices in the last three years are also seen as a reflection of excessive claims litigation. Reinsurers have increased prices and withdrawn from the Florida market due to the surge in litigation between 2018 and 2023.

The report is not the only document that downplays the role of litigation. Other regulatory reports on insolvencies also fail to emphasize claims lawsuits and attorney fees as major contributors.

While some argue that litigation plays a smaller role in financial losses, others maintain that intricate corporate structures and “profit shifting” are more to blame. In any case, the omission of claims litigation from the reports has sparked a debate about the real causes of insurers’ financial troubles in Florida.