Effective December 16, 2022 the Florida Legislature added new Fla. Stat. § 627.70154. It is titled Mandatory binding arbitration. It is applicable by its terms only to property insurers, and it provides in full as follows:
A property insurance policy issued in this state may not require that a policyholder participate in mandatory binding arbitration unless all of the following apply:
(1) The mandatory binding arbitration requirements are contained in a separate endorsement attached to the property insurance policy.
(2) The premium that a policyholder is charged for the policy includes an actuarially sound credit or premium discount for the mandatory binding arbitration endorsement.
(3) The policyholder signs a form electing to accept mandatory binding arbitration. The form must notify the policyholder of the rights given up in exchange for the credit or premium discount, including, but not limited to, the right to a trial by jury.
(4) The endorsement establishes that an insurer will comply with the mediation provisions set forth in s. 627.7015 before the initiation of arbitration.
(5) The insurer also offers the policyholder a policy that does not require that the policyholder participate in mandatory binding arbitration.[1]
Property insurers in Florida are likely to avail themselves of mandatory arbitration provisions in their property insurance policies, if the boxes set out in the new statute are checked. Other than the obvious reasons why property insurers in Florida would do this, there is another reason provided so far by the laws of other jurisdictions.
Under various statutes across the United States, it has been held that a first-party insured's claims for extracontractual damages, i.e., for damages outside the provisions of the insurance policy, may be preempted as to "any claim that is resolved or confirmed by arbitration or appraisal."[2]
[1] Fla. Stat. § 627.70154 (emphasis supplied), added by 2022 Fla. Sess. Law Serv. Ch. 2022-271, §18 (S.B. 2-A) (WEST), effective December 16, 2022.
[2] See Minn. Stat. Ann. § 604.18 Subd. 4(c) (West; Westlaw current with legislation effective through April 19, 2023 from the 2023 Regular Session): "An award of taxable costs under this section is not available in any claim that is resolved or confirmed by arbitration or appraisal."
The effects of mandatory binding arbitration on extracontractual, "bad faith" claims are examined at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:18, Arbitration Provisions (West Publishing Company 3d Edition, 2023 Supplements in process).
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