Case Studies
States such as California, Florida, New Jersey, and Washington that have adopted similar bad faith policies have seen a dramatic increase in fraudulent claims and frivolous lawsuits that create escalating costs for all consumers and businesses.
New Jersey:
In New Jersey, former insurance commissioners of Florida and West Virginia noted in an op-ed that a 2019 Milliman study, which reviewed a New Jersey bad faith bill, found that the bill would have likely cost policyholders a total of $2.5 billion more in insurance premiums.
Washington:
Researchers examining Washington state ound that with a more pared-down version of bad faith legislation, insurance premiums for Washington residents would still go up due to added legal costs, costing consumers statewide as much as an additional $650 million annually for auto, homeowners, and business policies.
Florida:
An issue brief from the Insurance Information Institute highlights Florida’s homeowners’ insurance crisis. In 2022, Florida led the nation in homeowners’ insurance-related litigation, despite accounting for less than 10% of claims, with a corresponding impact on policyholder premiums. Florida’s penchant for litigation and generous attorney-fee mechanisms resulted in an unstable insurance market and caused insurance costs to skyrocket for policyholders. Comprehensive legal system reforms passed in 2023 have started to address this crisis by creating a more competitive insurance market.
California:
For 10 years, California had case law that allowed the kind of lawsuits created by bad faith legislation. Claims and lawsuits increased dramatically over that ten-year period, and premiums increased between 32% to 53% until the law was finally changed.
