The Florida Insurance Roundup from Lisa Miller & Associates®

The Florida Legislature begins its 2022 session on January 11.  Among the bills filed are those seeking enhanced insurance consumer protection, greater safety for high-rise condominium buildings following the Surfside collapse, COVID-19 relief, controls on prescription drug costs, and legislative redistricting. 

Former Florida Deputy Insurance Commissioner Lisa Miller sat down with state capitol reporters Mike Vasilinda of Capitol News Service and Jim Saunders of the News Service of Florida, to discuss which bills may get serious consideration and why.

Show Notes

With 2022 being an election year for the Governor and many legislators, one of the questions is whether lawmakers decide to wait and see if the 2019 and 2021 insurance consumer reform measures previously passed into law are having enough of an impact on Florida’s “dire” property insurance market as recently described by Insurance Commissioner David Altmaier – or maybe at least go for minor adjustments?

“I don't think we can discount that this is an election year.  I think that you can frame a lot of issues in that context and property insurance is one of them,” said Saunders, who is Executive Editor of the News Service of Florida.  He noted that certain proposed measures in this session would drive up costs, including a failed mandate from last session that would have required actual cash value instead of replacement coverage for roofs.  “I think the real key is how far Governor DeSantis wants to push on doing something about property insurance.  You know, if he comes down and says we have to do something, maybe the legislative leadership will do it, but he's going to be in a reelection campaign and does he want to take that on in an election year?  I'm not sure at this point as we haven't heard a lot from him about it,” said Saunders, who has covered legislative sessions for the past 24 years. 

“I think the Governor's got to pay attention,” countered Vasilinda, who is founder and chief reporter for Capitol News Service, covering the legislature for 49 years for television stations across Florida.  “It was Charlie Crist who stalled Citizens (Insurance Corporation) rates when he was governor in 2007 for two years where they couldn't raise their rates and then they created the 10% glide path, which, for whatever reason, Citizens never ever got to 10% across the board on anybody.  And now they're proposing 11 and 12%, across the board on everybody.  There is going to be some political pressure for the Governor.  He’s going to hear about it in The Villages and everywhere else he's going.  And he's going to know that Governor Crist at the time was the guy that froze those rates.  And he'll try and use that against the former governor,” who is running again for governor against DeSantis.

Another question is how the Florida Office of Insurance Regulation (OIR) will act on Citizens request for those maximum rate increases statewide, even in Miami-Dade County, where Citizens’ actuaries had indicated a 3.2% rate increase.  “I think OIR feels political pressure as well.  To think otherwise is probably a little naïve,” said Saunders. 

Host Miller noted that the Florida Senate last year passed a bill containing actual cash value for roof claims but the House rejected it.  “I think we have to start at the roofing manufacturers, educate consumers that there's no such thing as a 30 year shingle, especially in Florida.  Consumers, in my opinion, should have a choice if they want to have skin in the game and have a lower premium with actual cash value.  For those that want replacement costs, let them have it.  But those choices were not offered in the legislature and unfortunately, who knows where that's going to go this session,” said Miller. 

The other big story in Florida in 2021 was the collapse of the Champlain Towers South high-rise condominium in Surfside which killed 98 residents.  A Miami-Dade County Grand Jury this month recommended that such buildings be re-inspected every ten years for recertification of occupancy and that condo associations be required to annually certify building repairs and maintenance.  That grand jury report will create “real pressure” on the legislature to act, said Vasilinda. 

“Now remember, hearken back I think to 2005 2006, the legislature passed a bill requiring inspections every 10 years.  And then by 2010, the condo boards were so upset, flexed their muscles, gave a lot of money out, and ended up getting that legislation repealed,” said Vasilinda.  

“Part of it is a financial pressure on these condo boards,” added Saunders.  “There's been an issue in the past about retrofitting buildings with fire sprinklers and it kept getting pushed.  As far as I know, it's still getting pushed off.  And the reason it keeps getting pushed off is it costs a lot of money to go into these old buildings and retrofit them with fire sprinklers.   That’s just one example of the types of issues that that these boards might be confronted with, if all of a sudden, they have to bring their buildings more up to modern standards or codes.”

At the time of this podcast recording, no bills had been filed in the legislature pertaining to re-inspections beyond HB 771 by Rep. Alex Andrade (R-Pensacola) which would direct the Florida Building Commission to develop statewide standards for the maintenance and periodic inspection of existing building structures or facilities, as well as consider allowing local deviations.  Another bill, HB 329 by Rep. Nicholas Duran (D-Miami-Dade) would require the Department of Business and Professional Regulation (DBPR) to establish a searchable database of condominium and homeowners’ associations’ information, including whether the association has reserve accounts for capital expenditures and deferred maintenance, and if they are fully funded.  Another bill, SB 880 by Senator Jason Pizzo (D-Miami), would expand the jurisdiction of DBPR in investigating complaints about condo associations and revise criminal penalties for misdeeds.   

“Condo boards themselves are very dysfunctional quite often.  I think there's a lot of competing factors there that do make it more complex than you might think,” said Saunders, noting that condo bills historically are “complex and convoluted.”

Host Miller and guests also discussed the coronavirus pandemic, with both expressing doubt that the Capitol would close to the public during session, despite the new Omicron COVID-19 variant.   Also discussed were measures filed that would further regulate Pharmacy Benefit Managers, who are third-party administrators that serve as middlemen between drug manufacturers and retail pharmacies.   

“People are complaining about their drug prices, and they are complaining about less benefits on their health insurance policy for the things they're doing.  So this might be one way, if the legislature were to try and thread that needle, to try and lower those costs in some way,” said Vasilinda.

Both reporters expressed doubt that such potentially complex and time-consuming legislation would reach completion this session, given the once-a-decade required legislative and congressional redistricting the legislature must tackle by law.  

“It is kind of a food fight,” said Saunders.  “The legislature this year, like they did 10 years ago, are saying how transparent they are and how legal this is going to be.  But that's what they told us 10 years ago, and then the courts came down on them hard for all the behind the scenes shenanigans that went on to draw these maps.  But that's the way it's always been.  It's not only parties looking for advantages, but it's individual legislators looking to save their careers,” he said.

“This year, you've kind of got the Senate being the good guy,” added Vasilinda.  “Everybody's raving.  The Democrats in the Senate are saying, ‘hey, these maps are all pretty good. We could probably live with these.’  But then the House is the one that's playing some games, it appears, to distract perhaps the attention and how that all plays out.  But we will see it in court.  I can't imagine we won't,” he said.

“I think that redistricting, drawing those maps, and those meetings are going to be the most important, and will just hover over everything else that's happening, including the budget,” predicted Host Miller. “So we'll wait and see.” 

Links and Resources Mentioned in this Episode

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

Major Provisions of SB 76 (2021 Reform)

Major Provisions of HB 7065 (2019 Reform)

The Surfside Condo Collapse Tragedy: Recommendations to Make Buildings Safer (Miami-Dade County Grand Jury report, December 15, 2021)

SB 742 Pharmacies and Pharmacy Benefit Managers

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

Capitol News Service

News Service of Florida

** 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 12/20/2021. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2021 Lisa Miller & Associates, All Rights Reserved

Florida Insurance Commissioner David Altmaier told a legislative committee in late September that the state’s property insurance market is in “critical condition” with a growing number of insurance companies losing money and consumers facing continued double-digit rate increases.  A new set of reforms designed to help is already being challenged in federal court by roofers and restoration companies.

Former Florida Deputy Insurance Commissioner Lisa Miller sat down with Jose Pagan, a former fraud regulator who is now one of Florida’s leading insurance defense lawyers, to discuss the legal challenges to the new reform law, the ongoing litigation abuse and unlawful activity in the marketplace, and how consumers are ultimately losing.

Show Notes

Jose Pagan, Partner with the Walton, Lantaff, Schroeder & Carson Law Firm, said the issues in Florida’s property insurance market today have their roots in the aftermath of 1992’s Hurricane Andrew in Miami, where he and host Miller worked together as insurance regulators.  The mediation program for property insurance claims created after Andrew was such a success that the legislature made it standard protocol for handling all future claims.  “While those programs still exist to try to resolve cases pre-litigation, a cottage industry has developed of a very small segment of the legal community as well as some contractors and some public adjusters who are really abusing the system,” said Pagan, an insurance defense lawyer with more than 25 years’ experience in the insurance industry, including as an insurance agent and fraud investigator.

He cited Insurance Commissioner David Altmaier’s report to the Florida Legislature earlier this year that Florida has 8% of all homeowners’ claims in the U.S., yet 76% of all homeowners’ claims lawsuits.  “And moreover, if you look at some of the information that was provided…. it's really only a handful of law firms that was generating a majority of all of those lawsuits,” he added.  “Those are the cost drivers that ultimately are generating the premium increases for all Floridians in this marketplace.”

To stem the abuse and stabilize the marketplace, the Florida Legislature last spring passed Senate Bill 76 (SB 76, now Florida Statute section 489.147) its most recent property insurance reform law.  Yet just two weeks after Governor Ron DeSantis signed the bill into law in June, the first of two lawsuits was filed in federal court in Tallahassee by a roofing and restoration company, complaining that the section of the law dealing with prohibited advertisements and soliciting infringes on its constitutional right of free speech.  The section establishes that contractors and public adjusters, or unlicensed persons acting on their behalf, may not solicit or incentivize a residential property owner to file a roof damage insurance claim.  Violations carry a fine up to $10,000.

Chief U.S. District Court Judge Mark Walker granted a preliminary injunction on the section in July, pending full trial scheduled for spring of 2022.  “Clearly, Judge Walker indicated that there was a significant government interest in attempting to address fraud and abuse in litigation…(but) his assessment, at least on the preliminary injunction side of it, looked at it in terms of commercial speech…and he was able to reach the conclusion that it was an infringement upon commercial speech,” said Pagan, who outlined the series of court tests the judge used.  

“It's pretty clear to me that the legislature was trying to just stop some of the high pressure sales tactics by solicitors knocking on front doors that we see every day, read about on social media, and experience in our own neighborhoods,” said host Miller.

Miller and Pagan also discussed a second lawsuit, filed by the Restoration Association of Florida in the same federal court.  It seeks to throw-out the entire law, which includes a series of provisions, including broadening the longstanding one-way attorney fee statute formula where fees are now awarded instead based on a percentage of recovery of the disputed amount of the claim.  The suit claims the law impinges on protected free-speech rights, interferes with contract law and commerce, and due process.

“There is nothing in the legislation that hasn’t been the case for decades…whether it is regulating the contracting industry under Chapter 428, or the insurance industry under Chapter 626,” said Pagan.  “Dating back as far as in the early 90s, during Hurricane Andrew and thereafter, the law was very well defined, and everyone knew or understood that you could act as a contractor, you could act as a public adjuster.  But unless you were licensed in both, you could not act as both a contractor and a public adjuster.”  He said that “some of those lines became a little blurred” and “there have been so many different actions either taken by the courts or not taken by the regulating entities that have allowed questions to arise,” that the legislature needed to provide clarification through SB 76.

Another provision in the new law focuses on presuit settlements.  It requires that insurance companies receive a ten-day notice and demand before a lawsuit is filed by first-parties, such as homeowners or commercial building owners.  And it gives carriers 10 days to respond in writing to such notices.  The idea is to settle claims before they become lawsuits.  Host Miller asked Pagan how that part of the law is working so far, especially given conflicting opinions in the market to which cases that applies. 

“Most of the attorneys and the carriers are certainly utilizing the Notice of Intent provision, in an effort to try to get to a quick resolution, rather than having to litigate these cases to the nth degree.  That is, I think, most beneficial for not only the policyholders, but all of the other stakeholders as well,” Pagan said.  Those cases that are unresolved are usually because of a communication breakdown and benefit from having another person from the insurance company review the claim, he said.

The stakes are high for the future health of Florida’s property insurance market.  “The problem that we face is affordability,” Pagan said.  “Because of the small amount of participants who are abusing the system and are creating such high premium increases, affordability becomes huge.  And that's especially acute for senior citizens who are living on a fixed income.  So when we are talking about double digit premium increases year over year, that means that in a very short amount of time, we're doubling, sometimes tripling the premiums for your home.”

Host Miller noted that the Florida Legislature is now in the middle of committee weeks, leading to the start of the regular session in January 2022.  Further insurance reform is already being discussed.  “I believe that SB 76’ purpose was to restore, rebalance, and revitalize, if you will, the insurance industry for all of its policyholders, to stop these premium increases, and protect consumers from what appears to be out of control litigation, solicitations, and high pressure sales,” said Miller.  She urged listeners to contact their state representative and state Senator and share their story, whether as a consumer or someone working in the industry. 

Links and Resources Mentioned in this Episode

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

Florida Senate bill SB 76 (the solicitation section is in lines 117-180; the presuit settlement section is in lines 1138-1173)

Major Provisions of SB 76 

Gale Force Roofing and Restoration, LLC v. Julie Brown, Florida Department of Business and Professional Regulation (first lawsuit)

Restoration Association of Florida, et al v. Julie Brown, Florida Department of Business and Professional Regulation(second lawsuit)

DFS Property Insurance Intent to Initiate Litigation portal 

Walton, Lantaff, Schroeder & Carson law firm 

Roofers Block Part of SB 76 For Now (LMA Newsletter, July 12, 2021)

Second Challenge to Insurance Reform Law (LMA Newsletter, September 20, 2021)

Florida one-way attorney fee statute

Property Insurance Reform (The Florida Insurance Roundup podcast, May 23, 2021)

Defense Attorneys’ Take on SB 76 (The Florida Insurance Roundup podcast, June 23, 2021)

Condo Underwriting & Presuit Settlements (The Florida Insurance Roundup podcast, August 30, 2021)

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 10/11/2021. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2021 Lisa Miller & Associates, All Rights Reserved

In the wake of the Champlain Towers South condominium building collapse, insurance companies are looking to tighten their underwriting requirements on Florida condo association policies.  Policy renewal premiums are expected to increase up to 25% for those that can’t show a good building maintenance record.  While the commercial residential market tightens, Florida’s homeowners insurance market is going through an upheaval of its own.  One insurance litigation reform measure passed into law is now coming into play in court: presuit settlements.

Former Florida Deputy Insurance Commissioner Lisa Miller talks with two professionals on the underwriting and legal side for their insight on market changes afoot and advice for insurance companies trying to navigate the changes.

Show Notes

This Florida Insurance Roundup podcast covered two topics that have one thing in common: how to clamp down on rising premiums, rising costs, and excessive litigation expense.  

Condominium Association Underwriting:

Florida’s commercial residential insurance companies are actively looking at how to avoid insuring another condominium building collapse or similar major catastrophe.  The Champlain Towers South collapse in June killed 98 residents in Surfside, Florida.  At least five other high-rise buildings in Miami-Dade County have since been partially or fully evacuated for being deemed unsafe.  

Brian Squire, Managing Executive Senior Vice President at Hays Companies, a national insurance consulting agency, said there’s a systemic issue at play with how condo buildings are maintained and how their associations are governed.  “You have a board of directors that make decisions on behalf of the association, but then the condominium association’s governing documents allow its members to veto the board's decision.  These decisions made regarding the maintenance of these associations, on a lot of cases, are based on cost first, then life safety.  This mindset needs to change,” he said, noting there have been multiple associations who’ve had decisions levied against them recently.

In the wake of the disaster, Surfside officials are moving up building recertifications for occupancy from every 40 years to every 30 years and requiring sign-off by both a structural engineer and a geotechnical engineer checking the foundation and subsurface soils.  But Squire insists the age of the building shouldn’t be the sole factor.  “I've seen newly constructed buildings have issues similar to a Champlain Towers.  So we really need to wipe away the mindset that this is only needs to be applied to a 40 year building,” said Squire, who has been in the insurance business for 21 years and is based in the condominium-popular Destin, Florida.

In his recent conversations with many insurance companies, Squire said there’s many potential new underwriting requirements now under consideration.  They include: 

Among the solutions he suggested, is requiring engineering studies of all existing condominium buildings, pre-qualification of underwriting through insurance carriers, and possibly legislative changes.   Squire said associations should be proactive prior to policy renewal, too.  “What's going to make it look better is replacing or maintaining a roof and making sure that you have impact windows.  Those are really the two items that can easily be addressed,” he advised.

Host Lisa Miller noted that the Building Officials Association of Florida recently held a summit to address structural safety issues and potential changes with other groups.  They included the International Code Council, the National Institute of Building Sciences, the Building Owners and Managers Association, and the Florida Bar’s Condominium Law and Life Advisory Task Force.  Proposed legislation is being drafted as well for the Florida Legislature to consider in its January 2022 session.

Presuit Settlements:

The new presuit settlement law is part of SB 76, Florida’s broader new property insurance reform law that took effect in June.  It requires that insurance companies receive a ten-day notice and demand before a lawsuit is filed by first-parties, such as homeowners or commercial building owners.  And it establishes how carriers need to respond.  Michael Monteverde, an insurance defense attorney with the Zinober Diana & Monteverde law firm, said the purpose was to allow insurance companies to resolve conflicts and reduce Florida’s “out-of-control litigation.”  But he said some of the intended benefits haven’t played out yet, including whether plaintiff attorney fees, a driver in expensive litigation, will ultimately be reduced.

With the elimination of Florida’s one-way attorney fee statute that encouraged inflated claims, the new law “creates more of a chess game, to try to get everybody to a place where there is a reasonable number,” said Monteverde, who manages the firm’s Fort Lauderdale office.  “Because of the way that the fee provision kind of shifts under the new statute and SB 76, what the insurance carriers can do is they can set up the offers in response to the demands in a way that really kind of dares the plaintiff attorneys to reject the offer, because now we are setting up a situation where the fees are either limited or completely done away with and each party to bear its own fees and costs depending on what you are ultimately able to recover in the lawsuit.”

He said the new law also takes away from the incentive for a plaintiff attorney to overly demand.  “So if you have a $70,000 case, there's no reason to come in and demand $600,000 to try to move the needle, because you may just be shooting yourself in the foot based on the way that the insurance carrier ultimately responds to that presuit demand,” said Monteverde, who appeared in a June podcast on how SB 76 works.

Monteverde added that it seems most of the policyholder attorneys are trying to comply with the presuit notice requirement “and some of the results have been somewhat encouraging,” but there’s confusion whether the law applies to actions filed after the effective date of the law (June 11, 2021) or the policy date.

Monteverde also weighed-in on the condominium association underwriting issue, noting past catastrophes, such as hurricanes, have revealed that some associations are not keeping statutorily-required reserves for basic functions.  “If I were advising a carrier, I would say look at your underwriting processes, make sure that people are properly reserving, and make sure that the maintenance funds are going where they're supposed to be because they're turning the insurance policies in some instances into maintenance contracts.  And that's not what they are,” he said.

“’Maintenance first’ sounds like the theme of this podcast for those that are in the commercial residential space,” concluded host Miller.  “Having impact windows, making sure your roof is intact, and of course, consulting with your insurance professional.” 

Links and Resources Mentioned in this Episode

Building Officials Association of Florida

Surfside’s Ripple Effect (LMA Newsletter of July 12, 2021)

Legislature to Review Condo Inspection Rules (LMA Newsletter of July 26, 2021)

Insurance Impacts of the Surfside Collapse (LMA Newsletter of July 26, 2021)

Who Will Insure Florida’s High-Rise Condos? (LMA Newsletter of August 9, 2021)

Hays Companies

Florida Senate bill SB 76 (the presuit settlement section is in lines 1138-1173)

DFS Property Insurance Intent to Initiate Litigation portal 

Zinober Diana & Monteverde law firm 

Florida Legislature 2021 Bill Watch summary (Lisa Miller & Associates)

Florida one-way attorney fee statute

Property Insurance Reform (The Florida Insurance Roundup podcast, May 23, 2021)

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 8/25/2021. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2021 Lisa Miller & Associates, All Rights Reserved

Florida’s new property insurance reform law takes effect on July 1.  While its intent is good, Florida policyholders are in desperate need for the law to have a significant impact on double-digit rate increases and questionable door-to-door solicitation practices.  Will it deliver?

Former Florida Deputy Insurance Commissioner Lisa Miller walks us through the details of Senate Bill 76 with two insurance defense lawyers who provide experienced analysis and perspective on each section of the new law, its likely impact, and the areas where legal conflicts may arise in its interpretation.  This is a must-listen to podcast for anyone in Florida’s property insurance industry.

Show Notes

Lisa is joined by Tom Diana and Michael Monteverde of the award-winning Zinober Diana & Monteverde law firm with offices in Ft. Lauderdale, St. Petersburg, and Tampa.  Tom is a Co-Founder and Principal Partner of the firm.  He is a civil engineer turned lawyer whose main practice areas focus on insurance claims involving engineering and architectural experts, all matters related to construction, and coverage issues related to professional and general liability policies.  Michael is a Partner at the firm who focuses his practice on the litigation of complex construction defect matters, first- party and third-party insurance disputes, as well as insurance coverage matters, including high exposure bad faith claims.

This extended hour-long podcast walks through the new law from the 44-page Senate Bill 76 (SB 76), section by section, as follows:

489.147 Prohibited property insurance practices, which cover advertisements and solicitations by contractors and public adjusters and establishes contractors or unlicensed persons acting on their behalf may not solicit or incentivize a residential property owner to file a roof damage insurance claim.

624.424 Annual statement and other information, requiring insurance companies file an annual report with specific data regarding litigation of personal and commercial residential property insurance claims

626.7451 Managing general agents; required contract provisions and 626.7452 Managing general agents; examination authority, which clarifies that the Office of Insurance Regulation has the authority to examine MGAs, including insurers’ affiliates.

626.854 “Public adjuster” defined; prohibitions, establishes that a public adjuster, a public adjuster apprentice, or unlicensed persons acting on their behalf may not incentivize a residential property owner to file a roof damage insurance claim and has an “up to $10,000 fine” for violations.

626.9373 Attorney’s fees, regarding lawsuits not brought by an assignee, directing awards of reasonable attorney fees only as provided under two specific statutes.

627.428 Attorney fees, regarding lawsuits not brought by an assignee in judgment against an insurance company.

627.70132 Notice of property insurance claim, changes the notice of claim deadlines by requiring that any claim must be provided to a property insurer within two years of the date of loss and the policyholder then has another year to file a supplemental claim if needed.   

627.7015 Alternative procedure for resolution of disputed property insurance claims, creates new statutory requirements for residential or commercial property lawsuits that are not brought by an assignee, including a ten-day presuit notice and demand, before bringing suit against an insurance company.  The company has 10 days to respond in writing to such notices.  This section also broadens the current one-way attorney fee statute formula.  If the claimant recovers at least 50% of the disputed amount, full attorney fees would be awarded; less than 20%, then there would be no attorney fees.  Judgments between 20% and 50% would merit the same proportional attorney fee to the percentage of the disputed amount obtained.

627.70153 Consolidation of residential property insurance actions, requiring each party that is aware of multiple lawsuits pertaining to the same property address to notify the court, which may then order the actions be consolidated. 

628.801 Insurance holding companies; registration regulation, allowing further regulation of insurance holding companies to ascertain the financial condition of the insurer.

The podcast mentioned, but did not cover sections 627.351 Insurance risk apportionment plans and 627.3518 Citizens Property Insurance Corporation policyholder eligibility clearinghouse program regarding Citizens, the state-backed insurer of last resort.

This podcast was recorded on June 15, 2021, about two weeks before the new law’s July 1 effective date.  This program was produced as both a podcast and a video webinar.  While specific lines in the bill – now law – are mentioned, it’s not necessary for the listener to have the bill in front of them as they listen, as Lisa and her guests read aloud the pertinent language.    You may watch the video webinar here.

Also of note is Senate Bill 1598 (SB 1598), which was also signed into law, effective June 16, 2021.   The bill, in lines 171-177, clarify that a license is required to act as an insurance adjuster in the state of Florida.  Violations are a third-degree felony, punishable by fines up to $10,000 per occurrence.

Links and Resources Mentioned in this Episode

Florida Senate bill SB 76

Zinober Diana & Monteverde law firm

Department of Financial Services Insurance Fraud Portal (to report unlicensed activity & other violations of SB 76 and SB 1598)

Florida Legislature 2021 Bill Watch summary (Lisa Miller & Associates)

Florida one-way attorney fee statute

Property Insurance Reform (The Florida Insurance Roundup podcast, May 23, 2021)

Florida’s Property Insurance Dilemma (The Florida Insurance Roundup podcast, March 26, 2021)

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

Tom Diana’s email is [email protected]

Michael Monteverde’s email is [email protected]

Video Webinar of this 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 6/15/2021. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2021 Lisa Miller & Associates, All Rights Reserved

The Florida Legislature has passed a property insurance reform bill designed to stem double-digit rate increases, costly claims practices, and excessive litigation.  While the bill awaits the Governor’s expected signature into law, there are questions about just how effective it will really be.

Host Lisa Miller, a former Florida Deputy Insurance Commissioner, talks with a leading state Senator and a veteran insurance defense attorney and legal strategist on what the measure does and doesn’t do – and its expected impact on Florida consumers.

Show Notes

Over the past 18 months, Florida’s residential and commercial property insurance market has seen a growing number of policy cancellations and non-renewals, greater coverage restrictions, and regulatory approval of necessary double-digit rate increases, some as high as 50%.

Senate bill SB 76 changes the calculation of attorney fees and restricts solicitation of roof damage claims, requires claims be filed within two years and requires that insurance companies receive a ten-day presuit notice in first-party litigation.  It also directs state regulators to collect insurance claims and litigation data annually.  (For a complete summary of the bill, click Lisa’s 2021 Bill Watch.)

State Senator Jeff Brandes (R-Pinellas County) voted in favor of the bill, which was watered-down in the last week of session, but warned colleagues on the Senate floor that it was just a 40% solution for what is needed to restore a competitive property insurance market and lower costs.  “We have a rash of roof claims across Florida.  The two things that we really needed to deal with were attorney fees and roof issues… most of that is missing (from the bill),” he shared on the podcast.

The bill changes the decades-old one-way attorney fee statute formula.  If the claimant recovers at least 50% of the disputed amount, full attorney fees would be awarded; less than 20%, then there would be no attorney fees.  Judgments between 20% and 50% would merit the same proportional attorney fee to the percentage of the disputed amount obtained. 

“The attorney fee provision is a step in the right direction,” said John Henley, Vice President and Head of Claims Shared Services at UPC Insurance, one of the largest writers of homeowners insurance in Florida.  “It’s so much better than the current paradigm, where if a claimant gets a judgement of a penny more than the insurance company offered, they get all their attorney fees paid, and even more.”  And the bill’s required ten-day notice before being sued, “is better than nothing, which is what we have now, where we settle the claim and think everything is fine and then they sue us and don’t tell us what they’re demanding,” Henley added.

Senator Brandes, a champion for insurance reform in the Florida Legislature, said he hopes the provisions will bring all parties to the table and to act reasonably.  “Prior to this law, people had no incentive to be reasonable.  In fact, they had an incentive not to be reasonable.”

Midway through the legislative session, Florida Insurance Commissioner David Altmaier released a letter citing National Association of Insurance Commissioners data that showed in 2019, Florida had 8% of all homeowners' claims in the U.S., yet 76% of all homeowners' claims lawsuits.  The letter “completely changed the dynamics and the tone of our colleagues in the House, because it’s indefensible,” said Brandes.  “It’s also unsustainable.  That’s largely what’s driving both the cost of insurance but also the investors out of the market.”

Henley, a longtime claims attorney, said the one-way attorney fee law is the reason behind the startling statistic.   He said another provision in the bill requiring insurance companies annually report to regulators their litigation figures, loss cost, and adjusting cost, will lead to greater transparency of the problem.  “When the state starts to get that information and they (regulators) truly see behind the veil of how much money this industry, this litigation economy in Florida is taking from carriers and ultimately insureds, that will be the kick-start to get the other 60% that we want done, done,” Henley said.

“People are essentially paying a hidden tax on property insurance that they’re paying through their insurer to the trial bar and that’s what’s causing all of these problems,” Brandes added.

Both guests pointed out that while the bill’s changes in law take effect July 1, the effects will take 12-24 months to make their way through carriers’ books of business.  That leaves insurance companies to continue to face these challenges and consumers facing skyrocketing premiums, along with other market factors such as record-high lumber prices and the next two hurricane seasons.  “In the meantime, Citizens Property Insurance (the state’s insurer of last resort) will likely grow to more than one million policies in the next two years,” said Brandes, putting taxpayers at risk of having to cover any potential reserve shortages that could occur in a future super storm or series of storms.  

Henley also predicts “a deluge of litigation” between now and when the law takes effect July 1 that he says the industry is already starting to see.  He likewise sees limited impacts of the new law itself.  “You’re dealing with a very creative plaintiff bar here in Florida.  So we need to see this bill play itself out in a court system that has been historically lenient toward plaintiffs.  I suspect we’ll see a flattening of litigation only.”

Even with SB-76, other challenges to Florida’s property insurance market remain.  The aging roof problem, where solicitors go door to door encouraging claims for roofs that instead have normal wear and tear, was unaddressed in the final bill.  “We’re already starting to see insurance companies pull away from writing coastal policies simply because they can’t get the reinsurance or raise additional capital,” said Brandes. 

Host Miller noted that there are three main factors causing rising rates: excessive litigation, contractor fraud, and claims creep from past hurricanes, along with resulting reinsurance price increases.  “Consumers are really rising up and they are upset,” Miller said.  She and her guests talked about the need for the insurance industry to do a better job communicating to policyholders about the negative effects of door-to-door repair solicitations and lawsuits. 

“I live in South St. Petersburg and I love it,” said Henley.  “But I pay three times more for a house that is three times smaller than one of my best friends who lives in Atlanta, Georgia.  Why is that?  It’s because of the claims litigation activity that is driven by these bad actors.”   He said the reporting requirement on carriers in the bill will prove “it’s not a made-up crisis.”

“This isn’t a made-up issue, as some claim,” agreed Brandes.  “There’s a real problem in Florida.  The insurance market is the Achilles heel of the state….and unless we get our hands around this problem, we’re going to have real challenges going forward.  This effects everyone, whether you are renting, owning, or in a condo...We have begun to address the problem, but there’s a lot more work to be done.”  

“It’s clear from our conversation here and from others we’ve had recently, that the legislative reform passed may have modest impacts on two of the foundations of insurance that are increasingly out of balance in Florida, availability and affordability,” concluded Miller.

Links and Resources Mentioned in this Episode

Florida Senate bill SB 76

Florida Legislature 2021 Bill Watch summary (Lisa Miller & Associates)

Florida one-way attorney fee statute

Florida Insurance Commissioner David Altmaier’s litigation statistics letter

National Association of Insurance Commissioners: The Cold, Hard Truth about Florida Litigation (LMA Newsletter of April 12, 2021)

Senator Jeff Brandes Senate floor debate video (beginning at timecode 1:35:25, The Florida Channel)

Senator Jim Boyd (sponsor of SB 76) Senate floor debate video (beginning at timecode 3:07:10, The Florida Channel)

Insurance Costs Threaten Florida Real-Estate Boom (The Wall Street Journal, April 25, 2021)

Reforming Florida’s broken insurance market (Inside P&C, April 12, 2021)

Florida Domestic Property Insurers Summary of 2020 Year-End Financial Results

Florida’s Property Insurance Dilemma (The Florida Insurance Roundup podcast, March 26, 2021)

UPC Insurance

Senator Jeff Brandes Legislative Webpage

Demotech Financial Stability Ratings for the Florida Domestic Market (March 12, 2021)

Regulators Reject Citizens Rate Cap Request (LMA Newsletter of April 26, 2021)

Several Factors Hinder Homeowner and Auto Glass Insurance Fraud Processing (Florida Office of Program Policy Analysis and Government Accountability, March 2021)

Florida’s P&C Market: Spiraling Toward Collapse (Guy Fraker, Cre8tfutures Advisory, January 2020)

Florida’s Property Insurance Market Is ‘Spiraling Towards Collapse’ Due to Litigation: Report (Insurance Journal, January 20, 2021)

Consumer Impact and Trends in Property and Automobile Insurance (Florida Insurance Consumer Advocate presentation to the Florida House Insurance & Banking Subcommittee, February 3, 2021, pages 37-45)

Citizens Exposure Reduction and Depopulation Opportunities Analysis (Florida State University’s Florida Catastrophic Storm Risk Management Center, November 2020)

How a $41,000 Plumbing Leak Turned Into a $1.2 Million Attorney Fee (Lisa’s Blog, March 12, 2020)

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

Floridians for Lawsuit Reform

** 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 5/14/2021. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2021 Lisa Miller & Associates, All Rights Reserved

Florida’s residential and commercial property insurance market is in a precarious state of flux, for both insurance companies and consumers.  Old hurricane claims, litigation abuse, and fraudulent repair tactics have led to big underwriting losses and rising reinsurance rates.  Those are being passed along to Florida residents in double-digit rate increases – some as high as 50%.

Host Lisa Miller, a former Florida Deputy Insurance Commissioner, talks with two veteran insurance agents on the frontline, who reveal the hidden consequences that higher insurance premiums are having on their customers and the impact now on Florida’s real estate market.

Show Notes

Florida’s domestic insurance companies are in a sea of red ink, with $1.6 billion in net underwriting losses.  Consumers have been left holding the bag for now.  Some are scrambling to find coverage.  They’re increasingly turning to their insurance agents for help.

“Sometimes we have to have uncomfortable conversations with clients and some clients decide they don’t want to keep insuring the property, they just want the liability (coverage),” said Ana Regina Myrrha, CEO of the American Insurance Point agency in Orlando.  “I see people taking a greater risk because they cannot afford to pay for the insurance.”  Myrrha, a 23-year insurance agent, said she has had to hire extra staff to review policies and quote and re-quote clients who’ve lost or can’t find affordable coverage.

The availability and affordability issue is even more advanced in South Florida, with many clients seeing rate increases of 20% to 40%, according to Dulce Suarez-Resnick, Vice President of Personal Lines for Acentria Insurance Associates in Miami.  “In the last two years, more and more of our markets have shut down,” said Suarez-Resnick.  “I represent 16 homeowners carriers and I have four open in Miami-Dade County and six open in Broward County.”  But many she said have policy restrictions, including roof age requirements of under 10 years old.   Those clients have little choice than to be placed with Citizens Property Insurance Corporation, the state-backed insurer of last resort, whose policy count has exploded in the current dilemma.    

Both agents report the situation has begun impacting home affordability and the Florida real estate market.  “Eventually what’s going to happen with people is that they are not going to be able to afford that mortgage payment because their insurance is escrowed with their taxes.  And it’s just becoming a dilemma,” said Suarez-Resnick, a 36-year agent in Miami who serves on the Citizens Property Insurance Corporation’s Agent Roundtable.  She said her own mortgage payment has gone up year after year, fueled by a $1,400 annual premium increase last year and another $800 increase this year.

Some insurance consumers are increasing their deductibles to help reduce the premium increases.   The usual 2% hurricane deductible is now offered at 5%.  Myrrha worries that some who had regular $1,000 all other perils deductibles are pushing their deductibles to $2,500, $5,000, and even $10,000.  “The clients that choose those deductibles, can they afford to pay them in case of a catastrophe?  Probably not.”     

Host Miller and guests also talked about some of the insurance market and litigation reform bills being considered by the Florida Legislature, designed to ease the dilemma and help re-right the market.

“It doesn’t matter what kind of reform you pass, as long as you ignore the one-way attorney fees and the fee multiplier then you have really done nothing.  You’ve basically closed the door and opened the window,” said Suarez-Resnick, who has travelled to the state Capitol for years to urge reform, from litigation abuse in the 2004-2005 storms’ claims, then sinkholes, followed by Assignment of Benefits (AOB), and now litigation on old hurricane claims.  She notes the constant stream of attorney commercials on local television.  “So the attorneys are educating the consumer to have a different mindset.  ‘Don’t call your insurance agent, your trusted advisor if you have a claim, call us.  We can inspect,’ they say.  Since when is an attorney a public adjuster?” she asked.   She urges the Florida Legislature to pass Senate Bill SB-76, the principal property reform bill this session. 

Another issue is door to door solicitation by roofing firms offering new roofs that they convince the homeowner their insurance company will have to pay for.  “To make matters worse, it’s not only the client.  Now I have realtors encouraging clients to file claims to replace the roof in order to get the house sold,” said Myrrha.  She said these jobs often involve an AOB and incomplete or shoddy work.   She said she educates her clients that “Maybe they’re giving you a free roof now, but for the rest of your life, you’re going to be paying for that roof.”

The result, the agents agreed, is that property insurance capacity is running out, the market has dwindled, and the lack of competition has driven rates even higher, pushing people to taxpayer-backed Citizens Property Insurance.  Even those homes with replacement values of more than $1 million are having a hard time finding windstorm insurance in coastal areas they said.  “I would tell the Florida Legislature that enough is enough.  The insurance industry has been bleeding for a while.  It’s impossible that they cannot look to the little guy that is using their savings as a down payment on a house and now cannot afford the escrow payment,” said Myrrha.

“It’s clear after listening to our guests today that Florida’s property insurance market dilemma is going to deepen and worsen without needed legislative reforms.  I see the insurance companies’ future, their profitability, is going to require them to shed business by cancelling or non-renewing more policies, said host Miller.   “This dilemma is falling squarely on consumers’ pocketbooks.”

Links and Resources Mentioned in this Episode

American Insurance Point Agency

Acentria Insurance Associates

Florida Legislature Bill Watch (Lisa Miller & Associates)

Florida Domestic Property Insurers Summary of 2020 Year-End Financial Results

S&P Global Market Intelligence

Demotech Financial Stability Ratings for the Florida Domestic Market (March 12, 2021)

Citizens Pushing Higher Rates (LMA Newsletter of March 22, 2021)

Florida Property Insurance Cos. Financials (LMA Newsletter of March 15, 2021)

Several Factors Hinder Homeowner and Auto Glass Insurance Fraud Processing (Florida Office of Program Policy Analysis and Government Accountability, March 2021)

Florida’s P&C Market: Spiraling Toward Collapse (Guy Fraker, Cre8tfutures Advisory, January 2020)

Florida’s Property Insurance Market Is ‘Spiraling Towards Collapse’ Due to Litigation: Report (Insurance Journal, January 20, 2021)

Consumer Impact and Trends in Property and Automobile Insurance (Florida Insurance Consumer Advocate presentation to the Florida House Insurance & Banking Subcommittee, February 3, 2021, pages 37-45)

2021 Legislative Proposals (Florida Insurance Consumer Advocate, February 2020)

Citizens Exposure Reduction and Depopulation Opportunities Analysis (Florida State University’s Florida Catastrophic Storm Risk Management Center, November 2020)

How a $41,000 Plumbing Leak Turned Into a $1.2 Million Attorney Fee (Lisa’s Blog, March 12, 2020)

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

Floridians for Lawsuit Reform

** 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 3/23/2021. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2021 Lisa Miller & Associates, All Rights Reserved

Whether you’re an insurance consumer or professional, 2020 is providing lessons and insight into the changing Florida insurance market for 2021.  How can you get the best priced coverage for your needs?  And for insurance professionals, how can you better serve your customers now and in the long-run?

Host Lisa Miller, a former Florida Deputy Insurance Commissioner, talks with Amy O’Connor of the Insurance Journal and Carol Williams, a strategy and risk consultant for insurance companies, on the qualities insurance consumers – and the professionals who serve them – need to have in 2021 to get the most out of their insurance. 

Show Notes

With the COVID-19 pandemic, the biggest hurricane season on record in number of landfalls, a record-setting number of catastrophic events, growing insurance fraud, and double-digit homeowners insurance rate increases in Florida to name but a few, it’s little wonder folks are feeling overwhelmed at times - and powerless.

It’s been a challenging year for insurance consumers.  Having an agent advocate is going to be more important than ever in 2021, according to Amy O’Connor, Southeast Editor of The Insurance Journal and Associate Editor of MyNewMarkets.com.  “I’m hearing a lot of stories of people not getting coverage renewed, huge rate increases, coverage being scaled down,“ said O’Connor.  Consumers may not understand what they’re losing.  She advises to look at the policy and make sure you understand it or find someone who can help you.  “The age of your home, the condition of your roof, all these things are going to be important to consider as you move forward into renewing existing policy or going with another company,” said O’Connor, who has covered the Florida insurance beat for the past six years.

Insurance companies are also being more proactive to help inform and educate consumers.  They’re using different channels, including text messages and live chats, to focus on clear and helpful communication to policyholders, according to Carol Williams, Founder and CEO of Strategic Decision Solutions, based in Tallahassee, Florida.  Companies are also developing advanced strategies to combat insurance fraud by third-party contractors and an increase in lawsuits, both key drivers – together with lagging hurricane claims and reinsurance costs – of rapidly rising Florida property insurance rates.

Williams said a growing number of insurance companies are starting their own repair programs, with a network of contractors ready to respond quickly to a policyholder’s claim.  “Something that a lot of consumers overlook in thinking that the insurance companies are only out for themselves, is that the insurance company has skin in the game for making sure that your home is repaired correctly because they are still on the risk.  They will still be providing coverage to you after the claim.  They want to make sure it’s being done right,” said Williams, an 18 year veteran of the insurance industry and a strategy and risk consultant for insurance companies. 

O’Connor said insurance is not something that consumers understand very well and they really don’t want to learn a lot about it if they don’t have to, yet it’s something they have to have.  “But the moment has come where everybody needs to start paying attention,” she said. Host Miller noted that “homeowners are insuring their largest asset yet agents are frustrated at times trying to get their customer’s attention.  Consumers need to take the time.”

Part of the problem, Williams pointed out, is that property insurance is often dismissed as a once a year purchase paid out of the home mortgage escrow.  But it’s “vital” that consumers take time to review their policies.  “Just like people are always focused on having health insurance, property insurance is for the health of your home.  People pour over their health insurance policy.  You need to do the same thing for your property insurance policy,” advised Williams. 

The podcast also discussed what insurance regulators can do, including setting the tone for the market and providing education about the actual insurance policy itself.  Available consumer education resources include the National Association for Insurance Commissioners, which has overviews of different policy coverages. 

Host Miller and guests also discussed COVID-19 and the impact the coronavirus pandemic has had on insurance.  O’Connor said new procedures utilizing work-from-home technology for agents and remote claims handling practices in potential hurricanes will have a long-term benefit: greater adaptability and responsiveness to consumer needs, in an industry that can be slow to adapt to change.  “Consumers are changing the way they do their business, especially with insurance, and they are demanding more from the industry,” she said.

COVID-19 has also accelerated the use of Insuretech, where consumers do everything on their phone or computer, from shopping for policies to signing-up for coverage.  “That is definitely the path that insurance is going,” said Williams.  “There are insurance companies in Florida that are specializing in that because they recognize that is a growing demand.  Consumer expectations are changing, so they know they need to adjust with it.”  There’s a long-term benefit here, too.  Williams said the savings from avoiding some of the traditional manual labor of underwriting and claims are being passed along to consumers through lower premiums.

“I see the 2021 consumer being more price-sensitive,” added host Miller.  “Prices of everything are going up in this time of COVID, including our insurance rates in Florida, and that’s going to force the issue of people being more sensitive to know what they are buying and ask more questions.”  Among them: make sure you know what coverage you’re getting for the price and the quality of the company that is backing the policy.  “Look at the financial ratings of the company, consumer complaints, do your research, and don’t make your decision based just on price,” warns Williams.

The podcast also touched on the upcoming 2021 session of the Florida Legislature.  Florida is experiencing accelerated homeowners insurance rates, due more to increased litigation and questionable claims, than catastrophes.  Regulators have approved about 100 rate increases in 2020, with a few close to 30%.  Several companies have also reduced the number of policies they write each month with some deciding to stop writing new business completely while they wait for the rates to catch up to the costs. 

The upcoming legislative session is going to be “hugely important” to the insurance market.  There will be bills to try to bring necessary reforms that are seen as consumer friendly.  O’Connor said Florida insurance consumers who are concerned about the rate increases, have more power than they may realize as constituents.  “People need to look at and decide ‘is this something that I want to support and that I need to reach out to my lawmakers, my insurance agents, and find out is this going to benefit me and help our rates in the long-term or is it just going to keep going down this path?’ and it’s a pretty scary path in terms of cost.”

Links and Resources Mentioned in this Episode

Florida Property Insurance Market Inches Closer to Crisis – Part 1 and Part 2 (Insurance Journal, October 29-30, 2020)

Strategic Decision Solutions

Insurance Journal

MyNewMarkets.com 

National Association of Insurance Commissioners Consumer Resources

Bill Watch (Lisa Miller & Associates)

Assignment of Benefits & Insurance Litigation (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 12/14/2020. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2020 Lisa Miller & Associates, All Rights Reserved

As hurricane season heats up, a growing number of properties located outside of FEMA-designated high-risk flood zones are actually flooding.  The problem is especially bad in the urban areas of America’s cities.  A national survey shows nearly 85% report experiencing urban flooding.  Insurance claims are on the rise, too.

Host Lisa Miller, a former deputy insurance commissioner, talks with Sam Brody of Texas A&M University about his latest research and fellow scientist and resiliency expert Alec Bogdanoff on how we can protect more homes and businesses from flooding.

Show Notes

“Urban flooding is kind of this hidden danger among all flood risks in the United States,” according to Dr. Sam Brody of Texas A&M University and Director of the Center for Texas Beaches and Shores.  It occurs mostly in high growth areas, where development brings rain impervious surfaces, such as roads, driveways, and parking lots, which change the natural drainage pattern of the land.  “It’s bringing flood impacts to unexpected areas, sometimes miles outside of the FEMA-designated 100-year flood plain.”

Brody’s joint study with the University of Maryland is titled, The Growing Threat of Urban Flooding: A National Challenge 2018.  The report revealed neighborhoods that were miles away from known flood risk zones but were surrounded by man-made barriers, such as roads, railroad tracks, and sound walls, referred to as “built environment barriers.”

“These features of the built environment are creating the flood hazard and the associated impact.  They’re either exacerbating or entirely creating the situation of risk.  FEMA’s models, which are all based on stream channels, don’t account for these growing areas of risk and impact,” Brody said.   He noted that 2017’s Hurricane Harvey, one of the largest flood events in U.S. history, exposed a lot of underlying conditions of urban flooding, especially in Houston, Texas, the fourth largest city in the country.

The study looked primarily at rainfall, but urban flooding can occur with tidal events, too, including high-tide or “sunny day” flooding, as seen in some South Florida communities.  Dr. Alec Bogdanoff is Principal Scientist and Co-Founder of Brizaga, a Fort Lauderdale, Florida based firm that assists businesses and communities in becoming more resilient to the effects of sea level rise and long-term environmental changes.  He said some storm water systems, which are meant for collecting and sending rainwater out to sea are instead becoming conduits for saltwater to back up into communities during this period of sea level rise.

“The challenge comes if you end up with a high-tide sunny day flooding example and instead of it being a sunny day, it’s a rainy day.  You now have to wait for the tides to go down before that rainwater is going to go out,” Bogdanoff said.

The study included a survey of more than 400 flood control professionals across all 50 states.  It found that 83% had experienced urban flooding and 46% indicated it has occurred in numerous or most areas.  “To me, the number one surprising result was that 85% of respondents experienced urban flooding outside of the FEMA Special Flood Hazard Area (SFHA), which means this is a problem and it’s growing nationwide,” said Brody.  “There are hotspots like Miami, Palm Beach, and Houston of urban flooding but this is something that needs to be addressed at all scales starting from the national level down to the local.”

“This phenomenon is greatly affecting businesses and homes to the point that I think it should become a part of the conversation when it comes to insurance, to cover the losses that occur,” said host Lisa Miller.  She pointed to the flood protection gap, which is the difference between the insured and the actual value of flood damage.  In Hurricane Harvey, the estimated insured losses were $30 billion but the overall value of damage was nearly three times greater, at an estimated $85 billion.  More than 75% of those flooded properties, some in urban areas, had no flood insurance to pay for their losses.

Part of the problem is adequately communicating risk to property owners.   Miller and her guests discussed the limits of FEMA’s flood insurance rate maps, whose flood zones area binary, showing simply whether a particular property is in or out of a zone. 

“We’ve worked with clients who are in the hundred-year flood zone, so they think they have a one-percent chance every year of being flooded, but the reality is you can be in a much higher-risk zone within that hundred-year flood zone than FEMA dictates from their maps,” Bogdanoff pointed out. 

“We’re trying to have people understand that it’s not if you’re in or out, it’s how far you are from that boundary and there are gradients of risk extending outward from the hundred-year flood plain that people need to be aware of,” Brody said.  

The podcast also discussed solutions.  Brody said his team, with support from FEMA, has developed a new method to predict and map hazards and risk.  Instead of hydrology and hydraulics models, they are using statistics and machine learning techniques to improve flood prediction.  “We may not replace the FEMA floodplain maps but we can augment them and complement them to help resident be more prepared and mitigate impacts,” he said.

Bogdanoff said Broward County, Florida has developed a series of “incremental but fairly significant” changes to improve resiliency.  They include a one-hundred year flood map that guides future development, a Fort Lauderdale seawall ordinance to provide better flood protection, another ordinance requiring flood disclosure, new infrastructure improvements, and efforts to encourage resilient building design.  “Ultimately what you want is insurance to be the last risk transfer.  We want to do as much as we can to protect people so that they don’t have to use insurance,” he said.

Host Miller also noted FEMA’s planned rollout this fall of its Building Resilient Infrastructure and Communities (BRIC) program.   BRIC focuses on pre-disaster mitigation by helping local and state governments fund projects that will reduce risk from natural hazards and disasters, such as flooding.  It replaces the existing Pre-Disaster Mitigation program.  Under BRIC, FEMA will set aside 6% of estimated disaster expenses for each major disaster to fund a mitigation grant program.  With demand expected to exceed the program’s resources, both Brody and Bogdanoff favor focusing on projects of regional importance to maximize the federal funding.

“Water doesn’t care about political boundaries,” said Bogdanoff.  “If you build resiliently in one community, build higher in one community, you could end up hurting another community.”  He pointed to the Central and South Florida Flood Control System with its thousands of miles of canals extending from Lake Okeechobee as an example of a regional solution providing flood control, water supply, and salt water intrusion protection for multiple counties. 

Brody agreed.  “If we don’t think regionally, we’re going to come up with the wrong answer.”  He said Hurricane Harvey was a “wake-up call” for Texas.  The Texas Water Development Board now has a new program that divides the state by water sheds and is creating collaborative plans to deal with unintended consequences of upstream development on downstream communities.  “Over the long-term, there’s going to be less need for federal funding and outside support, because these communities will be more resilient in the first place,” Brody said.    

Host Miller reminded listeners that flooding is the most frequent disaster, the most expensive, and can leave lasting economic devastation to communities and to those who cannot afford to repair or replace their buildings without insurance.  “If you don’t have flood insurance, your possessions and life savings are at risk.  And further, we’re on the hook as taxpayers having to subsidize those neighbors without flood coverage.  As our guests on today’s program have said, the water doesn’t understand a line on a map.  Just because it says you’re not in a high-risk area doesn’t mean that you’re not high-risk,” said Miller.  

Links and Resources Mentioned in this Episode

The Center for Texas Beaches and Shores and Interactive Webtools

The Institute for a Disaster Resilient Texas (Texas A&M University)

Brizaga

The Growing Threat of Urban Flooding: A National Challenge 2018  (University of Maryland and Texas A&M University)

Lower-Risk Properties Flooding More (LMA Newsletter of June 8, 2020) 

Flood Season Is Coming. Homeowners in These Cities Need More Insurance (ValuePenguin, May 18, 2020)

Building Resilient Infrastructure and Communities (BRIC) program (FEMA)

Lisa Miller & Associates Flood Insurance & Resiliency webpage (resources for private flood insurance)

www.floodsmart.gov (The 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 7/23/2020. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2020 Lisa Miller & Associates, All Rights Reserved

The invisible coronavirus' crushing impact is being felt by businesses small and large – and on the insurance companies that insure those businesses.  But for those organizations with business interruption policies, do they have a valid insurance claim because the government shut them down and/or their business was "interrupted"?  There’s a lot of disagreement and finger-pointing and now Congress and individual states are poised to get involved in what may be a multi-billion dollar solution.

Host Lisa Miller, a former deputy insurance commissioner, talks with insurance attorney and consultant John Burkholder and Kevin Miller, a seasoned independent property and casualty insurance adjuster, for answers and advice.

Show Notes

Insurance claims being filed on Business Interruption (BI) policies generally are focusing on two policy conditions: physical damage and/or civil authority.  A typical BI policy requires direct physical damage to a covered property by a covered cause, except as excluded.  About 90% of BI policies in the U.S. are reportedly on Insurance Service Office policy forms that specifically exclude viruses.   For the remaining policies, it’s also problematic.

“In this case (with the coronavirus), we’re not really having something like a direct cause of loss, like a fire.  It’s really unique, in that the allegations being made across the country are that it’s because we have a virus in the air,” said John Burkholder, a consultant with Municipal Partners, a firm specializing in risk management for local governments. 

Other insurance claims are being filed based on the civil authority clause in many policies, where a government authority has ordered a business to be closed. 

“But in the traditional sense, the civil authority closing someone down has a limiting factor in almost all the policies.  Typically, you get up to three weeks and it’s where you cannot enter the property.  Here in most cases, you can enter the property,” said Burkholder, who is also an insurance attorney.  “The plaintiff’s bar, the claimants, are saying ‘Well we can’t enter because the civil authority says that there’re dangerous conditions in the area and because of the latency of this virus, we can’t get into our property and therefore it triggers business interruption income coverage.”

In the meantime, insurance carriers are noting an increase in BI claims filings and investigating individual claims.  “That is part of the process of adjusting the claim,” said Kevin Miller, a Sarasota, Florida-based claims adjuster with Velocity Claims Administration, an independent adjusting firm.  “It’s about getting recorded statements from the policyholder, gathering documents, collecting information, and sending out reservation of rights letters.  Remember, you have to be concerned about avoiding unfair claims practices or bad faith.”

Federal lawmakers and an increasing number of states are trying to legislate forced coverage, whether it’s in the policy or not.  The Business Interruption Insurance Coverage Act of 2020 in the U.S. House would make coverage available for BI losses “due to viral pandemics, forced closures of businesses, mandatory evacuations, and public safety power shut-offs,” per the draft bill.  And it voids any exclusion currently in place in an insurance policy.  At least eight states have their own bills – Florida is not one of them.

“Business owners are suffering horribly,” said podcast host Lisa Miller, an insurance industry consultant.  “They are having difficulty accessing federal bailout funds in some cases, they’ve lost employees, and others are trying to get unemployment.  Many of these small businesses are looking for relief from the federal government and they were hopeful, as I’ve spoken to many small business owners, that their insurance companies would ‘be there for them’ as they put it.  There are things Congress can do to help ‘be there for them’ and help insurance companies ‘be there for them,’ too.”

Restaurants have been among the most vocal groups.  “They’ll never be able to fully recover because the meal you didn’t have yesterday cannot be replaced by the meal you’re going to have tomorrow,” said Burkholder. 

The podcast also discusses the other approach being contemplated in Congress, the proposed Pandemic Risk Insurance Act (PRIA).  It would “create a reinsurance program similar to TRIA for pandemics, by capping the total insurance losses that insurance companies would face,” according to the draft, thereby helping insurance carriers pay the claims.  But will these programs be enough?

“The short answer is no,” said Kevin Miller, who noted that PRIA, as currently drafted, would apply only to future pandemics, not the current crisis.  “The insurance industry is the best place to put money into people’s hands and from that, they can be reimbursed by the federal government.  This will offset any litigation and prevent the litigation, I feel, from happening, which we all know has already started happening.  We see the commercials and see the carriers being served already.” 

The podcast discusses how insurance companies are trying to get cases fully vetted, while the plaintiff bar representing claimants is seeking declaration actions by courts to expedite litigation.  But these are individual policies usually handled on an individual basis, and governed by individual state insurance laws.

“Those policies that didn’t exclude (viruses) should be paid and they should be paid promptly,” said Burkholder, who is a former Kentucky deputy insurance commissioner and a certified insurance examiner.  But beyond those policies, “it’s a huge, huge exposure and I don’t think it was priced or anticipated or included in what insurance was going to do.  We have to come up with a solution that doesn’t kill the golden goose.  We need insurance now, but we also need to make sure that whatever we do, that we’ll have insurance next year as well,” Burkholder said.

“What we can do on the insurance side in my opinion, and this may be counterintuitive, is hope for more claims, even if they’re being denied,” said adjuster Miller, who has 30 years of experience in claims disputes.  “Because the more claims that carriers are getting on the aggregate, we can take that back to our congressional representatives and say ‘Look, this is how big this is getting.  Your PRIA Act is not going to take care of it, because that’s for future events.’  We need to do something now because the insurance industry will be turned on its heels should these BI claims be required to be paid.”

The guests offered advice to insurance companies and to policyholders, including other federal programs.  For her podcast listeners, host Lisa Miller had this advice.  “We have to confront this new reality that the virus is not going away tomorrow.  It is just so uncertain and uncertainty in the insurance industry or in the business sector is not a good thing.  To our listeners, I hope that each of you can make peace with this unexpected uncertainty and that we can find a way to help our customers, and help policyholders, do what we can as we move through these very uncertain times,” Miller said.

Links and Resources Mentioned in this Episode

The Workplace Recovery Act: A Public-Private Partnership Solution White Paper (Texas Public Policy Foundation)

Business and Employee Continuity and Recovery Act

The Business Interruption Insurance Coverage Act of 2020 (U.S. House of Representatives)

Pandemic Risk Insurance Act (PRIA) (U.S. House of Representatives)

Big Onion v. Society Insurance Company

Cajun Conti, LLC d/b/a Oceana Grill v. Certain Underwriters at Lloyd’s London et al.

New York City Emergency Executive Order No. 100 (City of New York, NY)

Coronavirus & the Florida Market (Lisa Miller & Associates)

Florida Insurance Informational Memorandums (Florida Office of Insurance Regulation, March 2020 ongoing)

FloridaDisaster.BIZ (Resources for the Small Business Emergency Bridge Loan Program and other Florida assistance)

Coronavirus Resources & Insurance Consumer Information (Florida Department of Financial Services)

Estimates for COVID-19 (AIR Worldwide)

NAIC Coronavirus Resource Center (National Association of Insurance Commissioners)

Coronavirus Rumor Control (FEMA)

** 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 5/1/2020. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2020 Lisa Miller & Associates, All Rights Reserved

In the six months since legislative reform, insurance companies report the number of Assignment of Benefit (AOB) claims in Florida are way down as are related lawsuits.  But they’re also seeing new strategies by contractors and their attorneys to work around the reforms.

On the other side, contractors complain that without the “old AOB,” they’re getting shortchanged by insurance companies and homeowners for work they’ve already performed.

Host Lisa Miller, a former deputy insurance commissioner, talks with Tanaz Salehi, an insurance defense attorney, and Mohammad Sherif, a plaintiff attorney, on the reform’s impact, its unintended consequences, and the potential solutions to ongoing claims problems.

Show Notes

An Assignment of Benefits (AOB) contract is a legal agreement between the contractor and homeowner, which allows the contractor to receive payments directly from insurance companies for work they perform at a policyholder’s home, without the homeowner having to pay money upfront.  In past years, unscrupulous vendors and their lawyers have taken advantage of the AOB to take control of a homeowner’s policy, then inflate the scope and cost of claims and sue the insurance company if it refuses to pay the inflated bills.  The Florida Legislature passed AOB reform in 2019 establishing tighter rules to stem the abuse and fraud, while putting more responsibilities on insurance companies, too.

The reform, in part, revised Florida’s one-way attorney fee system, to make fee awards fairer.  “Insurance carriers have been filing motions to strike plaintiff attorney fees under the new law and have been prevailing in different counties across Florida,” said Salehi, managing shareholder with the Salehi Boyer Lavigne Lombana law firm in Miami.  She represents insurance companies.

Both Salehi and Sherif agree that while the reform is working, as evidenced by the reduction in lawsuits, there are now issues with loopholes being exploited and unintended consequences for both sides.

Host Miller noted reports of various workarounds to the reform law.  These include plaintiff attorneys making bulk deals with contractors to recommend the homeowner hire the attorney upfront to represent them at First Notice of Loss, to avoid using an AOB.  Also, there are reports of some restoration contractors splitting out “Emergency Services” they provide over several days, in order to get around the $3, 000 statutory limitation.

“That ($3,000 cap) applies to emergency mitigation services,” said Salehi.  “That leaves a huge void for the roofing contractors that are now charging maybe ten to twenty times what it actually costs to replace the roof and submitting permits to the county for repairs for a fraction of what they’re charging the insurance companies.”

Sherif said there are bad actors on both sides and lots of misinformation and confusion in the industry about what the reform did and the expectations going forward.  “There are front end desk adjusters at insurance companies who may be overzealous in applying the new law to hold vendors accountable,” said Sherif, a partner with Mubarak & Sherif, a Tampa law firm that focuses predominantly on helping homeowners in the Florida Panhandle with Hurricane Michael claims. 

Both Sherif and Salehi agree the reform has had unintended consequences, too, especially for contractors who want to work but want to be guaranteed payment.

“What I’m seeing is a lot of vendors who don’t want to use assignments anymore but who are having difficulty getting paid.  And the expectation has always been that ‘if I can’t go against the insurance company directly, what recourse am I left with as a contractor?’” said Sherif.

Salehi, who also advises contractors, said there are some cases where a contractor will submit an estimate, the insurance company will approve and cut a check to the policyholder, who then doesn’t pay the contractor for the work already performed.    “The carriers were willing to work with him, but it was the insureds who were not turning over the check.  There were other instances where the carriers were not putting his company’s name on the check,” said Salehi, who is also an IICRC-certified water damage technician.

The podcast discusses the AOB alternatives available to help prevent and resolve claims disputes among contractors, policyholders, and insurance companies.  They include the use of a “Direction to Pay” that among other things, allows the insurance company to put the contractor’s name on the claim payment check.  Another form is the “Letter of Protection” that serves as a lien on any monetary proceeds, including but not limited to insurance payouts related to repair work performed.  (See “Links and Resources Mentioned in This Episode” below for examples.)

But even these AOB alternatives are raising questions.  “The more sophisticated vendors are now just removing the assignment language altogether from their contract and just leaving in there the provision that is a direction to pay,” said Sherif.  “But what carriers are seeing is sometimes an additional power of attorney and if they get both of them together, the issue, at least from my perspective, is how is that not an assignment?”

Host Miller, a former Florida deputy insurance commissioner, noted the heightened hassle is discouraging contractors from doing work in areas where they are most desperately needed, such as the Florida Panhandle after Hurricane Michael.   She asked if regulators such as the Florida Department of Financial Services, Office of Insurance Regulation, Department of Business and Professional Regulation, and the Florida Bar are doing enough to police the marketplace.

“The legislative fix is always a possibility, but it’s never a way to deal with the problems in the law as they currently exist,” answered Sherif, a former regulatory and senior litigation attorney for the Florida Office of Insurance Regulation.   “That’s where I think the regulator could have had more involvement and more guidance.”  He and Salehi noted that follow-up enforcement of bad actors and more publicity around such cases would improve accountability.

“We urge all stakeholders here – whether you are an insurance company claims handler, defense or plaintiff attorney, contractor, public adjuster, or regulator – to show personal leadership and openly communicate with one another about issues and offer constructive solutions that are fair to all parties concerned,” concluded host Miller.  “Give me a call and let’s work together on this!”

Links and Resources Mentioned in this Episode

Assignment of Benefits (AOB) (Lisa Miller & Associates)

Key Provisions of 2019 Assignment of Benefits Reform (Lisa Miller & Associates)

www.salehiboyer.com

www.mubaraksherif.com

Excerpted “Direction to Pay” and “Letter of Protection”

Court Rulings Differ: AOB Attorney Fee Fight Continues:

Checklist of Requirements for AOB Agreements2020 Bill Watch (Lisa Miller & Associates)

AOB Under Attack (Johnson Strategies Blog, January 9, 2020)

Can a Contractor Negotiate with an Insurer? (by Mohammad Sherif, Esq. in LMA Newsletter of July 1, 2019)

Citizens, OIR Announcing AOB Reform-Related Changes (LMA Newsletter of June 17, 2019)

How Florida’s New AOB Law May be Exploited (LMA Newsletter of May 20, 2019)

New AOB Law: Putting Consumers on Offense (Florida Insurance Roundup podcast, May 13, 2019

Assignment of Benefits Resources & Consumer Alerts (Florida Office of Insurance Regulation)

** 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 1/8/2020. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2020 Lisa Miller & Associates, All Rights Reserved