There are universal problems that policyholders face in every state, but sometimes solutions to these issues come from adapting approaches from other jurisdictions. One of the common issues that face policyholders involves obtaining a check from an insurance carrier once a settlement has been reached.
Regardless of whether an agreement on settlement of the claim occurred after a prolonged contentious dispute or with little disagreement, insurance companies often hold onto the funds for as long as possible. Insurance companies increase their profits by investing the money they are holding in the form of premiums. If the insurance company can avoid paying out on a resolved claim for days, weeks or even months, their profits increase immensely because such a large amount of money is being pooled and invested.
While Florida insurance law currently does not provide policyholders with a perfect remedy for this issue, we might want to look to California. The California Insurance Code Section 2057 provides in pertinent part:
“Under a contract for fire insurance, payment to the insured shall be made within 30 days after the amount of the loss and the liability of the company have been agreed upon or settled by the insured and the company in writing. If the company fails to pay within the 30 days, the payment shall bear interest, beginning the 31st day, at the prevailing legal rate. The company also shall be liable for all costs of collection, including reasonable attorney’s fees, if legal action is necessary to obtain payment after the company has willfully failed to pay within 30 days.”
While this provision only appears to apply to fire insurance, the effectiveness of this approach should be apparent. Insurance companies have nothing to lose by stalling these payments if this type of approach is not used. Given that even a delay of a few days can generate a significant return when millions of dollars across many claims are at issue, the insurance company’s financial interests makes it predictable that it would not rush to pay a claim.
However, the California provision forces insurance companies to re-evaluate the risk and benefits of such an approach. The obligation to pay interests and attorney fees might eliminate the profitability of holding onto an insured’s money for the longest period possible. The California Civil Code indicates that the prevailing interest rate is ten percent, so the interest and potential attorney’s fees mitigate the financial incentive for insurance companies to delay paying claims where coverage issues and the value of the claim have been resolved.
This approach prevents insurance companies from operating as a bank with funds that should have been paid to the insured. While Florida insurance law does not include a comparable provision, there is no question that such an approach would provide a valuable protection for policyholders in our state.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].