The Florida Insurance Roundup from Lisa Miller & Associates®

Media coverage has intensified over an allegation by three independent insurance adjusters that Florida property insurance companies are cheating their policyholders out of rightful claim payouts.  The three accuse the industry of altering their field adjuster reports and reducing claim payouts – all without their knowledge or approval. 

Former Florida Deputy Insurance Commissioner Lisa Miller sat down with two independent field adjusters and an attorney who represents insurance companies to learn their perspective and just how damage claims – and their payouts – are ultimately decided and by whom.    

Show Notes 

The three adjusters and their allegations first appeared in public last December to testify during the Florida Legislature’s special session which resulted in a series of new consumer insurance reforms.  The reforms included the end of one-way attorney fees for property insurance lawsuits, the end of Assignment of Benefit contracts, and a further tightening of claim practices, among other things.  These were all abusive practices by bad actors against insurance companies and policyholders that were blamed for driving up the cost of insurance and creating market turmoil. (For full Show Notes, visit https://lisamillerassociates.com/13875-2/)   

Shawn Kelliher of Cape Coral is a 16-year veteran in the insurance adjusting business.  His first 13 years were working for Farmers Insurance Company as a desk adjuster and then as a catastrophe field adjuster, including large loss and complex claims across the country.  He said “it’s absolutely not the case” that insurance companies are out to get everybody and explained that there are many legitimate reasons why field damage estimate reports change.   Field adjusters often don’t know what damage is covered by the insurance policy.  

“Some policies have actual cash value only coverage, some policies have specific exclusions for certain items and a lot of times we don't know that,” Kelliher said.  “So we see and document the damage and that goes in our report and that’s sent up (to the independent adjusting firm or insurance company), only to be later found out that, unfortunately, in those circumstances where they (the policyholders) don't have coverage, those items have to be removed or taken out of the estimate.  And it's not a malicious situation,” the Naples, Florida native said.  Kelliher said he’s seen it many times over the past three years that he’s been an independent adjuster in Florida.  He said he works for a variety of adjusting firms and across a vast array of insurance carriers, doing both residential and commercial work.  

Vanessa McGonigal, an independent field adjuster from Cooper City agrees.  Often times, she said she is not aware of any changes that may take place in the final adjusting report on a claim.  “If we're preparing an estimate for all of the damages we see and we submit that and coverage is not afforded for something written on our estimate, where is it that we should give permission to have that removed?  If it's not covered, it's not covered,” McGonigal said.  She began her career in 2009 as an estimator for a general contractor and then five years ago, became an independent field adjuster.  She said she has worked for a couple of independent insurance adjusting firms, doing both residential and commercial claims, including from Hurricane Ian.

Both McGonigal and Kelliher said that if there is a change to the estimate, sometimes they make it, sometimes their adjustment firm does it, or the desk adjuster at the insurance company, depending on the change and the situation. 

“They'll call me and say, ‘Hey, you know, I read your report, I saw your photos, this is what I was thinking.  Can you kind of explain your thought process here or justify what it is that you put in your estimate?’ and we’ll have a conversation about it,” said Kelliher, who has worked “several hundred” Hurricane Ian claims.  “And ultimately, again, ultimately, it's the carrier's determination of coverage.  As independent adjusters, we have zero claims authority to extend coverage.  The adjustments that are being made, are to bring the estimate accurate, or in line with the policy or coverages as endorsed.”

McGonigal outlined the steps she takes as a field adjuster from the time she is assigned the claim to delivering her report on damage.  She said her typical day could include handling up to 15 Hurricane Ian claims.  That doesn’t leave a lot of time – nor should it – for follow-up, unless there’s a question or a dispute about damages, the Hollywood native said.   

Robert Schulte is an attorney with the Louisiana-based Monson Law Firm, working in its Florida office.  He has represented Florida insurance companies in homeowners and commercial insurance matters since 2012 and is skeptical of the three adjusters’ allegations against the industry.  “In the weeks before their December testimony, there was a YouTube video featuring the same folks and if you look at the description of that YouTube channel, it says, “We’re politically involved, where appropriate, to help consumers maintain the ability to hire professional and legal representation,” Schulte said.  “And so it should be no surprise that it seems like there's an agenda here and maybe there's a misunderstanding of what's going on.” 

The industry responded to the adjusters’ allegations by saying what they described is not common practice and at least one investigation is underway by regulators.  The Florida Legislature responded this spring, in part, by passing Senate Bill 7052, which Governor DeSantis signed into law.  It requires that any altered or amended insurance adjuster’s report include the following three elements:

“I do think that what's happened here is some give and take by the legislature,” said Schulte.  “More transparency is part of what the new process is with the new laws.  Is it just right?  Is it too far?  Or is it not enough?  We just have to wait and see, while these things work their way through the legal system,” he said. 

Host Miller noted there is skepticism by some in the insurance marketplace, given that independent adjusters are independent contractors, who are often paid based on a percentage of the claim.  She asked both McGonigal and Kelliher if there is a built-in temptation by adjusters as a result to inflate the claim estimate.

“I do believe that there could be some fellow 1099 field adjusters that think about that and do that, it is possible, yes,” said McGonigal.  “The answer is absolutely yes,” said Kelliher, who said that he’s done re-inspections often for estimates that are almost rejected because of the way they were written.  “Some adjusters are unscrupulous enough to write for increased or padded damages that are just not supported.  So you know, just because the adjuster wrote an estimate that's $100,000 does not mean that $100,000 estimate is supported,” he said.   The bottom line?  “If the estimate was written inaccurately, by all means, it needs to be changed and adjusted to make it accurate, even if it does reduce that adjuster’s estimate,” Kelliher said.

Schulte went on to explain specific instances where the estimate of damages is reduced.  There are lots of moving parts to a property insurance claim with multiple interactions among multiple parties.  “I think that what would help people is to understand how it's not just one person that makes the decision, and that it's the insurance company that's making the decision,” Schulte said.   “The insurance company is putting together all of the pieces of the puzzle to arrive at a fair evaluation of the claim pursuant to the policy.”

Host Miller reminded listeners that out of the more than 710,000 Hurricane Ian claims at last report, the number of those having problems with claim payments “according to the Department of Financial Services statistics is very, very small, less than 1% is the number that I'm hearing,” she said.  “Less than 20 or so questionable claims by these three adjusters are the recent focus of so much of the media's attention.  We're missing the forest for the trees,” Miller added.   She said the Florida Department of Financial Services Consumer Helpline exists to help open communication lines and help resolve complaints that do exist between consumers and their insurance companies.  “As Florida’s CFO Jimmy Patronis recently told a reporter, ‘There’s two sides to every story.’”

Links and Resources Mentioned in this Episode

Florida Adjusters’ Charges of Doctored Damage Reports Get Wider Spotlight (Insurance Journal, March 13, 2023)

Key Provisions of 2022 Insurance Consumer Protections & Market Reforms (Lisa Miller & Associates)

SB 7052, the Insurer Accountability Law of 2023 (Bill Watch, May 8, 2023, Lisa Miller & Associates)

HB 837, the Civil Remedies (Tort Reform) Law of 2023 (Bill Watch, May 8, 2023, Lisa Miller & Associates)

Department of Financial Services (DFS) insurance consumer helpline (1-877-MY-FL-CFO)

The Monson Law Firm

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 6/1/2023. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2023 Lisa Miller & Associates, All Rights Reserved 

An interim report submitted to the Florida Building Commission says that Southwest Florida coastal communities impacted by last September’s Hurricane Ian were “ill-prepared” for the storm surge and flooding, despite lessons on wind mitigation learned from Hurricane Charley 18 years earlier.  Ian was the costliest storm in Florida history, killing 156 people and causing an estimated $109.5 billion in damage in Florida.  Only an estimated half of that will be covered by insurance.

Former Florida Deputy Insurance Commissioner Lisa Miller sat down with the report’s co-author and another extreme events scientist who produced early catastrophic models on Ian for insurance companies.  They discussed how this new research shows some of the same patterns of destruction seen in prior storms, that Florida hurricanes are not getting stronger or more frequent, how elderly and poor residents are disproportionately hurt, potential changes to the state building code, and why a new approach to mitigation is needed.    

Show Notes 

New lessons are emerging from Hurricane Ian, the high-end Category 4 hurricane that made landfall near Fort Myers Beach on September 28, 2022.  An interim report by a team of scientists supported by the Florida Building Commission showed Ian’s tropical storm-force wind field was 2.3 times the diameter of 2004’s Hurricane Charley.  The greater resulting storm surge of 13 feet impacted high population areas living in both elevated and on-grade homes along hundreds of miles of canals and coastal frontage.  (For full Show Notes, visit https://lisamillerassociates.com/episode-44-dynamic-duo-ian-hit-hard/) 

Findings: The report evaluates specific building code-related impacts to structural performance, including breakaway walls relative to code provisions, placement of the coastal construction control line, evidence for surge-induced floor slab uplift forces, and performance of common roof cover and wall cladding elements. 

Dr. David O. Prevatt, one of the report’s co-authors, is a Professor of Civil & Coastal Engineering at the University of Florida’s Herbert Wertheim College of Engineering.  He is part of the Structural Extreme Events Reconnaissance (StEER) Network of researchers and product engineers that conducts surveys to assess building performance after each hurricane.  Its evaluation was used in the interim report and captured Hurricane Ian’s damage patterns and storm surge.  Dr. Prevatt said Ian was not a design level wind-event, meaning its wind speed on land of about 120 mph was below the building code standards of 154-160 mph for Lee County, where it made landfall on September 28, 2022.

“The severe damage we saw was really the flooding, in particular the manufactured homes on Fort Myers Beach and mostly older slab-on-grade homes,” said Dr. Prevatt.  “The good news, if there is any that we can draw from this, is that recent construction built to the recent Florida Building Code standards performed well, even in areas where they were impacted by the 13-foot high storm surge.”

Yet, Ian destroyed or severely damaged about 20,000 homes in a wide path from Lee County on the Gulf Coast and inland across central Florida to Daytona Beach on Florida’s Atlantic Coast.    Dr. Prevatt said he saw the same patterns of damage in Ian that he saw in the previous six years from Hurricanes Matthew, Irma, and Michael.  “It’s one of the saddest parts for me.  If we don't harden our communities or retreat and move them away from these intense events, we will repeat what we've seen here five, 10, 20 years down the road,” said Dr. Prevatt.    

Dr. Karthik Ramanathan is Vice President of Research at Verisk, the worldwide data analytics and risk assessment firm.  He led the catastrophe modeling team that estimated Hurricane Ian’s initial insurance and reinsurance losses at between $42 billion to $57 billion, not including federal flood insurance losses.  The firm’s catastrophe or extreme event models not only help insurance companies determine adequate insurance premiums to the assessed value of risk and speed adjusters to the hardest hit areas right after the storm but “can also act as excellent platforms for you to test out the impact of mitigation measures,” said Dr. Ramanathan.  

“As David said, the performance of manufactured homes or mobile homes continues to be a major issue, even 30 years after Hurricane Andrew, although a lot has been done to strengthen them,” said Dr. Ramanathan.  “We saw a colossal amount of damage to manufactured homes.  Older and middle aged homes also saw significant damage.”  He and his team spent a week in South Florida after Hurricane Ian made landfall, surveying damage in both coastal and inland counties.  Some inland counties he noted had “pretty staggering” claim losses similar to coastal counties near Ian’s landfall.

“Even on the wind side, some of these inland counties saw a significant amount of claims, primarily coming in from roof damage.  And to me, it's mind boggling, seeing the same state which sort of pioneered wind design, not just in the United States, but across the world, is seeing some of the same issues 30 years on in an event like Ian,” said Dr. Ramanathan.  

New Approaches to Mitigation: Host Miller noted that mitigation often poses a quandary for homeowners and policymakers.  “We’re looking at construction costs going through the roof if we build stronger.  We’re looking at property insurance premiums rising because perhaps we haven’t,” she said.   

Less than two weeks after Hurricane Ian, Hurricane Nicole made landfall on Florida’s east coast with modest winds but a large storm surge, creating additional flooding and tremendous coastal erosion.  Nearly 50 oceanfront homes, condominium buildings, and hotels in Volusia County either collapsed into the surf or suffered severe erosion damage.

Dr. Prevatt said the same conditions have actually existed for thousands of years in Florida.  

“We have the same hurricanes today.  They are no more intense.  They're not larger, nor are they more frequent than the hurricanes that have moved over the last 5,000 years.  So what is happening?  We have more construction.  We have more people building on barrier islands.  Barrier islands are called barrier islands, I think, because they were meant to protect the mainland shoreline from the storm surge, from these damages.  And they're meant to move the sand with the wind.  Hurricanes are natural hazards.  This is just how things are,” said Dr. Prevatt.

Florida’s population, he points out, is four times what it was in the 1970’s.  “We really have to stop and ask ourselves, ‘How much further?  How much money?  How much federal effort should we put into securing and holding on with our own biting nails, to small pieces of land, as opposed to leaving and understanding what is happening on a natural basis?’,” Dr. Prevatt asked.

“We are building in areas where we are not supposed to build,” Dr. Ramanathan agreed, noting a Florida Department of Environmental Protection report on designated critically eroded beaches.  “And further, we are building in a manner that is not necessarily resilient by putting homes on slab foundations.  It is what led to a disaster that, according to my humble opinion, could have been 100% mitigated.”

Part of the mitigation challenge is that 65% of Florida’s homes were built prior to Hurricane Andrew.  “New construction may be adding 2% or 3% to our housing inventory per year.  So we’re just not at scale to really impact future changes in our mitigation,” said Dr. Prevatt.  He said what’s needed is “research that will actually retrofit houses at scale, not one house at a time, (but) one neighborhood at a time, one town at a time.”  Doing so will involve looking beyond the Bell Curve of statistics and instead disaggregating the data.

“And what you're going to find is that the majority of this damage, disproportionately high percentages, are going to fall on the least able in our society.  The poorest, the minorities, the black communities, and the tribal communities.  These are the people who have been wiped out.  And the retirees.  Did you know that over 65% of the fatalities in Ian were over 60 years of age?” Dr. Prevatt pointed out.

Recommended Building Code Changes: The interim report will be updated to address questions by the Florida Building Commission that will lead to a final report, which can inform future code changes.  Dr. Ramanathan believes the commission can make additional changes to the Florida Building Code beyond those mandated in recent sessions of the Florida Legislature.    He said he would like to see more durable screened enclosures on homes “because if you have to replace a screened enclosure, you're looking at a claim to the magnitude of about $5,000 or $6,000 or probably higher with inflation.”  He said he’d also like to see required window protection across Florida, regardless of whether the home is in a designated wind-borne debris region, “which don’t cost a lot to install.”  Finally, although manufactured homes fall under federal HUD standards, he said states can add local amendments.    

“I hope, as David said, if the foundation designed for manufactured homes can be looked at closely and even more importantly, if they can be enforced to the same degree as some of the other regular single family home enforcements take place in Florida, I think it will go a long way in mitigating damage following such events,” said Dr. Ramanathan.  

Dr. Prevatt said he wouldn’t look to the Florida Building Code for short-term changes, but rather a bigger picture of how to create a resilient community born in the 22nd Century.  “I would spend my time in the interdisciplinary research between the economics, urban planning, and engineering analysis that will be necessary for us to re-site our coastal residential communities inland on a macro level.“  Included in that would be converting coastal land to other uses, finding ways to buy-out private properties, and moving entire communities to safer areas, he said. 

“If we engineers continue to do the same type of research for the next 20 years in the same type of way, we will still end up with the same result.  We have to think way bigger, we have to be grand, we have to be bold, and we have to go out there and do this.  This is a moonshot moment.  This is the time that Florida needs to step up and change it all,” said Dr. Prevatt.

Dr. Ramathan said Verisk does a lot of community outreach, through its work with extreme event models.  “In fact, one of our missions is to promote global resilience.  Because insurance, the way I look at it, is the best form of mitigation if used properly,” said Dr. Ramanathan.

Host Miller pledged to work with the “dynamic duo” of guests and the listening audience to expand the outreach of this critical scientific research to better educate local, regional, and state policymakers, as well as federal officials.

Links and Resources Mentioned in this Episode

Interim Report: Survey and Investigation of Buildings Damaged by Hurricane Ian (University of Florida Engineering School of Sustainable Infrastructure and Environment, April 17, 2023)

Dr. Prevatt slide presentation of Interim Report to the Florida Building Commission (May 10, 2023)

Preliminary Virtual Reconnaissance Report (Structural Extreme Events Reconnaissance Network, November 17, 2022) (Scroll down to the “Documents” section and click “View Data” to reveal the three PVRR PDF reports)

Priority Research Areas: Hurricane Ian (StEER Network, November 16, 2022)

Estimated Industry Insured Losses to Onshore Property for Hurricane Ian (Verisk, October 2, 2022)

Florida Senate Community Affairs Committee meeting on the Champlain Towers South Condominium collapse in Surfside, Florida |video of meeting | Florida Building Commission meeting materials (The Florida Channel, January 24, 2023)

Critically Eroded Beaches in Florida (Florida Department of Environmental Protection, June 2022)

Florida Designated Wind-borne Debris Regions (Florida Building Commission, as of December 2020)

Early Lessons from Ian’s Damage (LMA Newsletter of 12-5-22)

Safeguarding Tomorrow Revolving Loan Fund Program (FEMA, December 21, 2022)

Ian Was Costliest Florida Hurricane (LMA Newsletter of 4-10-23)

All of Florida is at risk of hurricanes. So why aren’t impact windows or shutters required statewide? (Sun Sentinel, February 5, 2023)

Florida Building Commission

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 2/18/2023. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2023 Lisa Miller & Associates, All Rights Reserved

The December 2022 property insurance market reforms passed by the Florida Legislature are making a big difference already, with fewer and less severe non-hurricane claims and fewer daily lawsuits, according to a major Florida insurance company. 

Former Florida Deputy Insurance Commissioner Lisa Miller talks with Stacey Giulianti of Florida Peninsula Insurance Company on how the reforms have leveled the playing field in insurance litigation and together with innovative industry practices, will bring positive results for consumers, carriers, and their reinsurance companies.

Show Notes

Stacey Giulianti is a Co-Founder and Chief Legal Officer at Florida Peninsula Insurance Company, a Florida-based homeowners property insurance carrier.  Together with its sister company Edison Insurance, they have a combined 180,000 polices in Florida.  The 2022 reforms were designed to stem high insurance and reinsurance rates, carrier insolvencies, inflated claims, an overly-competitive residual market, and especially excessive litigation.  According to the Florida Office of Insurance Regulation, in 2021 Florida had 7% of the nation’s homeowners insurance claims yet 76% of the nation’s homeowners insurance lawsuits.  (For full Show Notes, visit https://lisamillerassociates.com/episode-43-future-of-florida-insurance-litigation/) 

Giulianti, a former plaintiff attorney before representing insurance companies, said the reforms, specifically the elimination of one-way attorney fees, will “level the playing field” between plaintiff and defense attorneys in disputed claims.  “The problem was that it really only gave the incentive to the plaintiff lawyers, to people like me back in the day, to file that suit, no matter what, it doesn't matter about mediating, it doesn't matter about coming together and trying to find common ground, it was like, ‘Who cares, I am going to get attorney fees one way or the other,’” he said.

He disagrees with critics who argued that eliminating the one-way attorney fees would create a barrier for consumers looking to find an attorney to sue an insurance company on their behalf.  He said courts at the end of a case can still award attorney fees if justified and tax costs, such as the hiring of an expert witness, something he said is actually needed in less than 10% of disputes.  “That's a little bit of nonsense from plaintiff lawyers trying to say that you need an expert in every case,” said Giulianti, who is also an accredited claims adjuster.  “You don't, because most of these cases, we already know what the damage is.   And it's really a scope and pricing differential.  Do you repair it, do you replace it, is it $5,000 to repair that, or is it $50,000 to repair that?”  Giulianti said that hiring an expert would still be less expensive to the consumer than paying 30% to 40% of their court award in attorney fees.

Innovative Options: The reforms allow insurance companies to offer mandatory binding arbitration in their policies with a resulting premium discount.  “Ultimately what we want is a quick, easy, and inexpensive way to get an answer.  What we are really looking for is for someone to tell us either way, what the answer is to the dispute.  You get the answer relatively fast and it’s resolved, versus court cases that can last for years.”  Giulianti said the vast majority of claims are undisputed and simply get paid by insurance companies.

Citizens Property Insurance Corporation, the state-backed residual market carrier in Florida, recently received regulatory approval to handle contested claims outside of court through the state’s Division of Administrative Hearings.   These are for claims that were either denied because of a determination of no coverage or contract limitations regarding the coverage amount.  “I think those types of judges from the administrative side are every bit as smart as anybody else who's going to be sitting on the bench and making those decisions,” said Giulianti, who is a member of both the Florida and Maine Bars.

Florida Peninsula Insurance, along with some other carriers, have created “Customer Experience Departments,” in an effort to avoid disputes in the first place by making the claim process “as smooth as possible,” he said.  During Hurricanes Ian and Nicole, Giulianti said he personally handled 300-400 First Notice of Loss calls and an additional 200-300 follow-up calls.  “We have to do a better job, all of us as an industry, of walking people through the process and being transparent.”  His suggestion: treat the customer as you would “the friend of the company’s CEO.”

Reinsurance: Host Miller noted that although the recent legislative reforms included some state-provided assistance for insurance carriers needing reinsurance, it will not be enough, given the dwindling availability and affordability of reinsurance.  She asked Giulianti what a reinsurer should look at in an insurance company that it’s considering offering reinsurance coverage to.  “Look at the company’s operations in regards to what data they collect and how they use it, especially in underwriting.  Some companies do better than others in using data to better protect their capital,” he replied.  “Carriers are going to remember who in the reinsurance side stuck with them during this time when they weren't sure, because I'm telling you, it's going to get much better.  I saw it with the sinkholes issue.  I was a plaintiff's lawyer.  I know how people think.”

Expanded Elimination of One-Way Attorney Fees: Host Miller and Giulianti also discussed Governor Ron DeSantis’ recent proposal to expand the elimination of one-way attorney fees to disputes in all insurance lines, including automobile insurance, to address what the Governor called a “cottage industry of litigation.”  Giulianti applauded the move.  “So we're going to modernize it and not have this old ‘Hey, if you get $1 more than what you said you were going to get, you get a million dollars in attorney fees,’ which is, by the way, sometimes what happens.  You have a $10,000 case, somebody gets an extra dollar or $1,000 more than they thought they were going to get, and they get 500,000 to a million dollars in attorney fees.  That's not hyperbole, that's actually what's going on,” Giulianti said.  Eliminating the contingency fee multiplier that judges can award to sometimes double the attorney fees and reforming bad faith law – all part of the Governor’s proposal – is also very welcome he said.

“2023 will be a bit bumpy as policies are changed over to reflect the new language in the recent legislative reforms, but for those who stick it out, 2024 is going to be a banner year,” predicted Giulianti.

Links and Resources Mentioned in this Episode

Barry Gilway: Florida's New Law is a Profound Change (The Florida Insurance Roundup podcast of December 29, 2022)

Florida Peninsula Insurance Company

Florida One-Way Attorney Fee Statute 627.428 

Key Provisions of 2022 Insurance Consumer Protections & Market Reforms (SB 2-D & SB 2-A)

Property Insurance Stability Report (Florida Office of Insurance Regulation, January 2023) 

Florida Citizens’ Endorsement Now in Effect: Disputes to be Heard by Admin Judges (Insurance Journal, February 6, 2023)

Governor Ron DeSantis Announces Comprehensive Lawsuit Reforms to Protect Floridians from Predatory Billboard Attorneys (Governor’s Office Press Release, February 14, 2023)

2022 Litigation Reform & Consumer Protections (Lisa Miller & Associates)

Florida Market ‘Plagued’ by Attorney Fee-Shifting (LMA Newsletter of December 5, 2022) 

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 2/14/2023. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2023 Lisa Miller & Associates, All Rights Reserved

Florida property insurance companies, their policyholders, and repair contractors are starting the New Year with a new law designed to reform an out-of-control marketplace.  The Florida Legislature in December passed comprehensive measures to stem high insurance and reinsurance rates, carrier insolvencies, inflated claims, excessive litigation, and an overly-competitive residual market.

Former Florida Deputy Insurance Commissioner Lisa Miller talks with Citizens Property Insurance President & CEO Barry Gilway, insurance agency executive Andy McGuire, and reinsurance broker Adam Schwebach about the new law and the expectation it will help rebalance Florida’s decimated property insurance market.

Show Notes
Six Florida insurance companies went insolvent in 2022 and a seventh went into a regulated policy run-off.  Host Miller was joined in the podcast by Barry Gilway, President, CEO, and Executive Director of Citizens Property Insurance; Adam Schwebach, Executive Vice President of reinsurance broker Gallagher Re; and Andy McGuire, Co-CEO of PEAK6 InsurTech, which includes an insurance agency representing more than 100,000 policyholders.  (For full Show Notes, visit https://lisamillerassociates.com/episode-42-barry-gilway-floridas-new-law-is-a-profound-change/) 

The major provisions of the new law (SB 2-A) cover:

Attorney Fees: Ends one-way attorney fees in residential and commercial property insurance policy lawsuits;

Offers of Judgment: Reinstates the civil offer of judgment statute (also known as Proposals for Settlement) and makes attorney fees available for the prevailing party, while also allowing for joint offers of judgment;

AOBS: Prohibits Assignment of Benefits (AOB) contracts of residential and commercial property insurance policies issued on or after January 1, 2023;

Bad Faith: Prohibits the filing of a bad faith lawsuit until a final judgement is issued against the insurance company in the original claim dispute;

Citizens Property Insurance Reforms: Makes many essential improvements to current laws governing the state-backed “insurer of last resort,” Citizens Property Insurance Corporation, including:

- Changing the eligibility to remain a Citizens policyholder, by requiring that private insurance company coverage has to be 20% more expensive (up from 15%, to match current rules on new policies) and likewise for commercial residential policies;
- Ending capped rates (the so-called “glide-path”) and requiring its rates be actuarially-sound and be “non-competitive” with admitted companies’ market rates;
- Defining and allowing higher rates for second (non-homesteaded) homes; and
- Requiring personal lines policyholders purchase flood insurance to become or remain a Citizens policyholder.

Reinsurance: Establishes a second optional hurricane reinsurance fund (The Florida Optional Reinsurance Assistance Program) for carriers, offering rates of 50% to 65% of the cost of on-line rates, while maintaining the Reinsurance to Assist Policyholders (RAP) program created in the May special session;

Arbitration: Allows carriers to offer mandatory binding arbitration in their policies with a resulting premium discount;

Claims Handling: Reduces from 90 days to 60 days the time insurance companies have to pay or deny a claim, unless extended by regulators; and reduce from 14 days to 7 days the time a carrier has to review and acknowledge a claim communication and begin an investigation, along with other time requirement changes;

Claim Filing: Further tightens deadlines for policyholders to report a claim from 2 years to 1 year for a new or reopened claim, and from 3 years to 18 months for a supplemental claim; and

Greater OIR Regulation: Allows the Florida Office of Insurance Regulation (OIR) to withdraw approval of policies with an appraisal clause for companies that routinely invoke it; allows OIR to do market conduct exams after a hurricane on those companies in the top 20% of claims filed or DFS complaints and to include an examination of their MGAs; and requires companies begin monthly reporting of the numbers of claims opened, closed, pending, and those seeking alternative dispute resolution and of which type.

You can read a more detailed list of major provisions here of the December 2022 law, built upon previous measures passed in the May 2022 legislative special session.

Attorney Fees & AOBs: Gilway, a 46-year veteran of the property insurance industry, called the law “historic,” for repealing the state’s one-way attorney fee statute which he blamed for putting seven insurance companies out of business in 2022, reducing the availability and affordable of insurance for consumers.  “From a Citizens Insurance standpoint, our average litigation payment is $77,000 and the attorney fee associated with that payment is $39,000.  I’m paying more than 1,000 attorneys to defend the 20,000 outstanding lawsuits we have, brought because there’s an automatic payment under the one-way statute.  You have to admit (the new law) is going to make a profound change in whether an attorney brings a suit or not.”  According to the Florida Office of Insurance Regulation, Florida has 7% of the nation’s homeowners insurance claims yet 76% of the nation’s homeowners insurance lawsuits.   

The new law also eliminates AOBs, which Gilway said are responsible for 47% of all Citizens litigation and 35% of the industry litigation.  “These two provisions alone I think will have a profound impact on the industry’s claims going forward,” said Gilway.  He predicted this will draw capital back into the marketplace.  “The bottom line is more and more calls every single day from investors saying how do I get in, because on a going forward basis, if I can leave the development of losses behind, and I can charge rates that that are based upon historic litigation rates, when the litigation rate is going to drop like a rock, then it's time for me to enter this marketplace.”  Gilway said he believes it will take 12-18 months for the law’s changes to impact the market.

McGuire, whose business includes capital management and consulting, said that although he’s excited and proud of the legislature’s success, he’s still “a little worried,” too.  “With the cost of capital where it is right now, I'm still a little bit on the fence to see how things kind of wash through especially on the reinsurance side,” McGuire said, in sentiments echoed by Schwebach, a reinsurance broker for almost 20 years.  “There needs to be a period right now of kind of proving out the results of this legislation before reinsurers really get on board,” Schwebach said.  Past reforms haven’t shown results in the inflated hurricane claims from Florida’s primary insurance companies still being passed along to reinsurance companies to pay.  “Will reinsurance prices come down immediately?  I don’t think so.  Will reinsurers be more willing to commit capacity to the Florida market?  I think there’s a strong possibility,” he added.  

Nevertheless, Schwebach said the reinsurance market “thinks that this was a tremendous bill,” with McGuire anticipating many benefits for Florida policyholders.  “This is going to unlock the opportunity for rates to be able to come down over time,” said McGuire, who has 150 insurance agents in Florida through the Team Focus Insurance Group and WeInsure, representing 100,000 policyholders.  “It's also going to decrease the dependency of all of our agents on Citizens and really unlock consumer choice.”

Gilway said the new law’s litigation reform does not eliminate a policyholder’s right to sue their insurance company.  Allowing proposals for settlement and optional arbitration will allow lawsuits to be resolved more quickly, he said.  “I believe it will be a huge advantage that could reduce the average length of a lawsuit from 750 days down to 310 to 320.  It’ll cut the length of the suit process in half and it will eliminate the suit process if they accept the arbitration language in the policy,” Gilway pointed out.  He said one private company that has used optional arbitration has been able to reduce those policy rates by 20% for certain insurance policies.

Claims Handling & Filing: Host Miller noted that the new law has a lot of changes to the way companies have to respond to claims going forward.  McGuire said the requirement for faster claims handling is going to increase costs, something he’s okay with.  “I'm actually hopeful that these regulations combined with the elimination of AOBs and one-way attorney fees, that we can actually create a better consumer experience through insurance, and get away from what’s been an almost adversarial claim experience and at the point of sale or at the point of claim create a much better customer experience,” said McGuire, who started his career 27 years ago working insurance claims.

Schwebach agreed, adding that the law’s requirement reducing the claim filing deadline from three years to one year will help, too.  “If you don't understand that you have a claim within a year, it’s probably not a claim,” he said, adding that this is another part of the new law where the reinsurance community is taking note, designed to make sure claims are legitimate and paid accurately and fairly.  “At the end of the day, that's what reinsurers are basing their reinsurance pricing on.  They go through a tremendous amount of analysis to try to understand in a hurricane scenario, the estimated loss, down to the policy level.  When they're going back and reviewing that and seeing thousands and hundreds of thousands of dollars of litigation fees being added on to what was in some instances, a very minor actual property loss, and they're being stuck with the bill for all of that, it throws their analysis out the window,” Schwebach said.  

Citizens Property Insurance Reforms: Another big part of the new law makes significant reforms to Citizens Property Insurance, the legislatively created and taxpayer-backed insurer of last resort for homeowners and businesses that can’t find coverage in the private open market.  “Citizens is ridiculously competitive.  It’s not the market of last resort, it has become the market of first resort,” said Gilway, who has headed Citizens since June 2012 and recently announced his retirement upon the successful changes in the new law that he has long advocated.  He said Citizens’ policy count has grown from 414,000 in 2019 to nearly 1.2 million today, in part due to private companies going out of business.  “But there's a secondary issue, and the issue is, in some territories around the state, we're 50% below the market.  So we're competing openly with the private market.  That makes no sense whatsoever,” Gilway said.

The new law changes the eligibility to remain a Citizens policyholder, ends capped rates, requires actuarially-sound and non-competitive rates with the private market, and allows higher rates for second homes – “all good, interim steps to get us back to the role that we were meant to operate in,” said Gilway.  He said he hopes the private market will be in a better financial situation to resume depopulating Citizens’ policy count by the end of 2023.

“Who's going to come in and try to compete with a government entity?” agreed McGuire.  “Why would you commit capital to that?  Florida has now solved both of those and being able to talk to consumers about that is really, really important.  And that's how this market is going to change.”  McGuire said setting expectations that rates aren’t going to go down immediately is part of that.  “This is not a little speedboat here that we can just turn.  This is a big aircraft carrier and it’s going to take a little bit to get there, but we're going to get there,” he said.

Reinsurance Help: Schwebach shared his insight on the Florida Optional Reinsurance Assistance Program created under the new law, to help insurance companies that cannot find affordable reinsurance in the private market.  “I think the jury to a certain extent is very much out on how effective this reinsurance offering is going to be from the state,” he said.  And while the market is appreciative of the effort, “I think they are trying to determine if there's true value in what's being offered, the capacity being provided relative to the price,” Schwebach said.  He also discussed the important role reinsurance plays in the Florida insurance market and how consumers benefit from its availability.

Host Miller stressed that the new law should mark a new beginning among consumers, agents, insurance companies, contractors, investors, reinsurers, legislators, and Realtors.  “This should be a collaboration to get away from the nasty litigation and the adversarial relationships that we've seen over the past few years so that we can restore this market so that it will be vibrant for our consumers and very competitive,” said Miller.

Links and Resources Mentioned in this Episode

PEAK6 InsurTech

Gallagher Re

Citizens Property Insurance Corporation

Key Provisions of 2022 Insurance Consumer Protections & Market Reforms (SB 2-D & SB 2-A)

Reinsurance to Assist Policyholders (RAP) Program 

Florida Optional Reinsurance Assistance (FORA) Program 

Property Insurance Stability Report (Florida Office of Insurance Regulation, July 2022) 

2022 Litigation Reform & Consumer Protections (Lisa Miller & Associates)

Florida Market ‘Plagued’ by Attorney Fee-Shifting (LMA Newsletter of December 5, 2022) 

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 12/28/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved 

The Florida Legislature is meeting in special session the week of December 12 to address two issues vital to Florida’s economy: disaster relief for Hurricane Ian victims and further insurance consumer protections for homeowners across the state.  Property insurance and reinsurance rates have grown by 100% or more in the past three years, yet insurance companies’ losses continue, with six carriers becoming insolvent this year, and 13 others withdrawing coverage, driven in part by a nearly 400% increase in claims litigation since 2013. 

Former Florida Deputy Insurance Commissioner Lisa Miller talks with a former legislator and the head of an insurance brokerage for their perspective on the problem and what the legislature should do to help fix the Florida insurance market crisis.

Show Notes

Host Miller was joined by former state representative Andrew Learned, a Democrat from the Tampa Bay area.  During his term, he took a keen interest in the consumer protection side of the property insurance reforms passed by the legislature in 2021 and 2022.  Also joining her was Deb Franklin, Co-CEO of PEAK6 InsurTech, part of the PEAK6 family of companies.  InsurTech provides the technology behind online insurance shopping and offers property and casualty insurance through its Team Focus Insurance Group and WeInsure.  The conversation was part of a webinar hosted by the Florida Housing Coalition on December 2, 2022.  (For full Show Notes, visit https://lisamillerassociates.com/episode-41-special-session-preview/) 

Host Miller set the table for the conversation, identifying four key focus areas of insurance industry discussion going into the Florida Legislature’s December 12 special session:

Excessive Litigation – There are renewed calls to eliminate the one-way attorney fees statute altogether, contingency fee multipliers, Assignment of Benefits (AOB) contracts between homeowners and contractors, and reform Bad Faith law under the civil remedy statute. 

Roof Coverage – The ongoing debate is how carriers can insure roofs, without the coverage being used as a warranty by unscrupulous contractors seeking work or homeowners who fail to perform proper maintenance – and then suing when the claim isn’t fully covered.

Citizens Property Insurance Corporation Depopulation – The discussion is on how best to return Citizens to being what the 2002 Legislature created, as the “insurer of last resort.”  Those analyzing current numbers say that one of every two policies written by the private market end up at Citizens at renewal because they can’t compete on price with Citizens’ legislatively-capped rates.

Reinsurance Availability – Florida’s private insurance market is having difficulty finding adequate capital to purchase reinsurance (insurance for insurance companies) and to write new business.  Reinsurance costs have risen by 30%-70% at the same time that major reinsurance companies are limiting their capacity in the Florida market.  The Legislature is expected to consider providing assistance to improve the availability of reinsurance. 

“Consumers don’t get it.  They don’t understand why their rates are climbing or why they’re being non-renewed or cancelled,” said Franklin, whose agents are providing extra education and counseling for customers, while finding coverage alternatives.   

Former representative Learned, who owns a local student tutoring company, said he heard from many constituents with the same questions and confusion.  “This kind of skirts around the fact that what we've essentially done is socialize our insurance market, and put all of the risk of all these policies in Citizens Property Insurance, which is essentially the taxpayers and anybody who owns a car,” he said.

Franklin pointed out that Citizens is now the largest insurance company in the state, with almost 1.2 million policyholders.  She said Florida needs to consider what Louisiana recently did, by allowing Citizens to eliminate its caps and raise rates to actuarially-sound levels.  

Both Franklin and Learned said litigation reform is critical.   The Florida Office of Insurance Regulation found that Florida has 7% of homeowners insurance claims in the U.S., yet 76% of homeowners insurance claims lawsuits.  “It’s not just that, it’s that in an average payout from a lawsuit, the homeowner only got about 9%.  So upwards of 90% is going to lawyers and the insurance companies’ lawyers,” said Learned.  “And it’s destroying the marketplace for insurance,” added Franklin.  “Private companies are running out of the state as fast as they can because they can’t afford to operate here.”

Door-to-door and other solicitation by roofers and other contractors, especially post-hurricane, feed the litigation frenzy, with a cottage industry of attorneys who specialize in such litigation.  “To be honest, I think insurance companies do a terrible job.  The problem is they do a terrible job because they are constantly having to beat back fraud claims,” said Learned, who advocates that part of the solution is educating homeowners that “There‘s no such thing as a free roof,” despite the obvious attraction, he said.

Host Miller and her guests also discussed the lack of reinsurance availability in Florida, which relies heavily on reinsurance to help pay catastrophic claims from the state’s frequent hurricanes and flooding events.  “Because the insurance companies are not capitalized right now the way they should be, a lot of them aren't going to be able to buy reinsurance coverage,” said Franklin, noting that reinsurance prices are going up another 35% to 50%.  “They’ll be here for the right price,” she said, in answer to Host Miller’s question on whether the reinsurance market is going to be here for Florida’s insurance companies in 2023, following Hurricanes Ian and Nicole.

Miller and guests also discussed the predominance of flood claims versus wind claims from Hurricane Ian.  Many residents were left without coverage, as standard homeowners policies don’t cover storm flooding and they didn’t know about or choose to purchase flood insurance.  “The flood losses are the worst,” said Franklin, who spent many days at the insurance villages in Southwest Florida after Ian.  “You lose everything.  Everything's gone.  These people's belongings including their children's clothes and toys are out in front of their home.  It's the worst case scenario for consumers,” she said.  “The time to prepare for these things is years in advance when we make sure that we design a system that works,” added Learned.

You can read the latest Hurricane Ian news here.

Links and Resources Mentioned in this Episode

PEAK6 InsurTech

https://andrewlearned.com/

Citizens Property Insurance Corporation

Property Insurance Stability Report (Florida Office of Insurance Regulation, July 2022) 

2022 Litigation Reform & Consumer Protections (Lisa Miller & Associates)

Is the Legislature Poised for Meaningful Reform? (LMA Newsletter of December 5, 2022)

Florida Market ‘Plagued’ by Attorney Fee-Shifting (LMA Newsletter of December 5, 2022)

Florida’s Floody Mess (LMA Newsletter of December 5, 2022)

Hurricanes Ian & Nicole Latest (LMA Newsletter of December 5, 2022)

Florida Housing Coalition

Contact Your Legislative Leader: 

- House Speaker Paul Renner, 850-717-5019, [email protected] 

- Senate President Kathleen Passidomo, 850-487-5028, [email protected]

Florida Department of Financial Services Consumer Hotline, 1-800-342-2762

Hurricane Ian Fraud (LMA Newsletter of October 24, 2022)

FEMA’s National Flood Insurance Program

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 12/2/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved 

Most damage from Hurricane Ian appears to be from flooding, rather than wind, and thus won’t be covered under most Florida homeowners insurance policies.  Insurance adjusters face a challenging job now determining whether it was wind or water or both that damaged a home, and in some cases in what order, for hundreds of thousands of properties across Florida.

Former Florida Deputy Insurance Commissioner Lisa Miller talks with a seasoned insurance defense lawyer on how coverage is determined, who will pay, and the case law involved for those disputed claims that end up in court.

Show Notes

Hurricane Ian made landfall in Lee County on Florida’s Southwest coast on September 28, 2022 with winds of up to 115 mph, a storm surge of 10-15 feet, and rainfall amounts of up to 22 inches on its path across Florida before exiting in the Atlantic Ocean the next day.  The Category 4 storm was the 5th-strongest on record in the US and killed 114 people, making it the deadliest in Florida since the 1935 Labor Day hurricane.  While Ian was both a wind and a flood event, there was massive flooding in Lee County and throughout inland areas in Central and Northeast Florida.  While those residents who had mortgages and lived in a flood zone were required to have flood insurance, many of the rest of Ian’s victims likely didn’t.  In Lee County, only 31% of residential structures had National Flood Insurance Program (NFIP) policies, and statewide only 15%.  Standard homeowners policies do not cover flooding.

“It’s pretty clear what’s covered under a flood policy but it is a continued debate, particularly in the HO3 (homeowners policy) form as to which policy covers what,” said Tom Diana, attorney and co-founder of the Zinober Diana & Monteverde law firm in Tampa.  He handled a lot of claims cases for insurance companies during the series of eight hurricanes that struck Florida in 2004-2005 and since, including Hurricane Ivan, which like Ian he said, was more of a storm surge and flooding event than a wind event.  “The real difficulty with Ian now, and all storms for that matter, is going to be when there is evidence of flood damage and wind damage in the same room at the same property.  What is covered by the HO3 and what is not?"

New technology, such as before- and after- aerial pictures of individual properties taken right after the storm, will help adjusters and engineers make better damage evaluations, said Diana, who worked previously as a civil engineer.  Video and photographs taken by policyholders are also important “as the adjusters I know want to get everything right the first time, so they don’t have to do it a second time.”

Diana said ensuring open communication with the policyholder along the way is most helpful in settling the claim correctly without going to court.  “Adjusting an insurance loss is not a one-way street.  It’s a conversation, a continued dialogue between the insurance company and the policyholder.  Just because an adjuster is out there on day 10 doesn't mean that the policyholder can't share with them what's happened to the property between day one and day nine.  It should not be an adversarial process,” he said, in this podcast geared for field and desk adjusters and for homeowners.  

Diana and host Lisa Miller walked through the case law that has evolved since the 2004-2005 storms and Hurricanes Katrina and Irma, establishing legal precedents that will help decide Hurricane Ian cases.  Today’s homeowners policies, as a result, include the specific language “whether driven by wind or not” in excluding flood damage.   Diana said the main case that will likely be cited in any Ian litigation will be Sebo v. American Home Assurance Company.  In it, the Florida Supreme Court ruled that where two or more causes of a loss combine and where at least one of the perils is covered in an insurance policy, then the “concurrent cause doctrine” applies.  That doctrine requires that when the sole or proximate cause of the loss cannot be attributed to the covered or the excluded peril, then the policy must cover all damages.

“Ever since it was handed down in 2016, it has been litigated over and over and over again.  It has been expanded or attempted to be expanded by policyholder advocates.  We have tried to limit the application of it,” Diana said.  

Some insurance companies have tried to limit the use of the doctrine by including “anti-concurrent causation” language in their homeowner policies.   Diana said the case of Security First Insurance Company v. Czelusniak “kind of put this issue to rest in terms of what the policy covers…and is really going to control the guiding principles associated with the flood versus wind debate.  That means that technically, if flood and wind or rain water, let's say, combined to cause a loss to a specific item of personal property, or a specific area of damage, technically that is covered by the flood policy, and not the wind policy.”  He cautioned that the facts of an individual loss are really going to guide the outcome of a lot of trial and appellate court decisions involving Ian claims.

Host Miller and Diana discussed that while it would be ideal to have both the flood insurance adjuster and the homeowners insurance adjuster present at the same inspection, it’s often not practical, due to the volume of claims.  “Common sense must be the overriding guide for adjusters, to be able to say ‘this is wind damage’, ‘this is flood damage’, or ‘I think this is both’,” Diana said, adding that most property owners don’t know the difference between flood and wind damage.  He said he is optimistic that wind and flood carriers can work together to resolve claim responsibility and coverage.  “I think 50% of court cases I see shouldn’t be filed.  They could have been resolved earlier in the process.”

“I often say that a delayed claim is a more expensive claim, and more inconvenient for a policyholder,” said host Miller.  “So I know that the hundreds of adjusters in the area are working as fast as they can to get the adjustments in from the field, get them into their respective insurance companies, and have the insurance companies deliberate with the policyholder in trying to bring these in for a landing.”

Host Miller and Diana noted though that legal disputes are seemingly unavoidable in Florida’s excessive litigation environment.  They discussed the bad actors involved, trying to insert themselves between the policyholder and their insurance company, often just for the sake of taking over the claim to inflate its cost and their personal profit.  Many are knocking on victims’ doors under the auspices of wanting to help.

“I have spoken with a lot of homeowners who have had no idea that a lawsuit was being brought in their name, or on their behalf, by companies who may have done a simple thing like put a tarp on top of the roof, or things of that nature,” Diana said.  “It's very alarming because that drives up the cost of everyone's premium.  It drives up the cost of everyone's insurance policy.  And I think most people on both sides of this debate that's about to ensue will agree to that.  The only people who won't agree are the people who are undertaking those predatory tactics.”

Under Florida law, policyholders have up to two years to file initial property insurance claims.

Links and Resources Mentioned in this Episode

Ian More a Flood Event (LMA Newsletter of October 10, 2022) 

Zinober Diana & Monteverde P.A.

Florida Office of Insurance Regulation

FEMA’s National Flood Insurance Program

Florida Farm Bureau Casualty Insurance Company v. Cox

Corban v. United Services Automobile Association

Liberty Mutual Fire Insurance Company v. Martinez

Sebo v. American Home Assurance Company

Security First Insurance Company v. Czelusniak

Ian’s Fraud Warnings Sounded Early (LMA Newsletter of October 10, 2022)

Hurricane Ian Fraud (LMA Newsletter of October 24, 2022)

The Animal Refuge Center 

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 10/27/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved

Alternative dispute resolution – including appraisal – is playing an increasingly important role in settling homeowners property insurance claims.  Florida’s 2019 Assignment of Benefits (AOB) law requires third party contractors to utilize these alternatives before filing a lawsuit against an insurance company, if required by the policy. 

Former Florida Deputy Insurance Commissioner Lisa Miller talks with a repair contractor and an insurance appraiser who share how today’s technology and methods can not only reduce lawsuits, but herald the return of good customer service and improve the insurance claims process for everyone.

Show Notes

John Minor, President of Complete Inc. and Complete General Contractors of Florida said he’s seen a lot of changes in his 30 years in the business.  His firm does a lot of work now in alternative dispute resolution (ADR) which includes insurance appraisal and arbitration of claims.  He said he laments the diminished trust and relationship between adjusters and contractors, who used to work together on repair projects from start to finish. 

“We very much feel like some of that is now being picked up through the appraisal process,” said Minor, whose firm does a majority of appraisals on behalf of insurance companies.  “The appraisal process is a place for reasonableness.  Fully outrageous demands are going to be washed away by the process.  A true umpire is going to be writing things in such a way that they can explain it to any person.”  What it comes down to, he said, is just being fair, looking at the damages, establishing their true value, and then backing it up with an understandable explanation.  

“When an insured files a claim, they want to know three things.  That you saw me, that you know what my problem is, and you have a plan to fix it,” said Jason Evans, President of EIG Restoration of Texas and Florida.  The company provides emergency services, repair, and restoration contracting across the Southeast.  “Doing those three things absolutely can take out 40% of the claims that go into litigation,” he said.  

EIG has developed an “Option to Repair” program for insurance companies that provides seamless service to policyholders, where the insurance company chooses the contractor to execute repairs. 

“Many do not want the option to repair and so we take it as a challenge really to wow them with customer service,” said Evans.  “And I say wow them, we just want to be very present and answer all their questions and no detail is left unturned in their repair.  So we do that by taking time and being very attention to detail and providing clear expectations of how the claims process is going to go.”  Evans said the option is in most insurance policies and exercised in Florida and other states.  “I think you'll get to see more and more of that in Florida and around the United States as time goes on,” he added.

Both Evans and Minor also talked about the role that technology is playing in improved customer service and claim settlement.  Minor’s team works with the Florida Coastal Monitoring Program in staging measurement equipment prior to a hurricane’s landfall and afterward dispatches drones to the areas that had the highest winds.  “We document the worst conditions, identify what properties are obvious total losses early on, so that those people can get paid and get on down the road and get it off of our insurance company's books,” said Minor.  

Evans’ team uses artificial intelligence and chatbots to communicate with policyholders before and after the storm and receive real time updates from them to help quickly triage the response.  “Our intent is to get there within one day to that insured’s house and look at it,” said Evans.  “Even if they have evacuated, we're going to go take pictures and provide those pictures to the customer and say ‘hey, your house looks pretty good’ or ‘your house is really not in good shape, we've tarped it, we've got the debris out of here, and your claim has been filed,’” he said, adding that it’s really a “concierge service, partnering with the insured.”

“I think Jason’s ahead of it, he’s calling them first.  There’s no reason this shouldn’t be the model for every insurance company,” replied Minor, emphasizing that a more customer-oriented approach is a win-win.  “It's the method of applying old school values in a modern society.  If we can do that, then these armies of AOB roofing contractors and others that are going to triple the value of the claim so that they can somehow end up resolving it at a number that they're comfortable with, or that allows them to pay for their Rolls Royces and their sports cars will be diminished,” said Minor, who is also a certified contractor.   

Doing so, Minor said, will also reduce the need for appraisals and alternative dispute resolution.  “I don't think that the contractor should be getting rich off of this job.  They should be making a good margin.  They shouldn't be having to say that a shingle roof is $1,000 a square so that they can end up at $550 or $450, that it's the actual value depending on your market.  And I think technology is absolutely the place to do it because everybody’s got a cell phone camera and can help start the claim….before unscrupulous contractors, or on some occasions, public adjusters are going to be canvassing and knocking on doors and making a bunch of false promises,” Minor said. 

Host Miller also asked Minor and Evans how homeowners can be encouraged to invest in mitigation measures before the next storm hits to help make their homes more resilient.  Evans noted that “most homeowners unfortunately don’t know what it takes to keep up a house” and that insurance companies could do a better job educating them in a collaborative way through home inspections.  Minor said underwriting is key.  “It's amazing to me that on some occasions, the experts that show up once it becomes an appraisal or a claim, all of a sudden can give me a list of things that are not sufficient or not correct, associated with that construction.  I don't know where that expert was the year before the storm came.”  Minor also discussed the success of the Rebuild Northwest Florida hazard grant mitigation program in the aftermath of Hurricane Ivan in 2004. 

Both Minor and Evans agreed the insurance industry as a whole can improve claim service and reduce litigation by putting an even greater focus on customer service.  “I think we're in an exciting time,” said Evans.  “It's scary in Florida, we see that with the carriers.  But there's going to be a pivot, I think, to more customer service and more partnership with the clients and the insurance company.”

Links and Resources Mentioned in this Episode

Complete, Inc. 

EIG Restoration

Florida’s 2019 AOB Reform (HB 7065) (Lisa Miller & Associates)

Resolving Claims of Assignees through Appraisal (LMA Newsletter of May 17, 2021)

Rebuild Northwest Florida

Home Hardening Sales Tax Exemption

PrepareFL.com.

Lisa’s Lucky 7 Hurricane Season Prep (Lisa Miller Associates)

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 8/30/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved

The Florida Legislature in a May special session passed a series of reforms to help stabilize a property insurance market that has seen a growing number of carriers stop writing business or becoming insolvent.  Homeowners rates keep growing by double-digits and coverage is increasingly difficult to obtain. 

Former Florida Deputy Insurance Commissioner Lisa Miller talks with a lawmaker who was one of the handful of leaders behind the reforms and the head of a litigation analytics firm on whether the two new laws will help re-right the marketplace and lower homeowners rates - and what further reform is most needed next. 

Show Notes

Florida’s newest property insurance and consumer reforms build on legislation passed in 2019 and 2021.  The two new laws (SB 2-D & SB 4-D) target excessive litigation, contractor solicitation abuse, and provide $2 billion in no-cost reinsurance coverage to carriers to improve the affordability and availability of insurance coverage.  More than 12 companies have stopped writing new business since January.  Another seven companies have become insolvent since 2019 - six in just the past 12 months.  

“This was a matter of first aid to save a dying patient, which was Florida's property insurance market but there's absolutely still more to do,” said Representative David Smith (R-Winter Springs) who supported the two bills that became law and took effective immediately on May 26, 2022.  “There are some homeowners that the legislation is going to help immediately.  But longer term, I think homeowners will see lower rates and an impact of the rates going up less because of the stabilization of the market….we’re on the right track.”

According to the National Association of Insurance Commissioners’ data, as reported by state Insurance Commissioner David Altmaier, Florida has 9% of all homeowners insurance claims in the US yet has 79% of all homeowners insurance claims lawsuits.  The number of property insurance lawsuits in the state has increased 363% in the past nine years.  The current excesses are driven by fraudulent roof claims.  

“A lot of the new measures are litigation related with the intent that either the laws will reduce the lawsuit amounts or reduce the cost of each lawsuit to the insurance industry, which would then translate to lower insurance premiums for Floridians,” said Wesley Todd, CEO of CaseGlide, a Tampa-based litigation analytics and software firm serving the insurance industry.  He noted the real question is exactly when rates will come down given the reforms will take time to be reflected in renewal policies over the coming months.  Insurance companies and their reinsurers will then want to see “years of data” that suggests litigation costs are under control.  “I believe that lawmakers still have one more thing left to do, which is get rid of the attorney fees statute, which is the structure that incentivizes attorneys to sue insurance companies.  I think until they do that, we won’t actually start to see rates for Floridians decrease.”

Florida’s attorney fees statute (627.428 f.s.) requires an insurance company pay attorney fees when the policyholder prevails in a lawsuit against the company.  It has helped in catastrophes such as 1992’s devastating Hurricane Andrew, to encourage representation “so that consumers would have a level playing field,” host Miller said.  “What has happened is that there are contractors who use that statute to their own benefit and will have their favorite partner, a plaintiff lawyer, and they become a team, once the consumer is kind of marginalized, if you will.”

Rep. Smith said the new reforms prohibit awards of attorney fees to contractors or other assignees of an Assignment of Benefits (AOB) contract.  “Again, we've got to do more.  And the legislature never wants to deny the consumer, that homeowner the ability to get an attorney and be represented and get their day in court,” he said.  While Florida has weather issues to deal with that can impact insurance rates, “it's the litigation costs that are driving these rates up and why reinsurance companies don't want to take the actuarial risk of having all this litigation in Florida.  It's not the hurricanes they fear, it’s the trial lawyer,” Rep. Smith said.

Todd agreed and said the “surgical approach” the legislature rightfully utilized in the 2019 and 2021 reforms was meant to solve the litigation problem without getting rid of the attorney fees statue, but that hasn’t worked.  “If we put a lot of loopholes and obstacles in front of the plaintiff attorneys, but they get paid to jump through those loopholes because they get paid for all their attorney fees, then are they really obstacles?  They're things that actually create more revenue for the attorneys because they're being paid to jump through hoops,” Todd argued.

“It’s not the $35,000 roof that is the burden on the insurance company,” added Rep. Smith.  “It’s the $150,000 or $200,000 in attorney fees that they get paid.  That’s what creates the litigation risk.”  He discussed his idea of creating a blue ribbon commission to meet outside the time constraints of the legislature’s annual 60-day session and five weeks of prior committee meetings to collect data, benchmark other states’ efforts, and “to get everybody that has a vested interest in solving the problem to everybody that’s part of the problem to come together to be part of the solution,” Rep. Smith said.  In the meantime, Senator Jim Boyd (R-Bradenton) who chairs the Insurance and Banking Committee is expected to hold workshops this summer to provide more information and data that some lawmakers complained they didn’t have during the special session.

Host Miller and her guests also discussed what wasn’t in the new reform laws: Citizens Property Insurance Corporation, the state-created and taxpayer-backed “insurer of last resort.”  Its policy count is rapidly approaching one million as private insurance companies have gone insolvent or shed policies because of underwriting losses.  It under-market rates and growing policy count burden will subject the rest of Florida’s policyholders across almost all insurance lines (including automobile & surplus lines) to pay a special assessment if Citizens runs out of money to pay claims, as it did during the spate of 8 hurricanes during the 2004-2005 season.

Host Miller agreed with both of her guests that the legislature needs to eliminate the attorney fees statute.  She said lawmakers should also go beyond the roof deductible option that consumers can access as part of the new law and instead require actual cash value for roof replacement as 40 other states do.  She also advocates for elimination of AOB contracts and reform of the Florida Hurricane Catastrophe Fund that could save homeowners an estimated average $150 a year on their premium.

Links and Resources Mentioned in this Episode

CaseGlide

Representative David Smith

SB 2-D & SB 4-D (bills covering the 2022 reforms)

Final Special Session 2022 Florida Legislature Bill Watch (Lisa Miller & Associates)

Florida Statutes section 627.428 (on attorney fees)

Top 20 Attorneys Filing Property Insurance Lawsuits - 2022 Q1 (Florida Department of Financial Services, April 2022)

Florida Insurance Industry’s Litigation, 2013-2021 (Citizens Property Insurance Corporation)

Top 10 Florida Domestic Insurers Net Income Losses (from Citizens Property Insurance Corporation, March 2022)

Private Insurance Industry Cumulative Rate Filings 2020-2021 (from Citizens Property Insurance Corporation, March 2022)

Florida’s 2019 AOB Reform (HB 7065) (Lisa Miller & Associates)

Florida’s 2021 Litigation & Solicitation Reform (SB 76) (Lisa Miller & Associates)

Florida’s 2022 Litigation Reform & Consumer Protections (SB 2-D & SB 4-D) (Lisa Miller & Associates)

CFO/Department of Financial Services Insurance Consumer Helpline (1-877-693-5236)

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 6/22/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved 

The Florida Legislature will meet in a special session May 23-27 called by Governor Ron DeSantis to “bring some sanity and stabilize” Florida’s property insurance market.  Homeowners are suffering big rate increases and some have lost their coverage, while a growing number of insurance companies are going insolvent or reducing or eliminating their policy-writing in the state.

Former Florida Deputy Insurance Commissioner Lisa Miller explores the problems in the marketplace with an insurance agency executive and a top real estate agency owner who share their ideas on which reforms would be most effective for lawmakers to achieve.

Show Notes

The Governor’s proclamation calls for the legislature to address property insurance, reinsurance, civil litigation, and changes to the Florida Building Code to improve the affordability and availability of insurance coverage.   The legislature failed to pass any reforms in its regular 60-day session earlier this year.  Reforms passed into law in its 2021 session under SB 76 have had key roofing solicitation restrictions temporarily enjoined from enforcement by a federal judge. 

Ron Assise, Senior Vice President of Horton Personal Insurance, in Estero, Florida, said his clients are experiencing “sticker shock” on their homeowners insurance premiums.  “Clients are very disrupted when they get their bill and it's 20% or 25% or 30% more than it was last year,” said Assise, who is part of The Horton Group of Chicago, an insurance, employee benefits and risk advisory firm.

Whitney Dutton, owner of The Dutton Group@Re/Max First, a full-service real estate agency in Fort Lauderdale, said with 30% of his clients from out of state, the sticker shock is even greater and comes with greater consequences, too.  “When people get a loan, the lender uses a debt to income ratio in order to qualify them for a purchase.  When the debt to income gets offset by $1,000 to $4,000 of swings from insurance quotes, that can really put a damper on someone's ability to purchase a home, or to be competitive when trying to bid on property,” Dutton said.  He said some home purchasers have faced being dropped by their insurance company following a quality control check 60-90 days after closing, when it’s determined the roof is too old or other changes are required to keep the policy in force.  “A third way that it comes is simply just getting dropped without any notice whatsoever from insolvency due to a lot of these companies that are just getting out of the market,” said Dutton, whose group was the top Realtor in Fort Lauderdale in total transactions last year.  

Rising Litigation: The Governor’s proclamation states upfront that “Florida’s general tort environment related to property insurance has led to thousands of frivolous lawsuits…and according to the Office of Insurance Regulation, Florida accounted for 79% of the nation’s homeowners insurance lawsuits while making up only 9% of the nation’s homeowners insurance claims.  Florida citizens are seeing the effects of this higher litigation in their rising premiums.”

Assise said litigation reform is a must.  “We all know that Florida is far and away the unfortunate leader in litigation when it comes to insurance claims with approximately 116,000 insurance related lawsuits last year versus less than 1,000 for the rest of the country combined,” he said.  

Roof Claims: Assise suggested the legislature approve what was in last session’s SB 1728, passed by the Senate but not taken up by the House, which would require a roofing deductible or an actual cash value or repayment schedule for older roofs, in place of the current full replacement value.  “Doing that will really make it not worth its while to an attorney to go after an insurance company, if they're going to get, let's say 40 cents on the dollar as an example,” Assise said.

His other suggestions are to change the state’s 25% Roof Repair/Replacement Rule that requires an entire roof be replaced if 25% or more of it is damaged and ease existing material “matching” requirements in repairs, where a new roof is required if the repaired material can’t be matched with the rest of the undamaged roof.  “So insurance carriers are paying claims of 25, 30, 40, or $50,000, where the damage might be $1,000.  These are the things that need to be addressed to really make a significant difference going forward,” Assise said.  “The incentives go away for both the roofers and the trial attorneys that see big dollar signs when it's most likely probably wear and tear or just a plain old older roof where someone should be taking care of the maintenance on their home like any other thing.”

Those proposed restrictions would have to come with a lower policy premium cost, said Dutton, who owns eight rental properties of his own and has seen annual premiums on each grow from about $2,800 per year in 2017 to $4,200 today.  “I'm okay with it if the policy cost is relative to that type of coverage, but from what we're seeing in the type of properties that I deal with, they're writing the policies with a lot of those exclusions, water damage, restoration, and they're not changing the price of them,” Dutton said.  “The lower coverage isn't what people are worried about.  It's the cost…and it’s being passed on unfortunately to the renters.”

While Assise said he can appreciate consumers wanting something substantial in return for giving up some coverage, the cost break won’t be immediate.  “There's so much red ink going out at this point, it’s difficult for that to happen without these legislative changes where they can see light at the end of the tunnel and the reinsurance industry can see light at the end of the tunnel, which very much affects the pricing for the insurance carriers in Florida,” said Assise, a 40-year veteran of the industry and both a Certified Insurance Counselor and Certified Personal Insurance Counselor.  The Florida insurance industry has seen two straight years of net underwriting losses exceeding $1 billion each year.

Assignment of Benefits: For Dutton, those restrictions are just “the tip of the iceberg” and what’s also needed is further reform of abusive Assignment of Benefit (AOB) contracts between homeowners and various contractors, roofers, and public adjusters.  “A lot of these homeowners don't even know that this stuff is happening.  They've simply signed a piece of paper that allows these contractors to act on their behalf.  And I know people firsthand, that are shocked what happened and never would have went through it to the level that these different companies have squeezed every dime they can out of the insurance companies, “ Dutton said.

“The three of us realize that the consumer is the loser here,” said host Lisa Miller.  “You've got the consumer that's paying the exorbitant premiums.  They're trying to buy or afford to stay in their current homes.  And then they get locked in by an unscrupulous bad actor at the front door,” she said.  She read a text between a roofer and a colleague of hers on a home repair, in which the roofer is coaching the homeowner on how to represent old damage so that insurance covers it, while also offering an unlimited $200 referral for each neighbor who “needs a free roof.”

“The legislature is going to have to understand that this is going to come at a cost to somebody,” said Dutton, “and the attorneys in these larger law firms that this is all they focus on, they're going to take a hit.  So the legislators are going to have to have the political courage to stare down some of these big law firms who may donate to certain areas that they're going to have to take a hit.  And it's going to have to come from top down, the legislator down,” he said.

Prior to the Governor’s special session call, regulators with the Florida Office of Insurance Regulation and the Florida Building Commission had begun creating regulatory measures to help.  They’ve implemented new policy to allow optional roof deductibles, ease existing material “matching” requirements in repairs, and approved mandatory arbitration clauses in insurance policies.  They’re also considering further measures, including making exceptions to the state’s 25% Roof Repair/Replacement Rule.

While the Governor’s proclamation did not provide specific proposals for the legislature to consider in the upcoming special session, Miller shared there are two other key issues that will likely be addressed, besides roof claims and litigation reform.  They are reform of the state-backed Citizens Property Insurance Corporation, whose legislatively mandated and actuarially unsound rates have contributed to a policy count expected to surpass one million policies by year-end, and allowing insurance companies to access less expensive reinsurance from the Florida Hurricane Catastrophe Fund.  

“The Florida Legislature basically left homeowners exposed to a perfect storm of rising rates, limited coverage and diminishing options, because it failed to pass the reforms that should have been passed earlier this year.  Let's hope that changes May 23,” said Miller.

Links and Resources Mentioned in this Episode

Governor DeSantis Proclamation of Special Session on Property Insurance (April 26, 2022) 

Court Denies Effort to Stop All of SB 76 for now (LMA Newsletter of January 24, 2022)

The Horton Group Agency

The Dutton Group @ RE/MAX First Realty

Calls for a Special Session Falling on Deaf Ears (LMA Newsletter, March 28, 2022)

If You Can’t Legislate, Regulate! (LMA Newsletter, April 11, 2022)

More Insurance Companies in Trouble (LMA Newsletter, April 25, 2022)

Top 10 Florida Domestic Insurers Net Income Losses (from Citizens Property Insurance Corporation, March 2022)

Citizens Insurance Losing Money (LMA Newsletter, March 28, 2022)

Private Insurance Industry Cumulative Rate Filings 2020-2021 (from Citizens Property Insurance Corporation, March 2022)

“No Roof Left Behind” campaign solicitation pitch (Facebook video advertisement by Roofing and Reconstruction Contractors of America)

Roofers Busted in “Free Roof” Fraud (LMA Newsletter, March 28, 2022)

Unlicensed Adjuster Busted (LMA Newsletter, April 25, 2022)

Repair contractors’ newest billing strategy leaves homeowners on the hook if insurers don’t pay (Sun Sentinel, November 18, 2021)

Demolish Contractor Fraud Webpage (Florida Insurance Consumer Advocate)

Florida Fraud Fighter Reward Program (Florida Department of Financial Services)

First Quarter 2022 Florida Insurance Litigation Statistics (LMA Newsletter of April 11, 2022)

Top 20 Attorneys Filing Property Insurance Lawsuits - 2022 Q1 (Florida Department of Financial Services, April 2022)

Property Insurance Crisis in Florida (WPLG-TV Miami, April 27, 2022)

Insurance defense attorney slams Florida’s ‘egregious’ homeowners insurance system (WFLA-TV Tampa, April 28, 2022)

Major Provisions of SB 76 (2021 Roofing & Litigation Reform law)

Major Provisions of HB 7065 (2019 Assignment of Benefits Reform law)

Assignment of Benefits & Insurance Litigation Webpage (Lisa Miller & Associates)

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 4/28/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved

Beside their direct impact on Florida homeowners, multiple double-digit rate increases in property insurance are impacting Florida’s real estate market as well.  If rates continue to rise, there’s concern they will affect the availability and affordability of insurance for new homebuyers.  

Former Florida Deputy Insurance Commissioner Lisa Miller explores the reasons for the increases, including increased insurance litigation, and how they’re now impacting the state’s economy.

Show Notes

In a recent address to the Pensacola Association of Realtors, host Lisa Miller identified some key drivers behind the past two years of homeowners insurance rate increases in Florida.  She noted as rates go up, so do home mortgages for those who escrow their insurance, impacting home affordability. 

Rising Litigation: In 2021, 76,526 property insurance lawsuits were filed in Florida, an 18% increase from 2020, according to CaseGlide.   Claims with lawsuits cost almost five times more than those without.  “In testimony last week in the Senate, Barry Gilway, who’s head of Citizens Property Insurance said that when a third party is involved, the average claim is $48,000.  When there's no third party involved, anybody want to guess what it is?  $10,000,” said Miller.  “As claims costs go up, what do you think happens to rates?  They go up.  It’s pretty simple.  You don't have to be an actuary to know that.” 

She noted that according to industry stakeholders, it is estimated that three of every five insurance claims are inflated, whether the increase is only slightly or obviously suspicious.  Contingency fee multipliers, which allow plaintiff attorneys to request attorney fees twice or three times the customary rate, are also contributing to the increased and unnecessary costs of claims.  Miller told the Realtors that the DFS Division of Consumer Services has an insurance consumer hotline offering free help to any policyholder who faces challenges dealing with their insurance company and that it has a high rate of success settling disputes.  

“When the third parties come into the room, I encourage you and your clients to say to that person, I don't need to see you.  If I can't get the free service that my tax dollars are paying for, I'll come back.  But many times now, people file a claim and the first thing they do is hire a lawyer,” Miller said. 

The resulting “cottage industry of 15 to 20 law firms” are responsible for the majority of homeowners claims lawsuits in the state, currently numbering about 100,000.  “The theory is, the more you sue, some are going to stick,” said Miller.  The Florida Legislature’s 2021 reforms in Senate Bill 76 that now require lawyers give a 10-day notice to insurance companies before filing suit, are being challenged in federal court.  “It forces them to come to the table and have a conversation like human beings should do…and work it out.  They don’t want to do that.  It’s easier to file suit, hope for the best, and get attorney fees,” Miller said.

Many of those lawsuits she said are driven by unscrupulous home contractors and roofers canvassing neighborhoods doing free inspections and proclaiming “you need a new roof and we’ll get the insurance company to pay for it,” said Miller.  “I want us all to have a new roof but that's not what an insurance policy is all about.  If you need a new roof and it's wear and tear, you have to figure out how to pay for it yourself.  If it's wind or weather damage, they'll (insurance companies) pay for it.  It's just that simple,” Miller told the Realtors.

Reinsurance: From 40- to 45-cents of every dollar of a homeowners insurance premium goes toward the cost of reinsurance – insurance that insurance companies buy to protect themselves from overwhelming losses in larger claims and catastrophes.  Miller noted that money flows from Florida to off-shore reinsurance companies in Bermuda, London, and Germany.  But some reinsurance is purchased from the less expensive Florida Catastrophe Fund, a state-run entity that has $16 billion in future claims paying capacity.  “There are those who think we cannot change the Cat Fund, but it’s going to take a long time to deplete that fund,” said Miller, noting the legislature could look at reducing the cost of reinsurance purchased from the Cat Fund.

Since her address, Senator Jeff Brandes (R-Pinellas) has offered an amendment to a bill in the 2022 Florida legislative session that would do just that.  It would:

Senator Brandes argued that lowering the threshold or “aggregate retention point” would lower the cost of reinsurance, with the savings under his amendment to be passed along to policyholders.  Suspending the hurricane tax would save every Florida residential policyholder an estimated $150 annually.

Premium Tax: “Two cents of every dollar that you pay in premium goes to state government.  It’s not a lot.  The regulatory arms of the insurance industry use that money to fight fraud,” Miller explained, saying she is not opining either way.

“There’s three ways to help this situation.  Change the reinsurance structure of our state, reduce litigation, reduce taxes,” Miller said, predicting the problem is only going to get worse, “because there's only two ways for an insurance company to survive what I call the dysfunctional property insurance market.  And that would be to either reduce expenses or raise rates. The Office of Insurance Regulation is approving rate increases and companies are hoping the legislature will help them do one of the three things that I’ve just suggested.  It's just pretty simple.”

Links and Resources Mentioned in this Episode

Florida Insurance Market “Dire”(LMA Newsletter, October 4, 2021) 

Containing the Cat Fund (LMA Newsletter, January 3, 2022)

Major Provisions of SB 76 (2021 Reform)

Major Provisions of HB 7065 (2019 Reform)

Florida Personal Lines Coverage Reaches Crisis Levels (Renaissance Alliance blog January 2022) 

Price of Paradise (WFTS-TV Tampa, January 20, 2022)

Notices of Intent to Litigate by Top 20 Law Firms (Guy Carpenter, January 2022)

Assignment of Benefits & Insurance Litigation Webpage (Lisa Miller & Associates) 

2022 Florida Legislature Bill Watch  (Lisa Miller & Associates) 

** The Listener Call-In Line for your recorded questions and comments to air in future episodes is 850-388-8002 or you may send email to [email protected] **

The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers' Compensation, and Surplus Lines insurance from around the Sunshine State.  Based in the state capital of Tallahassee, Lisa Miller & Associates provides its clients with focused, intelligent, and cost conscious solutions to their business development, government consulting, and public relations needs.  On the web at www.LisaMillerAssociates.com or call 850-222-1041.  Your questions, comments, and suggestions are welcome!  Date of Recording 2/10/2022. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2022 Lisa Miller & Associates, All Rights Reserved