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Florida Phoenix

Special session opens Monday on troubled property insurance market: Will reforms work long term?
If approved, legislation would include hundreds of millions of dollars for property tax, toll, and disaster relief


Florida Capitol

The Florida Capitol, January 2021. Credit: Michael Moline

Insurers and the larger business community would get virtually everything they want under legislation proposed for the Legislature’s special session on that topic and trial attorneys would likely take it on the chin, as lawmakers convene Monday in the Florida Capitol.

That includes repeal of the state’s one-way attorney fee in insurance disputes — perhaps the No. 1 item on the insurance industry’s wish list. The Legislature approved the fee law to even the balance between policyholders and their carriers, but insurers now claim it’s leading to frivolous, but expensive, litigation.

In addition, the Legislature will take up toll relief for commuters and property tax relief for Floridians who suffer significant hurricane damage.

The proposed insurance legislation would authorize $1 billion for a new reinsurance program to back insurance companies, on top of $2 billion authorized in another special session last spring.

But that’s not all when it comes to the hundreds of millions proposed in several pieces of legislation. For example, the toll relief program, if approved, would include $500 million in the 2022-23 budget year. And the disaster relief bill would include everything from $350 million for FEMA public assistance grants to $150 million for affordable housing for hurricane recovery and $100 million for beach erosion projects, according to legislative documents.

As to homeowners, don’t expect lower property insurance premiums soon. In fact, people could be forced out of the Citizens Property Insurance Corp., the state-backed insurer of last resort, if a policy is available on the private market for no more than 20 percent above the Citizens premium. They’d be blocked from insuring through Citizens under those same conditions.

‘Difficult but careful balance’

Kathleen Passidomo Naples Republican Kathleen Passidomo answers reporters’ questions following her installment as Florida Senate president on Nov. 22, 2022. Credit: Michael Moline

Senate President Kathleen Passidomo and House Speaker Paul Renner announced that the legislation had been filed on Friday night, “I believe the goal we all share is for Florida to have a robust property insurance market that offers homeowners the opportunity to shop for insurance that meets their needs and budget,” Passidomo said in a written statement. “We also want to make certain that when damage occurs, claims are paid promptly and fairly, so homeowners do not have to contend with time-consuming and expensive litigation,” she added.

“This special session is about providing short and long-term relief to property insurance consumers, extending aid to victims of hurricanes Ian and Nicole, and helping commuters using Florida’s toll roads save money,” Renner said on Twitter.

“Our policymaking strikes a difficult but careful balance that ensures Floridians can access property insurance, targets cost-driving frivolous lawsuit while protecting access to the courts, and sends a strong signal to insurance carriers that Florida is open for business.”

Rampant receivership
Gov. Ron DeSantis pressed for the special session while taking heat from Democratic opponent Charlie Crist during his reelection campaign this year, after an earlier special session on the topic failed to produce immediate relief.

According to the Florida Office of Insurance Regulation (OIR), eight insurance companies have entered receivership in Florida since 2019, five of them during 2022 alone.

They’ve been losing a ton of money. According to a legislative analysis, Florida insurers all together ran a $1 billion in the red during 2020 and 2021; the last time they showed a profit was in 2016.

Complicating the picture were hurricanes Ian and Nicole, which struck Florida, respectively, in late September and November. The first caused estimated damage in the range of $40 billion to $64 billion, including uninsured flood losses of $10 billion to $16 billion. Estimated insurance losses from Nicole run to nearly $2 billion.

The result of these trends has been a surge in policies written by Citizens, which reported an increase in policies from 759,305 worth more than $232.5 billion at the end of 2021 to more than 1.1 million policies worth around $399 billion as of Oct. 31 this year.

“If we get to have a stable and competitive market, consumers will benefit, because companies will be competing against each other to take market share. You do that most quickly by being able to lower the price,” said Michael Carlson, president and CEO of the Personal Insurance Federation of Florida, representing companies including State Farm, Progressive, Allstate, and Farmers.

Blame game
One of the main culprits, to the industry and even the OIR, is the plaintiffs’ bar, which they accuse of exploiting legal loopholes to extract money from insurers.

The Florida Justice Association, a lobby for plaintiffs’ attorneys, didn’t respond to an interview request, but in the past has blamed mounting litigation on insurers that don’t pay claims fully or promptly.

But during a speech at the Florida Chamber of Commerce’s annual insurance summit last week, Florida’s Chief Financial Officer Jimmy Patronis targeted assignment of benefits agreements, in which policyholders transfer their right to sue carriers to a law firm or a contractor. The argument is that these agreements — AOBs in shorthand — encourage unnecessary litigation.

Jimmy Patronis Florida Chief Financial Officer Jimmy Patronis. Credit: Florida Department of Financial Services

As mentioned above, the legislation would repeal another long-term insurance industry target, that one-way attorney fee laws (here and here). It was designed to discourage insurers from low-balling claims; if a policyholder sues and gets awarded any amount above the offer — even a relatively small amount — he or she could demand the insurer pay his or her litigation costs

“It’s created an incentive to bring lawsuits over low-dollar amounts,” William Large, president of the Florida Justice Reform Institute, told the Phoenix in a telephone interview.

“So, you see lawsuits where the amount recovered is a low-dollar amount, but it leads to huge fees. If they can collect a penny on a lawsuit, they get their fees paid. And it’s not that difficult to go behind an estimate and get a penny or a dollar more to be paid,” he continued.

William Large William W. Large, president, Florida Justice Reform Institute. Credit. FJRI website.

That’s especially true following a large storm that causes extensive damage. Competition for contractors and building supplies can delay repairs to individual homes and spin off inflation that drives up repair expanses. Unscrupulous contractors and lawyers can leverage homeowner frustration to take advantage of that, Large said.

“Multiply that fact pattern times 100,000 homes. This is not a tenable business model, and this is what is driving insurers to file for bankruptcy and leave the state of Florida. It’s creating an increase in the number of insured under the state-run property insurance company, Citizens Property Insurance,” he said.

Even if the policyholder is entitled to more money, “it’s not meant to be a lawsuit. But that’s the system that we have in place,” Large argued.

Another law allows courts to order insurers to pay a policyholder’s court fees in any suit filed seeking timely payment of claims, within 60 days. The insurer is entitled to have an appraisal done, but it can be difficult to perform those within the time allotted under some circumstances, Large said. The policyholder is still entitled to recover his or her attorney fees.

Large categorized the dynamic as “rent seeking,” which he defined as “parking yourself on a regulatory mechanism that offers absolutely no value to society, and that’s what the plaintiffs are doing with the one-way attorney fee provision. They’re making money on a provision that was meant to benefit the insured but it’s only benefitting attorneys.”

Again, the Florida Justice Association provided no comment to the Phoenix, but in remarks to the Florida Bar News association president Curry Pajcic complained that insurance companies bring litigation upon themselves through their claims practices.

“The corporate elites and the insurance industry want to take your arm and your leg, and in exchange, give you a crutch,” Pajcic said. “They don’t want to make it right; they don’t want to make it even.”

Bad faith
The legislation attempts to address these complaints. It would become harder to press bad-faith claims against insurance companies accused of low-balling or slow-walking claims. For one thing, a policyholder no longer would automatically have a claim for bad faith if he or she forces the carrier to improve on an initial offer of settlement — instead, the customer would have to establish breach of contract.

And the Florida Office of Insurance Regulation would gain new powers to punish insurers for abusing the appraisal process; they could lose their ability to use for process for two years and get publicly named and shamed on the office’s website. The legislation would tighten timelines for insurers to respond to claims.

What’s getting very little mention is the climate change driving these losses — either by the Republicans driving the legislation or the industry.

“It’s not something we’re actively talking about,” said Carlson, the insurance lobbyist.

“I think some of the national companies have looked at the issue to see what the risk of sea-level rise, for example, is. What the risk of increased storm frequency and severity is driven by warmer temperatures of the planet. But, to my knowledge, the companies have never stepped into the public policy arena with regard to that. I do know that we strongly support any resiliency measures,” he said.