Florida, 2022: Demotech Found an Implied $52,167 Litigated-Claim Average Behind Eight Insurer Failures.

In late 2021 and 2022, eight Florida-focused property insurers failed, seven of them carrying Demotech's own financial stability rating. Demotech president Joseph Petrelli ran an internal review of the carriers' financial history, then concluded in March 2022 that a research project was necessary. Petrelli had already written that he felt "something beyond" door knocking, billboards, TV and radio advertising had been deployed against the carriers. Late that month he brought in data scientist Todd Kozikowski to run the project. Kozikowski found the pattern inside the Florida Office of Insurance Regulation's own claims report: OIR data implied an average cost of $52,167 to close a litigated claim, against $14,500 for a non-litigated claim, a category that includes claims of unknown resolution. Petrelli and Kozikowski would later call the gap a business model regulators, auditors, and rating agencies had never been positioned to see.

Petrelli's internal review found the carriers had looked sound for more than a decade before they failed. Florida's Office of Insurance Regulation had reviewed quarterly and annual statements and applied its own catastrophe reinsurance stress tests. Independent auditors issued unqualified, "clean" year-end opinions. Reinsurers sold treaties meeting or exceeding the minimum needed for an acceptable rating, and Demotech monitored the reinsurance programs alongside the carriers' financial stability. None of that activity, Petrelli's review found, ever triggered an actuary, auditor, advisory organization, or rating agency to flag where the litigated claims were actually coming from.

The mechanism sat inside two public records. Florida's chief financial officer runs the Service of Process Reports portal, where plaintiffs' lawyers file service on insurers doing business in the state. The Demotech reprint reports that Kozikowski aggregated litigated-claim counts against the same eight carriers off that portal and watched the total climb every year: 6,196 in 2018, 8,313 in 2019, 10,825 in 2020, 12,338 in 2021. Florida Office of Insurance Regulation data, as reported in the Demotech reprint, supplied the cost side behind the $52,167 and $14,500 figures; Petrelli's own article divides the two and calls 3.60 the resulting differential, an implied average-cost ratio rather than a fixed per-claim price.

Petrelli and Kozikowski gave the pattern a name: tech-enabled claim instigation. Kozikowski's research found that opportunists had harnessed search engine optimization, litigation platforms, and online marketing to outrank carriers online and redirect homeowners' searches toward generating contested claims. Kozikowski's review also found the model deployed countrywide, not just in Florida, riding on ground cover Petrelli says the state's one-way attorney fee statute and the Johnson, Joyce, and Sebo decisions had already built for it. No single law firm or lawyer carries the accusation here. The tactic itself is the subject, built from the online marketing and litigation-platform infrastructure Kozikowski's research identified.

The exposure compounds rather than adds, in Petrelli's telling. His illustration, based on OIR-derived averages, models a book running 6 percent claim frequency, split 1 percent litigated and 5 percent non-litigated, at a loss cost of $1,246.67 per policy. Flip that mix so litigated claims reach 5 percent and non-litigated falls to 1 percent, and the same book's loss cost rises to $2,753.35 on the identical claim count. Petrelli argues that shift is what eviscerates rate adequacy built on the old mix and complicates loss reserving set against it.

Third-party litigation funding is the next thread, one the Sentinel has already traced through Ohio's foreign-funder ban and New York's cap on consumer litigation funding. Petrelli believes the returns tech-enabled claim instigation generates have pulled funders in at what he calls record levels, alongside the spread of alternative business structures, arrangements that in Arizona let non-lawyers own, hold an economic interest in, or manage a law firm since January 2021, with similar structures advancing in Utah and the District of Columbia. On December 12, 2024, the Association of Professionally Responsible Lawyers sent ABA President William R. Bay a public letter transmitting a report from APRL's own Future of Lawyering Subcommittee that proposed revisions to Model Rule 5.4. The proposal now sits with the ABA.

The growth in litigated claims never triggered an actuary, auditor, advisory group, or rating agency to comment on where it was coming from.

Eight carriers still failed. Petrelli's review found the audits stayed clean in the years before each liquidation, and that the growth in litigated claims never triggered an actuary, auditor, advisory group, or rating agency to comment on where it was coming from. None of the eight failed insurers is on record answering that account; nothing in the local file carries a competing explanation from their side. Kozikowski and Petrelli coined the term together, and Kozikowski's company, 4WARN Inc., has since built tools it says can measure, remediate, or prevent the targeting they identified. Florida is where Kozikowski's research says the pattern first surfaced; he found the same model already running countrywide. The live thread is the ownership rule itself. APRL's proposal to loosen Model Rule 5.4 now sits with the American Bar Association. Arizona already lets outside capital hold law-firm stakes, while Utah and the District of Columbia are advancing similar structures. The next jurisdiction that opens the door decides how much more capital the model Kozikowski traced can raise, the same money the Sentinel has tracked through Ohio's funder ban and New York's funding cap.