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Property Insurance Bills Head To DeSantis' Office

By Shawn Rice

Law360 (May 25, 2022, 7:01 PM EDT) -- Florida House representatives pushed forward property insurance bills Wednesday despite efforts by some lawmakers to amend a $2 billion reinsurance program — described as a bailout to help insurers with significant losses — to instead pass savings directly on to consumers in the Sunshine State.

The legislative package, already approved by the Florida Senate, will now make its way to Gov. Ron DeSantis, who has already signaled that he will sign the bills addressing the state's property insurance crisis.

Governor Ron DeSantis

A pair of Florida bills seeking to address the state's property insurance crisis are heading to
Gov. Ron DeSantis' office, who already signaled that he would sign both of them. (AP Photo/Phelan M. Ebenhack)

Lawmakers at the special session voted in favor of several bills, which included H.B. 1D, that creates the Reinsurance to Assist Policyholders, or RAP, so that Florida insurance companies can tap into a $2 billion pool for their two greatest loss events in a year, up to 90% of the losses above a retention. H.B. 1D and its identical companion bill, S.B. 2D, passed by a vote of 95-14 on Wednesday.

Rep. Andrew Learned, D-Brandon, said the bills won't result in lower premiums or prevent more Floridians from having coverage dropped with the increased frequency and severity of weather-related events.

Learned unsuccessfully tried to amend RAP, which he said was a bailout to the insurance industry. Learned suggested reinforcing the Florida Hurricane Catastrophe Fund so that insurance carriers could access $2 billion in state reserves. He said the money earmarked for the RAP program should go to consumers who are back at home struggling with paying for higher gas and rent and who are worried about their health care bills.

House Appropriations Committee Chair Jay Trumbull, R-Panama City, who sponsored the bills, pointed to consumer savings with the $150 million added to the My Safe Florida Home Program. Under that existing program, Floridians can tap into funds to reconfigure their homes with safer and more resistant materials to handle hurricane damages.

On Wednesday, Florida legislators also unanimously passed reforms to the Florida Condominium Act to prevent another tragedy in Surfside, Florida, in which 98 people died in the collapse of a condominium complex. Under S.B. 4D, lawmakers added new measures that would enforce regular building inspections statewide and ensure that condominium associations were maintaining sufficient reserves.

'Shining Star Of The Bill' 

The insurance community welcomed the RAP program, which some believe could have a direct impact on premium rates. Ahead of the special session, the insurance industry wanted attention given to the reinsurance market.

Beth Vecchioli, a senior policy adviser of Holland & Knight LLP, said the final product is a "good balance" with both sides sacrificing certain aspects. The reinsurance provision "is the shining star of the bill" she said, noting the existing challenge for a number of smaller insurers to obtain reinsurance.

Insurance companies rely on reinsurance to share in the cost of paying claims after a catastrophic event. The new RAP program provides much-needed protection for insurance carriers that are having difficulty obtaining private reinsurance as they approach the start of hurricane season, according to some experts. RAP would require participating insurance carriers to make rate filings on the savings received.

Vecchioli said that the savings would be passed to policyholders through reduced rates. Florida's lawmakers were keen on the reinsurance provision because the consumer rate relief will most likely be reflected sooner in rates than with any litigation reform that would take more time, she added.

Matthew Weaver of Reed Smith LLP, who represents policyholders, said the reinsurance proposals are a welcome sign given the importance of getting insurance carriers properly reinsured for catastrophic events. A lack of reinsurance can negatively affect insurer behavior when presented with claims, he said.

Representatives for the Personal Insurance Federation of Florida and the National Association of Mutual Insurance Cos. told Law360 that most of their members already have reinsurance for the upcoming hurricane season, so they recommended that the RAP bill not be mandatory but tailored to specific companies.

Michael Carlson, PIFF's president and CEO, said PIFF doesn't typically back changes to the Florida Hurricane Catastrophe Fund, so "this targeted use of state dollars to provide some capacity to the industry and rate savings to consumers is much better than making permanent changes to the fund."

Litigation Reform

Litigation reform was also a red-hot topic in these bills, though both sides disagree on who is at fault. The insurance industry blamed the hostile legal environment in Florida as the reason for premiums going up for homeowners and as the cause for some insurers no longer renewing policies or going insolvent.

Lawmakers passed S.B. 2D, which put restrictions on the use of attorney fee multipliers in an award and clarified when a bad-faith suit can be filed. The bill also prevented homeowners from transferring their rights in property insurance litigation — through an assignment of benefits — to a third party.

Rep. Dotie Joseph, D-Miami, said it is harmful to take away one of the few tools that homeowners have going up against insurance carriers and their attorneys: a bad-faith claim. She said there are people waiting years to be paid and that they should be allowed access to the courts when an insurer fails.

Trumbull, R-Panama City, said the bills weren't looking to eliminate the bad-faith claim.

Rep. Matt Willhite, D-Wellington, challenged the oft-cited figure from the insurance industry that about

79% of the country's homeowners insurance litigation is in Florida but that the state accounts for 9% of property insurance claims in the U.S. Without being shown that data, he said he couldn't verify and trust it.

It's at least six to 12 months before homeowners see relief from this legislative package, Willhite warned, 'though he said he would still vote for the bills, as they are attempting to address problems that aren't going away.

'Get It Right The First Time' 

The insurance industry has pushed hard to fix problems its members believe exist in Florida's legal environment.

William Large, president of the Florida Justice Reform Institute, said the bills are "a tremendous step forward to help the consumers in the state" with a focus on the assignment of benefits, one-way attorney fees, provisions and bad-faith claims. Those three areas have been a sticking point for insurance carriers.

"I'm confident that these reforms will work," he said.

Katelyn Ferry of Bolin Law Group, who testified during the House of Representatives' Appropriations Committee meeting, told Law360 that the discussion focused on a consumer's right to bring a bad-faith claim, with her position being that the plaintiffs' bar "has attempted to turn every case into a bad-faith claim."

Legislative changes requiring policyholders to prove breach of contract first will allow insurance carriers, once again, to be able to participate in appraisal, Ferry said. Tens of thousands of lawsuits will be prevented, leading to reduced attorney fees and costs and hopefully decreased premiums, she said.

Currently, Floridians have to file a civil remedy notice with their insurance carrier if they disagree over damages and are looking to file a suit accusing the insurer of acting in bad faith. After a policyholder gives notice, an insurance carrier has 60 days to address the concern and can use the appraisal process.

Reed Smith's Weaver disagreed with some of the rhetoric about attorney fees and bad faith. The plaintiffs' bar can give plenty of examples where carriers undervalued claims and then were ordered to pay, he said.

If insurance carriers were to "get it right the first time," then the issue wouldn't exist, he said, explaining that lawmakers should give time to see if how the recently passed presuit notice requirements "play out, and go no farther than the ban being proposed on attorney fee shifting in the assignment of benefits context."

The bad-faith fix looks to try to solve a problem that doesn't actually exist, Weaver said. Florida law already states that there can't be bad faith in the absence of coverage, which must be established first.

Weaver said the new statute would only protect insurers from bad-faith liability when they undervalue or are slow to pay a claim, even if it is later proven that they owed more.

"That would simply hand insurers a playbook for not handling claims in good faith or in accordance with industry standards," Weaver said.

 --Additional reporting by Eli Flesch and Carolina Bolado. Editing by Emma Brauer.

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