Florida Passes ‘Catch All’ Insurance Bill Impacting Surplus Lines, Catastrophe Fund

By Amy O’Connor | May 13, 2019

A Florida bill that the insurance industry says will help modernize the state’s surplus lines system, as well as impact property insurer contracts under the Florida Hurricane Catastrophe Fund and reduce “bad faith” lawsuits, is now awaiting the governor’s signature after being passed by state lawmakers.

House Bill 301, sponsored by Representative David Santiago, was dubbed an omnibus bill because it included several insurance-related provisions, including:

•  Increasing reimbursement from the Florida Hurricane Catastrophe Fund for loss adjustment expenses from 5 percent to 10 percent of reimbursed losses beginning with contracts issued after June 1, 2019
•  Provides that workers’ compensation insurance applicants and their agents are not required to have their sworn statements notarized
•  Prohibits an insured from filing a civil remedy notice with 60 days after an appraisal is invoked
•  Expands the allowance of multiple policy discounts in certain circumstances
•  Reduces the minimum amount of premium that must be collected for motor vehicle insurance at the initial issuance of a policy

Many in the surplus lines industry praised other parts of the bill that they say will give the state’s Florida surplus lines industry a much-needed update. The bill eliminates a prescriptive cap on surplus lines agent policy fees and replaces it with the requirement that the fee be “reasonable” and separately disclosed to the customer, according to the Wholesale & Specialty Insurance Association (WSIA), which worked with the Florida Surplus Lines Association (FSLA) to support the legislative reform effort.

The law previously stated surplus lines agents could not charge more than $35 for filing surplus lines policies.

“Currently, Florida is one of the few states that caps the surplus lines broker policy fee. Once this legislation is signed into law by the governor, Florida will join a majority of states that permit reasonable fees to be charged in a surplus lines transaction,” WSIA said in a statement. “This simple revision not only modernizes Florida’s laws, but it promotes increased options for consumers and a prosperous Florida economy.”

The provision also impacts surplus lines export eligibility by decreasing the residential structure dwelling replacement cost to $700,000 from $1 million as it relates to “diligent effort” procedures. Agents must currently make a “diligent effort” and have been rejected by at least three authorized admitted insurers before seeking coverage from the surplus lines market for a policy. However residential structures with a value of $1 million or more need only be rejected by one insurer. The new provision reduces the dwelling replacement cost threshold from $1 million to $700,000.

FSLA President Elect Michael Franzese of R-T Specialty in Tampa called the passage of HB301 “great news for the surplus lines insurance industry and ultimately Florida businesses of every size.”

“As our industry has modernized over the years, keeping up with technology and new industries, the laws surrounding us had not. These changes will help us operate efficiently and promote a growing Florida economy,” he said.

FSLA, which supported the legislation and lobbied for other surplus lines changes this session that were not passed, said Florida is one of the top three consumers of surplus lines insurance in the country, with the industry writing more than $2 billion in premium for commercial property in the state annually. FSLA said there are currently 1,079 surplus lines agents in Florida actively writing policies, according to the Florida Surplus Lines Service Office.

Surplus lines insurance is “important to Florida consumers, businesses and the health of Florida’s economy,” said Joel Cavaness, WSIA president.

But not everyone in Florida agreed the surplus lines changes were positive for the state. Lisa Miller, a former Florida Deputy Insurance Commissioner and current advocate for the state’s admitted market, said the changes in HB 301 make it easier for surplus lines insurers to compete with Florida’s admitted market for high value personal residential homes and called it “bad public policy and ultimately bad for consumers.”

“…It’s the consumers who will lose, not at the time of policy issuance where prices may be artificially lower by surplus lines carriers but at the time of a claim when past history shows their poor claim handling performance simply because surplus lines answers to no one,” said Miller.

FSLSO said it is still analyzing the bills that passed and failed and will have more information in the coming week on what impacts the surplus lines community.

The Florida Office of Insurance Regulation said it had no comment on HB 301.

Florida Hurricane Catastrophe Fund

The FHCF was established in 1993 after Hurricane Andrew to operate as a form of reinsurance for residential property losses. Property insurers in Florida are currently reimbursed by the state-administered tax-exempt trust fund for a selected percentage of hurricane losses to residential property above the insurer’s deductible. According to the bill’s analysis, property insurers doing business in the state are required to enter into reimbursement contracts with FHCF to “protect and advance the state’s interest in maintaining insurance capacity in Florida by providing reimbursements to insurers for a portion of their catastrophic hurricane losses.”

Insurers are charged the “actuarily indicated premium” for the coverage FHCF provides based on the insurer’s relative exposure to hurricane losses. FHCF also is required to reimburse insurers for adjustment expenses (LAE) at a current rate of 5 percent. Under HB 301 that rate increases to 10 percent beginning with contracts issued after Jan. 1, 2020.

Civil Remedies Against Insurers

HB 301 also contained a provision designed to reduce “bad faith” litigation by saying a civil remedy notice may not be filed within 60 days after appraisal is invoked by any party in a residential property insurance claim. It was included to address a decision in the case of Cammarata v. State Farm

In this case, a Florida Fourth District Court of Appeals held that the insurer’s liability for coverage and the extent of damages, and not the insurer’s liability for breach of contract, must be determined before a bad faith action became ripe.

The Florida Justice Reform Institute praised the passage of the provision in HB 301.

“By giving appraisal time to work, and removing simple valuation as an issue in dispute, the bill should reduce the likelihood of a claimant subsequently moving forward with a claim of bad faith,” said William Large, president of the FJRI.

Florida HB 301

Correction: This story has been updated from an earlier version that incorrectly stated the effective date for changes to the Florida Hurricane Catastrophe Fund reimbursement for loss adjustment expenses. The correct date is for contracts issued after June 1, 2019.

https://www.insurancejournal.com/news/southeast/2019/05/13/526135.htm

 

Florida Agents March on State Capitol in Lawmaker Push to Reform AOB
By Amy O’Connor | January 25, 2018

More than 125 insurance agents from across Florida, along with members of the
Consumer ProtectionCoalition (CPC), march to the Florida Capitol on Wednesday
to highlight the need for Assignment of Benefits (AOB) reform. Photo by Colin Hackley.

Insurance agents from across Florida marched together on the state’s capitol Wednesday to deliver a message to Florida lawmakers: It’s time for assignment of benefits (AOB) reform.

Carrying signs that read “STOP AOB ABUSE,” about 125 members of the Florida Association of Insurance Agents (FAIA) were accompanied by representatives from the Florida Consumer Protection Coalition (CPC) as they carried their message from downtown Tallahassee to the Florida Capitol building.
 
“We are here with folks who see it every day,” said Jeff Grady President of FAIA, which represents about 2,000 property and casualty independent agencies in the state, in a video by CPC. “Rates are going up and coverages are becoming less. Consumers are losing because of the failure of the legislature to address AOB fraud.”

Contractors and attorneys are being blamed for abuse of AOB’s by taking control of a homeowner’s policy, inflating water or roof damage claims, and then suing the insurance company when it disputes the bill.

CPC, which consists of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups pushing for reforms to end AOB abuse, has worked for two years to call attention to the problem. The march was the group’s latest effort to get lawmakers attention after they have failed to agree on reform in the previous five sessions.

Barry Gilway, CEO of Citizens, the state-run insurer of last resort, also attended the march with a message for lawmakers. Citizens has faced the brunt of AOB abuse, particularly in South Florida. But Gilway says things are just getting worse.

“Here is the scary part, this used to be Southeast Florida problem – it’s not a Southeast Florida problem anymore, its spreading across the state,” Gilway said. “The ultimate payer in this situation is the consumer – it’s that simple – they will pay the price.”

Rates have already started going up for many Florida homeowners, but that’s just the tip of the iceberg, says the industry. Many insurers are also responding by refusing to write in certain zip codes or are tightening coverage offerings.

Citizens raised rates last year and was approved to do so again in 2018. The company has said policyholders should expect rate increases for the foreseeable future. Citizens also blames AOB for an expected increase to its policyholder count after several years of shedding policies to the private market.

Lawmakers have accused the industry of exaggerating the effect of the abuse and using it as an excuse to raise rates. But the numbers look to be on the industry’s side. A recent data call report from the Florida Office of Insurance Regulation (OIR) of water or roof damage claims from private insurers between Jan. 2015 and June 2017 found that the frequency of water claims per 1,000 policies increased 44 percent since 2015 and severity increased by 18 percent.

The use of AOB’s on water claims has increased from 12.8 percent in 2015 to 17 percent in 2017, OIR said. According to the Florida Justice Reform Institute, there has been a 300 percent increase in AOB lawsuits since 2010.

“This is not an emotional issue – just let the data speak for itself,” said Florida CFO Jimmy Patronis, who spoke to agents at a breakfast before Wednesday’s march and has also been vocal about the need for AOB reform.

Patronis urged lawmakers to act, saying the increase in AOB lawsuits is “a total exploitation of the law.”

“I hope the [legislature] will pass meaningful legislation that, at the end of the day, will keep insurance in the state of Florida as low as it can for our consumers,” he said. “It’s an issue that is going to potentially affect every insurance policy in the state of Florida if we don’t do something about it.”

Grady said the industry has tried to get that message across to legislators, but for the last five years it hasn’t been received. The industry is hopeful this year will be different.

“These folks are here firsthand with the experiences of their consumers to tell legislators to get this done,” Grady said.

For their part, lawmakers have been weighing several bills that would address the problem since the 2018 Florida Legislative Session kicked off earlier this month.

But which path lawmakers choose is a point of contention and concern for the insurance industry. So far the Florida House has passed a bill the industry supports, House Bill 7015, but the Florida Senate has yet to act on it.

The industry says it would be the most effective at reforming AOB because of provisions addressing Florida’s “one-way attorney fee” statute. The statute, designed to be a policyholder protection for those suing an insurance company, has been the main source of abuse, the industry says, as an assignee can sue insurers over a claim and the insurers end up paying the attorney fees.

The bill, sponsored by Rep. Jay Trumbull, would chip away at incentives for third parties to sue insurance companies by awarding fees under a formula based on the judgement obtained by the assignee and the pre-suit settlement offer.

In a press release, the Consumer Protection Coalition urged the Florida Senate to take up HB 7015, which they said include “commonsense protections for consumers and modifications to one-way attorney fee rules.”

The industry has also voiced support for Senate Bill 62, drafted by OIR and other stakeholders last year and reintroduced this session, but it has not had a hearing. Senate lawmakers let the current house bill die last year.

“The House has understood that consumers need this loophole closed, that there is fraud going on in AOB in Florida,” said David Hart, executive vice president of the Florida Chamber of Commerce, a member of CPC and part of yesterday’s march. “Consumers are long overdue for attention to this issue and this loophole to be closed.”

Senate lawmakers have called for a guarantee that property insurance rates would go down if the industry’s proposed reforms are enacted. The Florida Senate has shown preference for Senate Bill 1168 filed by Senator Greg Steube, which does not address the one-way attorney fee statute and is favored by the trial bar and water restoration contractors.

CPC said in a statement that it opposes that bill “because it does not go far enough to protect consumers and would not allow insurers to include litigation costs in their rates.”

The industry appears to have consumers on their side of the issue this year, at least according to a poll by the Property Casualty Insurers Association of America (PCI) that showed 60 percent of voters surveyed say the current system for using AOBs in property insurance claims needs to be reformed.

“Let’s keep the consumer number one in our mind. The same homeowners that I represent as an insurance agent [lawmakers] represent as a constituent, and we all ought to be working together regardless of the issue,” said Doug Wiles, chairman of FAIA and president of Herbie Wiles Insurance Agency in St. Augustine, Fla. “But in particular now, to avoid these significant rate increases, to avoid degradation of coverage, to make sure that our homeowners insurance market remains healthy in the state of Florida.”

https://www.insurancejournal.com/news/southeast/2018/01/25/478397.htm 

 

Florida Lawmakers Approve Medical Malpractice Reform

By Michael Adams | May 3, 2013

In a victory for medical malpractice insurers and physicians, Florida lawmakers have approved a series of tort reforms that among other things will require expert witnesses testifying against physicians in a malpractice suit to be engaged in the same specialty.

The Florida House of Representatives by a 77-38 margin approved the legislation (SB1792), which originated in the Senate Judiciary Committee.

A priority of the Florida Medical Association, the Florida Chamber Coalition for Legal Reform and the Florida Justice Reform Institute, the legislation is designed to address several areas of the law that proponents said are exposing physicians to legal action and contributing to higher medical malpractice costs.

FMA General Counsel Jeff Scott said the law changes are needed so that physicians can be assured they are granted adequate legal rights as they practice medicine.

“It is important that we promote the highest standard of medical care our state has to offer by holding bad actors responsible for their actions,” said Scott in a statement. “But we must extend the same constitutional rights and fairness that a plaintiff is afforded to physicians.”

The Florida Chamber praised lawmakers and the FMA on the passage of the bill.

“We congratulate the FMA on this victory for our state’s physicians,” said David Hart, executive vice president of the Florida Chamber. “This bill aims to make Florida’s legal environment more friendly for physicians.”

At the center of the legislation is a provision concerning the right of a physician to consult an attorney. A recent Florida Supreme Court Case held that the state’s patient confidentiality statute prevented certain ex parte discussions between attorneys retained by a medical malpractice insurer and physicians involved in a case.

In that case (Hasan v. Garvar SC10-136), Ramsey Hasan sued his dentist, Lanny Garvar, for failing to diagnosis and treat a dental problem that resulted in Garvar suffering a bone infection that allegedly resulted in permanent physical and emotional damage.

Hasan then sought treatment from Jennifer Schaumberg, an oral and maxillofacial surgeon.

After filing suit against Garvar, Hasan later discovered that Garvar and Schaumberg were both insured by OMS National Insurance Co. Although different attorneys represented the two dentists, the attorneys were both retained and paid by OMS.

Further, Hasan discovered that Schaumberg was going to have an ex parte discussion with Garvar’s attorney prior to her deposition. The attorneys claimed the discussion would be limited to questions about the deposition procedures, the potential for legal exposure and how the case could affect the dentist’s board certification.

Justice Fred Lewis, writing for the majority, opined that based on a prior court ruling in (Acosta v. Richter 671 So. 2d 149 FL 1996) it is “pure sophistry” to suggest the ex parte discussion would not disclosed Hasan’s privileged medical information no matter how inadvertently.

Joined by four other justices, Lewis wrote that the insurer could not provide Schaumberg with an attorney, thereby preventing any ex parte discussions.

“OMSNIC’s efforts to foster an environment conducive to inadvertent disclosures of privileged information by providing Schaumberg with an attorney are impermissible,” wrote Lewis.

Chief Justice Ricky Polston, in a minority opinion, noted that the ruling is so broad it would prevent Schaumberg from consulting any attorney, much less one provided by the insurance coverage she paid for.

Polston also took exception with the majority opinion that assumes a physician in Schaumberg’s position would violate patient-physician confidentiality and “tell all” to an insurance company.

“The practicing physicians and the lawyers of Florida deserve more respect as professionals who are faithful to their oaths of ethical conduct,” wrote Polston.

Following Polston’s line of thought, proponents of the legislation claimed that the Hasan case interfered with Schaumberg’s, and potentially other physicians’ in similar circumstances, right to counsel.

Under the new legislation, the insurer may not choose the attorney for the physician, but may recommend other attorneys. That attorney is prevented from providing any information to the insurer other than its bills.

Florida Justice Reform Institute President William Large said overturning the Hasan case would ensure that physicians that may be witnesses would receive the proper legal advice.

“I think this will lead to an overall improvement in medical malpractice cases,” said Large.

Another provision in the legislation is one that requires an expert witness testifying against a physician to be in the same specialty as the physician. Before the law change, the expert witness could be in a same or similar specialty and the courts had the broad authority to decide what constituted a similar specialty.

Large said that led to serious problems, especially in the area of emergency medicine.

For example, Large said, under the current law an emergency room physician might have been forced to treat a patient with a heart attack and allegedly made a mistake only to be confronted in court by a cardiologist who had more training and experience in treating heart attack patients.

Now, Large said, the law change will level the playing field by requiring the opposing expert witness to also be an emergency room physician.

“Because of the change what you will get an honest look and see if someone did deviated from the standard of care,” said Large.

https://www.insurancejournal.com/news/southeast/2013/05/03/290898.htm