The Florida Insurance Roundup from Lisa Miller & Associates®

The Florida Legislature begins its 2020 session this Tuesday, January 14 amid growing concern about the state’s property insurance market.  Two carriers have failed in recent months.  Others are seeking rate increases of up to 30% to stem rising reinsurance and litigation costs.  Future financial ratings downgrades on some Florida domestic insurance companies are also likely.

There are other insurance issues facing lawmakers as well, including automobile Assignment of Benefits (AOB) reform, bad faith, ongoing Hurricane Michael recovery, and a proposed change to the state building code.  There are also big ticket issues, such as education, the environment, and transportation, as part of a proposed $91.4 billion budget.

Host Lisa Miller, a former deputy insurance commissioner, talks with Jim Saunders, Executive Editor of the News Service of Florida for a preview on what to expect this session.

Show Notes

Property Insurance Market – Saunders and Miller discussed the significance of rising reinsurance costs on the homeowners insurance market.  One domestic carrier, Edison Insurance of Boca Raton, is seeking a 21.8% statewide average rate increase in its homeowners multi-peril line.  Growing operating losses by some companies prompted state Senator Jeff Brandes (R-Pinellas) to describe Florida’s property insurance market as “rapidly declining” and as the most underreported issue going into the 2020 state legislative session.

“This is something we really need to get up to speed on because it’s not just a business issue, it affects me, you, and everybody else who owns a home if nothing else,” Saunders told Miller.  He noted there are political ramifications of property insurance that are “far different” in South Florida than they are in inland and northern Florida.

Automobile AOB Reform - The ongoing effort to reform growing AOB abuse in automobile windshield repair and replacements got off to a shaky start in the committee weeks leading to the session.

“I tend to think that it’s a very live issue still,” said Saunders, despite the Senate Banking and Insurance Committee voting it down in December 2019.  “It’s not going to be a death-knell” to the reform efforts this session he said, noting the House has been very aggressive with AOB issues in the past. 

Host Miller said it’s an issue needing to be addressed.  She shared a recent automobile AOB case involving a $64 windshield replacement.  The insurance company paid the standard $60 fee, but the $4 difference is now the subject of a lawsuit.  “It’s insane, make no mistake,” Miller said.

Litigation & Bad Faith Reform – Saunders and Miller discussed the potential of Bad Faith law reform passing this session and the Governor’s reference to “factories of lawsuits” which are impeding the state’s economic development and prosperity. 

“I didn’t get the sense Senate President Bill Galvano has much appetite at all for tort issues during a recent interview,” said Saunders, but “I don’t doubt the Governor and Florida House would be amenable to it.”

Miller and Saunders also discussed the changing composition of the Florida Supreme Court in the past year and the expectation it will produce more favorable rulings for business and insurance interests.  “The old court was not friendly to insurance companies, as a diplomatic way to put it,” said Saunders.

Miller brought up another property insurance company with a recent 28% rate increase request that attributed about 60% of that rate hike to growing legal expenses and fees.

“One of the driving forces of those fees is the fee multiplier, approved by the previous state Supreme Court in 2017.  You see a judgment for $10,000 but you’ll see a fee award for $150,000 to $200,000, sometimes $300,000,” Miller said.  She predicted double-digit rate requests will continue and eventually reach the point where the legislature will respond.

Hurricane Michael - The surprising amount of damage from the October 2018 Category 5 hurricane that still exist today in Panama City and especially in outlying rural areas was also discussed on the podcast.  There are bills filed this session seeking additional financial relief to communities to help rebuild damaged infrastructure, including schools.

“I’m not sure how much traction any of the Michael issues will get this year because there’s a lot of demands on the state budget this year.  And if you listen to some of the folks out in the Panhandle, they’re kind of worried that they’ve just been forgotten,” said Saunders, noting it was despite efforts by Panhandle legislators to keep up the pressure for more state aid.

Building Code - There’s also a bill that would mandate the Florida Building Code require that the entire envelope of certain buildings being constructed or rebuilt be impact resistant and constructed with high wind-resistant construction materials, together with meeting testing criteria.

The differing wind standards of the Panhandle versus other areas of the state has been under debate again since Hurricane Michael. (See Episode 21 – Is Florida’s Building Code Protecting All of Us?  and Episode 22 – Why the Panhandle Wasn’t Hurricane Strong for Michael).  Saunders and Miller discussed whether the legislature has the appetite to change the building code this session.

“Although more recent building using current codes survived Michael’s winds, older buildings built under older code often didn’t,” said Saunders, who called the state building code “a complicated animal” to change.

“It’s politically difficult, but it’s also technically very difficult, so whether that’s going to become a priority for legislative leadership to really dig into this year, I’m not sure,” he said.

Host Miller agreed.  “I think they have so many competing interests and they just think the building commission is going to take care of it or the builders are going to take care of it, and so they can just move on to something else,” she said.

Saunders and Miller also discussed the big ticket issues facing the legislature this session.  They include the Governor’s requested $900 million in spending for teacher raises and bonuses, $635 million for Everglades’ restoration and other water resources, increases in transportation and prison spending, criminal justice reform, and strategic tax cuts.

Links and Resources Mentioned in this Episode

News Service of Florida

2020 Bill Watch (Lisa Miller & Associates)

Lisa Miller & Associates Assignment of Benefits (AOB) webpage

Home insurer seeks $30 a month average statewide price hike (Sun-Sentinel, December 30, 2019)

Florida Homeowners Insurance Market Update (Federal Association for Insurance Reform, January 6, 2020)

More Than a Dozen Florida Insurers Facing Ratings Downgrades (Insurance Journal, January 9, 2020)

Viewer Discretion Advised (LMA Newsletter of January 6, 2020)

Three New Justices Seated on Florida Supreme Court (LMA Newsletter of February 4, 2019)

** 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

Two hundred Mexico Beach, Florida homes sitting beach block from the Gulf of Mexico, yet labeled X-Zone, FEMA’s lowest risk for flooding, were nearly wiped out by 2018’s Hurricane Michael.  Many of those residents had no flood insurance, complicating which damage from the Category 5 storm may or may not be covered by their homeowners insurance.

In fact, 80% of flood losses in the Florida Panhandle were uninsured.  Yet, there’s just a trickle of greater demand for flood insurance post-storm.   Mexico Beach is fighting back with a tough new ordinance to counter the complacency created in residents by FEMA’s inaccurate and outdated maps. 

Host Lisa Miller, a former deputy insurance commissioner, talks with two residents and an insurance agent about the impact of the new ordinance and how agents could be doing more to promote increasingly affordable flood coverage to their clients.

Show Notes

FEMA flood maps for Mexico Beach were last revised in 2009 but were based on a maximum storm surge of 10 feet.  Hurricane Michael produced a 15.5 foot storm surge plus 5-foot waves topping the surge, when it made landfall there on October 10, 2018.  The maps are used to identify which properties must have flood insurance to meet federal mortgage requirements and to set rates for those policies.

Only one-third of Bay County, home to Mexico Beach and some of the worst damage in the 13-county impact zone, had National Flood Insurance Program (NFIP) policies.   Dina Bautista didn’t have flood insurance, but was one of the lucky ones.  Her Mexico Beach home was built on 12-foot pilings, the only one in her neighborhood.  “Every neighbor had water up to their roof,” she said.

Yet despite the devastation, few Bay County residents have learned the lesson from Michael.  “I get the speech of ‘I've been in this house fifty years and never flooded’ quite a bit,” said Trey Hutt, owner of Hutt Insurance Agency in nearby Panama City.  “What these mostly elderly people don't get is that in those intervening 50 years, we've poured a lot of asphalt and concrete all around them, and that water is going somewhere.  And every neighbor is now building higher than that original home, and water always runs downhill.”

Melissa Poage became concerned walking around her Valrico, Florida neighborhood after a recent hard rainstorm and noticing a waterline almost up to front doorsteps.  She said her insurance agent had never discussed purchasing flood insurance with her.  Her entire neighborhood is in an X-Zone, defined as being at risk of a 1 in 500 year flood event, which equates to a 0.2% chance every year of being flooded.  “So I bought flood insurance and it was very reasonably priced, it’s not expensive,” she said. 

Hutt, a 25 year insurance veteran, said people don’t understand the true meaning of an X-Zone.

“In our agency over the years, we’ve paid an awful lot more flood claims in X-Zones than we have in other zones.  An X-Zone does not equal ‘we will not flood’, it just means it’s less likely to flood than a Special Flood Hazard Area,” he said.

Since Hurricane Opal in 1995, Hutt said his agency has aggressively offered flood policies with homeowners policies (which don’t cover most flood damage).   Those customers who choose not to purchase it have to sign a form acknowledging that.  “A flood rejection form has become a part of a lot of agencies’ tool kits,” he said.

Both Hutt and Poage agree that it should be mandatory for insurance agents to “make the call” and offer customers flood insurance.  “I’m in favor of putting pressure on fellow agents to not only recommend flood insurance but we need to be able to prove that we’ve recommended it to a client, otherwise we might face legal action after a big storm such as Michael,” Hutt said.

Bautista is an engineer with Dewberry Engineering and along with being a resident herself, serves as the consulting engineer for the city of Mexico Beach.  Within weeks after surveying Michael’s devastation from both the 160 mph winds and 20.6 foot peak water level, city officials adopted a tough new floodplain ordinance that goes above and beyond FEMA flood maps. The ordinance affects rebuilding of homes that suffered substantial damage (greater than 50% structural damage) from Michael and all new construction:  

“We’re trying to pick up the insurance gap and protect the residents,” Bautista explained.  “Most of them may not buy or be required to buy flood insurance in the zone they’re in, but through our ordinance and the actual construction, we’re trying to minimize their risk for future damage.”

While such building code changes are not occurring in the rest of Bay County, Hutt said more private flood insurance companies are selling coverage alongside or in competition with the NFIP.  Florida’s private market has been steadily growing with the number of companies more than doubling in the past two years.

“We’re finding these products are based on better data.  They’re often less expensive and they are almost always better coverage,” Hutt said.  “The long-term solution is to get flood insurance priced more accurately.   Since it’s been driven by political forces more than profitability, NFIP rates are artificially suppressed, and what that does is just encourage people to borrow money and build homes where they frankly might not or should be doing,” he said.

The podcast discussion also included the potential for Increased Cost of Compliance (ICC) insurance coverage or FEMA hazard mitigation grants to help homeowners pay for construction required in tougher building ordinances, such as those in Mexico Beach.  Private insurance companies offering both homeowners, wind, and flood coverage on the same policy would also simplify the process.

Host Lisa Miller, a former deputy insurance commissioner, commended Mexico Beach officials for their leadership in building greater resiliency into the city’s recovery.  “You’re completely revolutionizing the new construction and rebuilding of the area in an attempt to withstand Mother Nature the next time.  That’s very smart and helpful,” Miller said.

Links and Resources Mentioned in this Episode

Definitions of FEMA Flood Zone Designations 

Majority of Michael Flood Victims Uninsured (LMA Newsletter of July 29, 2019)

www.dewberry.com

www.huttinsurance.com

Private Flood Insurance & Resilience (from Lisa Miller & Associates)

Flood Follies (The Florida Insurance Roundup podcast, episode 16, December 16, 2018)

Coastal communities should exercise caution in using FEMA Flood Maps as the primary indicator of coastal risk (by Dr. Rob Young, Director, Program for the Study of Developed Shorelines at Western Carolina University, and guest on the Flood Follies podcast)

** 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 10/29/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

Recent disasters and the growing number of open insurance claims are creating renewed interest in an alternative to costly litigation in resolving claims disputes: mediation.

While claim frequency is down, claim cost is way up – more than five times what it was 20 years ago.  Unnecessary and abusive litigation, including Assignment of Benefits (AOB) contracts, has contributed to growing claim cost in Florida.

Host Lisa Miller, a former deputy insurance commissioner, sat down with Bruce Blitman, a Certified Mediator, Arbitrator, and Umpire, to learn what role mediation can play in successfully resolving these claims.

Show Notes

Bruce Blitman was one of the first Florida Supreme Court certified circuit-civil mediators and has practiced since 1989.  He was an associate with several law firms prior to becoming a mediator. 

“What really makes this process work is that you have all of the decision-makers present at the same time, at the same place, in the same room, much earlier on in the process before all of the time and the money and aggravation have been invested in the case.  So there’s a tremendous opportunity to resolve cases when you’re getting to them earlier on in the process,” said Blitman on the podcast.

Mediation in Florida dates back 30 years.  Initial skepticism has given way to acceptance over the years, as lawyers on both sides have gotten more practiced in the mediation process, according to Blitman.

“Lawyers found they were able to either put more money into their clients’ pockets at an earlier stage of the process or if they were insurance carrier representatives, they could save money by putting that money into the plaintiff's pocket without litigation costs,” Blitman said.  As a result, mediation has become a way to more efficiently move claims and for courts to move dockets.

Host Lisa Miller was an insurance regulator during 1992’s Hurricane Andrew and the eight hurricanes in 2003-2004 that also struck Florida.  She suggested in the podcast that state officials initiate formal mediation centers sooner after major hurricanes strike. 

“After a storm hits, we should consider having immediate mediation on the disputed amount of the claim,” said Miller.

Florida law requires insurance companies to pay the undisputed amount of a claim to the policyholder within 90 days of receiving the claim.   Blitman said he’s a proponent as well of pre-lawsuit mitigation in such claims, a process that worked “very well” through a catastrophe mediation program set-up in Miami-Dade County following Hurricane Andrew.

“There was an enormous amount of claims considered.  Not every case was resolved at mediation, but many of them were,” he shared.  “And by getting through that vast volume, people were able to get on with their lives much more quickly.”  Blitman also noted that many insurance companies became more proactive with mediation going forward.

Miller referenced recent Florida legislative committee testimony that almost 40-cents of every dollar involved in a litigated paid claim goes to the plaintiff’s lawyer, not including court fees and the cost of defense counsel.  Blitman said such plaintiff contingency fees are typically only 20% to 25% if the claim doesn’t go to litigation.  Mediators, he said, are paid hourly, ranging from $150-700 per hour based on the complexity of the case.

“If you can resolve a case within five hours of mediation, with both parties splitting the mediator’s fee, those fees are relatively small in comparison to what it would cost to litigate that case endlessly,” Blitman said.  He noted that the Florida Department of Financial Services has a roster of mediators available to help resolve different kinds of insurance claims disputes.

The podcast also addressed Florida House Bill 337 which was signed into law last spring and becomes effective on January 1, 2020.  By raising the dollar threshold of disputes (from $15,000 to $30,000), it will shift court cases that are now heard in circuit court to be heard instead in county court.  Miller and Blitman discussed the impact of having a lot more insurance disputes going into civil court, which generally have more limited resources than circuit courts.  In fact, 31 of Florida’s 67 counties only have one county court judge.  Many of those counties are in the Florida Panhandle and there is concern of logjams created by the 150,000 Hurricane Michael claims. 

“I think it’s in the best interest of all consumers that we do everything we can to keep claims out of the court system,” said host Miller.  “Mediation, with the right attitude and skill set going into it by all parties, can be a very useful approach to create a ‘win-win’ by all parties to an insurance claims dispute.”

Links and Resources Mentioned in This Episode

www.BruceBlitmanEsquire.com

Mediation and Neutral Evaluation Assistance (Florida Department of Financial Services Division of Consumer Services)

Ten Tips for Getting the Most Out of Your Mediation Process (by Bruce Blitman, Esq.)

Court Jurisdictional Limits (Florida HB 337, now law)

Insurance Research Council Report Finds Rapid Increase in Cost of Homeowners Insurance Claims, Despite a Drop in Claim Frequency (The Institutes, September 30, 2019)

Assignment of Benefits (AOB) (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 10/29/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

Not only was the Florida Building Code not fully effective in buildings damaged by Hurricane Michael, but neither were mitigation efforts designed to fortify our homes and businesses, according to a new FEMA report. 

A team of building experts conducted an assessment of 350 structures affected by Michael’s Category 5 winds that reached upwards of 160 mph.  They paint a dismal result.  Buildings with wind retrofits, such as stronger windows or doors, suffered significant damage, even when those windows and doors held up. 

The FEMA report notes people were injured as a result.  Expensive mitigation upgrades were for nothing.  And entire buildings, including multi-million dollar local government facilities, now have to be rebuilt from scratch.

What happened?  Isn’t mitigation supposed to be a smart investment?  Host Lisa Miller, a former deputy insurance commissioner, asks her guests, including a former state legislator who had a hand in creating the Florida Building Code and the Panhandle’s wind standards, and two noted structural engineers.

Show Notes

This podcast is a follow-up in part, to the August 31, 2019 podcast Is Florida’s Building Code Protecting All of Us?  A University of Florida engineering school report found that the Florida Building Code wasn’t tough enough to withstand Michael’s Category 5 winds.  Not even in some newer structures, although they did fare better than those built before the 2002 code was enacted. But almost two-thirds of those buildings built after the code had some roof cover loss, according to the report.

Although there is a single state building code, it has different wind standards depending on where you live.  The eastern Panhandle, where Hurricane Michael struck, has some of the weakest wind standards in the state, at 130 mph on the coast and 120 mph slightly inland.  Former state Senator Charlie Clary was involved in the creation of those wind standards in 2002. 

“We tried to come up with some ways of helping, as we made the codes tougher and more uniform throughout the state, but still be somewhat affordable as they constructed these homes, because we were in a very intense growth mode at that time.  There had never been a Category 4 or greater hurricane to impact NW Florida at that time,” said Clary, who is founding principal with DAG Architects in Destin, Florida.  “We have to just learn lessons from Michael and make the changes necessary.”

In Bay County, ground-zero for Michael, officials estimate nearly 75% of its 68,000 households were impacted. 

The UF report noted roof and siding loss was common in both pre-code and post-code construction. Dr. Arn Womble, Research Engineer with the Insurance Institute for Business & Home Safety, said roofing products themselves need improvement and that aging effects seem to play a big role in how the roofs perform.  

“We are frustrated as well as I think everybody in the industry in that the standard test for shingles – and we run them in our lab and they pass a certain test and then when they get subjected to reality out there in the field, they don’t perform like the laboratory test indicated that they might, so we’re realizing there’s a big disconnect there,” said Dr. Womble, who led a field survey team after Michael struck.  He added that siding products haven’t gotten as much attention as roofing, but need to going forward.

The conversation moved to the newest set of post-Michael reports from FEMA.  Its recovery advisory Successfully Retrofitting Buildings for Wind Resistance, resulted from FEMA’s Mitigation Assessment Team survey of Hurricane Michael damage.  It found that buildings and homes with wind retrofits suffered significant damage—even in cases when the retrofit itself performed well—because other building vulnerabilities were not addressed when the retrofit was installed.  So “the whole retrofit project may be ineffective.” 

“It is true that when you mitigate to try to gain more resilience, your building is only as strong as its remaining weakest link,” said Dr. Karthik Ramanathan, Assistant Vice President & Principal Engineer for
AIR Worldwide, a global catastrophe modeling firm.  He, too, has found disconnects between what mitigation can achieve versus what’s actually happening in the field.  As an example, his field work has noted “striking dissimilarity” in metal roofs in areas ravaged by Hurricanes Michael and Irma. 

“Most agree if built and installed properly, metal roofs are a great mitigation investment against wind damage.  But time and again, you saw metal roofs installed on pre-existing shingle roofs.  When you’re not attaching a metal roof to a substrate that it ought to be attached to, you cannot expect a metal roof to perform in the way it is supposed to,” said Dr. Ramanathan.  He added that there seems to be a lack of knowledge and a need for education in proper installation.

The FEMA assessment also found that “even modest damage to the building envelope or rooftop equipment was observed to lead to costly water damage, which can take months to repair and cause disruption of building operations.”   A companion assessment, Best Practices for Minimizing Wind and Water Infiltration Damage has some recommendations on building materials to use to provide extra layers of protection.

Based on the University of Florida report, the Florida Building Commission has taken several steps with the support of the homebuilders to strengthen the next 7th Edition of the Florida Building Code to be published in December 2020.  It includes adoption of ASCE 7-16, the newest Minimum Design Loads and Associated Criteria.  While there’s no reported plans to change the various wind standards around Florida, the method for determining the design pressures on roofs for buildings less than 60 feet in height has changed.  There are expected to be requirements for secondary roof underlayment to prevent water intrusion in the event the roof covering is blown off.

New sections are also being added to the code detailing requirements for the attachment of vinyl, fiber-cement, and hardboard.  Wood structural panels and soffit panels are also being added to the code.  All these moves were applauded by the podcast’s guests. 

“I’d like to see the building code and material science move down the building envelope now from the roof,” said Dr. Ramanathan, who focuses on the structural impacts of storms in his work.  “I think the research now needs to focus more heavily on how you build soffits that can withstand the impact of wind-driven rain so that you can keep the home’s envelope watertight.  How do you look at the performance of wall siding, be it vinyl or brick, how can you make these better?”  He noted that water damage is more expensive to repair than wind damage.

All three guests agreed that code enforcement is crucial when building resilient homes and businesses.  In a recent guest column in the Insurance Journal, two Munich Re senior executives cite “the need to enhance and consistently enforce building codes” as one of the two big challenges facing reinsurers with Florida interests.

“I think you’re naturally going to have different levels of enforcement just because of the different sorts of budgets throughout the state and the ability to cover what’s necessary,” said Dr. Womble.  Given the code is key to protecting consumers, having uniform code enforcement is important, he added.

With Hurricane Michael recovery still ongoing in the Panhandle, “I think we’re definitely on the right path to building under a tougher code,” said Clary.  “Enforcement is vital and it’s important to have the architect and engineers that work for the client involved to make sure the structures are built according to plans and specifications.”

Dr. Ramanathan said he sees individual building departments within Florida have gaps in how they adopt and enforce certain practices, including verifying building plans and conducting on-site inspections.  “I think the Panhandle and other parts of Florida need to move to the high-velocity zone (170 mph wind standards), which is essentially Miami-Dade and Broward, not just in terms of building standards but also enforcement standards,” said Dr. Ramanathan.  “Michael did pretty much just what Hurricane Andrew did, so the time is never more opportune than what it is now to reflect that learning, in terms of building code enforcement in the Panhandle.”

FEMA will use its two assessments to develop formal conclusions and recommendations to improve resilience of buildings and their utility systems in Florida.  A formal report is expected by December 2019.

Host Lisa Miller, a former deputy insurance commissioner, noted “there is ongoing concern that even for those with insurance checks, some Panhandle residents may not be able to afford to rebuild their homes.  Is it time for these tougher standards, materials, and practices we’ve discussed today to be enacted across the Florida Panhandle – and across Florida for that matter?”

Links and Resources Mentioned in This Episode

DAG Architects

Insurance Institute on Business & Home Safety (IBHS)

www.DisasterSafety.org  (IBHS guidance for home and business owners)

AIR-Worldwide.com

Successfully Retrofitting Buildings for Wind Resistance (FEMA Recovery Advisory 1, June 2019)

Best Practices for Minimizing Wind and Water Infiltration Damage (FEMA Recovery Advisory 2, June 2019)

Is Florida’s Building Code Protecting All of Us? (The Florida Insurance Roundup podcast of 8/31/19)

Reports referenced from our previous podcast “Is Florida’s Building Code Protecting All of Us?”:

Florida Building Commission

Florida Building Commission Wind Maps

Pitfalls in Mitigating Risk (LMA Newsletter of 8-26-19)

Cities Where Hurricanes Would Cause the Most Damage (24/7 Wall Street, July 31, 2019)

** 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 9/10/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

As Hurricane Dorian bears down on Florida, two reports that examined damage from last fall’s Hurricane Michael have mixed reviews on building construction in Florida’s Panhandle.  While newer homes built after the 2002 Florida Building Code was enacted suffered less structural damage than older homes, the roof cover loss and siding damage was just as common in the newer structures.  In fact, almost two-thirds of those newer buildings built after the code went into effect had some roof loss from Michael’s high winds.

While Florida is known for its tough building code, few know that the maximum wind standards of materials and methods in the code vary depending on which part of the state you live.  Miami-Dade County, where Hurricane Andrew struck in 1992, has the toughest wind standards.  But the Florida Panhandle, where Hurricane Michael’s Cat 5 winds struck in 2018, has among the weakest wind standards.  Why?  Just how vulnerable are homes throughout Florida?  And what can be done to strengthen them?

Host Lisa Miller, a former deputy insurance commissioner asks noted television meteorologist and hurricane expert Bryan Norcross and Cindy Shaw, a forensic engineer with Haag Engineering Services.

Show Notes

Hurricane Michael struck the Panhandle as a Category 5 storm, the fourth in U.S. history, with maximum sustained winds of 160 mph and a 15-foot storm surge.  43 people died in the storm and its aftermath.  Total damages are estimated to climb to $25 billion.

A University of Florida Engineering School report prepared for the Florida Building Commission examined both wind and storm surge damages from Hurricane Michael.  It found that roof cover loss was the most common type of structural failure, even with wind exposures below the building code’s threshold. 

“Structural damage was predominantly experienced by older (pre-2002) structures, while newer structures generally experienced no more than roof cover and wall cladding loss.  However, roof cover and wall cladding damage was still commonly observed even in newer structures,” according to the report.  Almost two-thirds of buildings built after the code went into effect had some roof cover loss.

Another report from the Structural Extreme Event Reconnaissance Network had similar findings.

Although Florida is recognized as having the toughest building codes in the nation, they vary by wind standards, depending on the area of Florida.  In the Panhandle, where Michael struck, those wind standards are among the weakest in the state at 130 mph at the coast and 120 mph slightly inland.   In Miami-Dade and Broward Counties, the standards are the strongest at 180 mph at the coast and 170 mph inland.

Cindy Shaw is a Senior Engineer and Southeast Regional Manager for Haag Engineering Services, a global forensic engineering and consulting firm.  In her review of the reports, Shaw said she noted improvement in homes built after the enactment of the 2002 Florida Building Code, but performance varied a lot, even among similar homes.   Homes built above code standards performed best. 

“Finishing materials installations varied within a single residence and that led to wind damage.  Roofing that was to a higher code than a garage door led to vulnerabilities and failures in the overall structure,” said Shaw, a 20 year veteran of structural inspections.

“It was tremendously frustrating to see the damage from Hurricane Michael because we lived this already,” said Bryan Norcross, Hurricane Specialist for WPLG-TV, Local 10 News in Miami.  He is known for his 23-hour on-air marathon during and after Hurricane Andrew struck South Florida.  Andrew was the last Cat-5 storm to hit Florida before Michael.

“Something failed.  The roof might have been good, but the windows or the front door or the garage door wasn’t, and that lead to a cascade of failure once the home’s envelope was breeched.   Our tougher building code in South Florida post-Andrew, ensures the entire house is secure by all its components meeting the same standard,” said Norcross.  “The building code was somewhat intentionally made less strong in the eastern Panhandle than even the western Panhandle for no rational meteorological reason.” 

The problem with the current Florida Building Code and its varying wind standards, said Shaw, is that it doesn’t deal with areas of the state that have had significant hurricanes, whose wind standards don’t match their historical experience.  Shaw said those need further refinement.  She noted that Florida’s code for existing structures, which covers buildings being updated, is a good example of progressively refined codes that work well.

So what would Shaw and Norcross advise the Florida Building Commission on potential changes post-Hurricane Michael?

Shaw, who specializes in examining new building materials and methods in the Florida Building Code in between hurricanes, said the design wind pressures that exist as standards need to be less arbitrary and political and instead correlate to the reality of the coastal regions.  Improved code enforcement is needed, too.   

“It’s not that we expect to have no damage when we have a Category 5 hurricane, but we would like to not have catastrophic damage.  We would like to not have loss of life.  We would like the homes to still be livable.  And with regard to Hurricane Michael and up in the Panhandle, we failed on all three of those fronts,” said Shaw.

Norcross agreed.  “We have this high-velocity wind zone here in Southeast Florida, for no rational reason does it stop at the Broward County lines.  There’s just no meteorological reason why you couldn’t have a Category 5 hurricane strike any part of the state of Florida and have a Category 3 or 4 hurricane go all the way across the state.  You don’t even have to think about it as a meteorologist, you just have to look in the history book to see examples….Ironically, the Panhandle is especially vulnerable to strong hurricanes,” he said.

As for the higher cost of construction that comes with a stronger code, Norcross and Shaw agreed that there are other places in the building where cost savings could be achieved and channeled to build a safer, more durable house.   “It’s just too easy to do it all the way right, than to do it halfway,” said Shaw.

“The real challenge for builders and the real resistance here, is the inspection process,” said Norcross.  “It is a pain in the neck to do anything here in South Florida…the issue is to create an inspection system that is as efficient and simple as it can be.”

Host Lisa Miller, a former Florida deputy insurance commissioner, noted that building better should lead to lower property insurance costs as well.  “Hurricanes and other catastrophes don’t know or care who is insured or not and as we’ve learned, don’t necessarily follow historical patterns – including those on which we base risk.” 

Links and Resources Mentioned in This Episode:

Investigation of buildings damaged by Hurricane Michael  (The University of Florida Engineering School of Sustainable Infrastructure and Environment, prepared for the Florida Building Commission, June 10, 2019)

Hurricane Michael: Field Assessment Team Early Access Reconnaissance Report (from Structural Extreme Event Reconnaissance Network, October 25, 2018)

Pitfalls in Mitigating Risk (LMA Newsletter of 8-26-19)

www.BryanNorcross.com

www.HaagGlobal.com

Florida Building Commission

Cities Where Hurricanes Would Cause the Most Damage (24/7 Wall Street, July 31, 2019)

** 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 8/23/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

The July 4 earthquakes that hit South Central California are a fresh reminder that California's population is the most susceptible in the country to major earthquakes.  So why is it, that earthquake insurance is no longer required as a condition for California mortgages?  Especially, when wind insurance is required throughout the state of Florida and elsewhere to protect against hurricane damage?

While less frequent, earthquakes are unique in that the risk is constant and the potential damage can easily exceed those of hurricanes, wildfires, and flooding combined.  Is it time to readjust our public policies - and our insurance policies - to adequately cover all our 21st century risks?  

Host Lisa Miller, a former deputy insurance commissioner asks John Rollins, Consulting Actuary for Milliman and Jim Wilkinson, Jr., Executive Director of the Central United States Earthquake Consortium (CUSEC).

Show Notes

Losses from the early July earthquakes in and around Ridgecrest, California are estimated to reach $200 million of which insurance companies will likely cover only about a fifth, according to Karen Clark & Company.  Less than 20% of property owners affected by the magnitude 7.1 quake and the 6.4 magnitude foreshock had earthquake insurance.

The event has rekindled discussion on earthquakes in California.  If a similar quake had occurred in a more populated area, the costs could have been much worse.  California homeowners policies don’t cover earthquake damage.  According to global consulting and actuarial firm Milliman, the lack of protection for 90% of the state’s 14 million dwellings poses a risk to the largest assets of many state residents: their homes.

So why is earthquake insurance no longer required as a condition for California mortgages?  GSE’s (Government-Sponsored Enterprises, a type of financial services corporation such as FannieMae and Freddie Mac) servicing guidelines don’t require it, so private lenders who originate and sell mortgages to the GSE’s don’t either.  Contrast this to windstorm insurance, which is required everywhere as a condition for a mortgage, as dictated by the same GSEs.

John Rollins, Consulting Actuary for Milliman, explained that while different regions in the U.S. are predominantly impacted by a single peril, such as California with earthquakes and Florida with hurricanes, Milliman’s research indicates that all of the catastrophic perils from earthquakes, wildfires, floods, and hurricanes, actually contribute significantly a measureable amount to the total amount of what an actuarially-sound homeowners premium should be for the true risk of these disasters underlying each policy across the U.S.

“Each one of those types of disasters contributes potentially hundreds of dollars to the quote -‘fair’ – or right insurance premium as actuaries would define it,” said Rollins.  “So that runs up against a policy question, which is, if you have significant, roughly equal risk from hurricanes, floods, wildfires, and earthquakes across the country, why aren’t the guidelines for determining eligibility of mortgages for Fannie Mae and Freddie Mac… and their concomitant insurance servicing requirements exactly the same across the country?  We don’t have all the answers as to why that it, but we do know that a pure clinical look at the numbers would indicate that there’s really no reason to favor one peril over the other,” Rollins said.

The Central United States Earthquake Consortium (CUSEC) is comprised of the eight states that would be most impacted by quakes along the New Madrid earthquake fault line, which runs along the Mississippi River, in partnership with FEMA.  CUSEC examines the earthquake threat and ways to encourage mitigation and reduce losses.  Yet, earthquake insurance isn’t popular.

“Clearly we have to figure out a way to get affordability down for earthquake insurance,” said Jim Wilkinson, Jr., CUSEC’s Executive Director.  “For example, the six most vulnerable counties in the state of Missouri saw an almost 700% increase in their premium costs between 2000 and 2018.  We need to figure out how to get that cost down and the availability up, whether that’s through incentives or other means.  There are a whole host of folks, including the banking and real estate industries together with local developers, who have a role in figuring out how to make this affordable for people who need it,” said Wilkinson.

Rural communities, Wilkinson pointed out, are especially vulnerable, because they don’t have the resources that larger communities have and shoulder a higher percentage of buildings and infrastructure that are vulnerable.  “We want to get to the point where we have covered as many people as we can for this peril,” he said.

Host Lisa Miller noted that the purpose of insurance is to spread risk to as large a group of policyholders as possible, which can lead to more affordable premiums.  Resiliency, through stronger mitigation programs, has made a demonstrated difference in hurricane and other windstorm events.  Mandatory insurance premium discounts for specific mitigation features have been shown to reduce windstorm losses.  But can resiliency measures make the same difference to earthquake-threatened communities?

Rollins said that with earthquakes, one of the issues is the cost and who is going to pay for mitigation.   “Consumers simply don’t like spending money upfront to reduce a contingent future threat that may or may not materialize.  And they think very viscerally about the payback period for that investment.”

He said there also has to be a catalyst, such as low-interest loans, direct government grants or loans, or public-private partnerships.  “The second problem with earthquakes is that there is far less definitive engineering backed up by recent experience to tell us exactly what sort of construction and retrofits would make a big difference and give us the highest bang for the buck,” Rollins added.  And in areas facing multiple disasters, a mitigation for one risk may be counterproductive to mitigating against a second risk.

“The program is not set-up to build to a higher standard, but simply to rebuild to put it back the way it was,” noted Wilkinson.  “They have been working to make changes in the program, so that we’re not adding to the problem.  That’s the challenge that we’ve had.  It’s a conflict to how we build back better, safer, stronger communities.”

Also, “asking a business or a homeowner who is very anxious to get back into their property to spend an extra two weeks and an extra one to two thousand dollars on top of what they’re already facing to do this cross-hazard risk reduction becomes a real challenge,” said Wilkinson.  “It’s something we’ve failed to really grasp in the process of how we assess these programs and their costs.  It’s something that FEMA is taking a hard look at because we can’t keep printing money and unfortunately the disasters seem to be increasing in frequency.” 

While better rebuilding after the fact is a goal that we’re all striving for, host Miller noted that “Knowing that we have an uninsured population, we know that residents in earthquake-prone states are exposed to millions of dollars in damage that will not get repaired because the federal government’s ability and willingness to step in and replace everything that gets damaged just isn’t there.”

“FEMA will help a community put everything back to the way that it was before an earthquake, but for an individual, they help provide low interest loans but there’s not going to be a check written to rebuild a person’s house,” said Wilkinson.

Rollins also discussed the increasing entry of private sector solutions, such as flood insurance, to disaster insurance problems.  He noted each one had a public policy change that served as a catalyst that attracted private insurance attention and capital. 

If Fannie Mae and Freddie Mac were to update one page of their servicing guidelines to require earthquake insurance, too, “it would instantly kind of upend the entire U.S. homeowners insurance market, similar to the way the Biggert-Waters Act and a few other follow-on regulations upended the flood insurance market, resulting in a whole bunch of other business models being considered,” Rollins concluded.

Links and Resources Mentioned in This Episode:

The Ridgecrest earthquake: Will recent quakes shake up the California insurance market? (from Milliman)

The Sand Palace house in Mexico Beach, Florida (from the New York Times)

Milliman website

Central United States Earthquake Consortium (CUSEC) website

Private Flood Insurance & Resilience (from 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 7/30/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

Florida’s seven year wait for meaningful reform of Assignment of Benefits (AOB) abuse is over.   The Florida Legislature has passed a measure to level the playing field for consumers and reduce the skyrocketing rates of litigation filed by vendors against insurance companies, driving double-digit rate increases.

Hailed as a “wake-up call for the bad actors” exploiting homeowners and the insurance industry, what exactly does the reform do and what doesn’t it do?  What impact is it expected to have with more than half of Florida’s insurance litigation today now involving an AOB?  And what creative alternatives and other shenanigans still exist for further scams?

Host Lisa Miller, a former deputy insurance commissioner, talks with insurance defense attorney Kimberly Salmon of Groelle & Salmon, and Paul Handerhan of the Florida Association for Insurance Reform.

Show Notes

An Assignment of Benefits (AOB) agreement is a legal contract that allows repair vendors to receive payments directly from insurance companies for work they perform at a policyholder’s home, without the homeowner having to pay money upfront. While it sounds good, unfortunately in the past seven years in Florida, unscrupulous vendors and their lawyers have taken advantage of 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 number of property insurance AOB lawsuits rose 900% from 2008-2018.

In late April 2019, the Florida Legislature passed HB 7065 which puts new requirements on assignees (contractors and other vendors) and insurance companies.  An AOB must now provide the following:

The bill also allows an insurance company to offer a policy prohibiting assignment in an effort to lower homeowners policy premiums, which have grown by double-digits.

Paul Handerhan, Senior Vice President of Public Policy for the Florida Association for Insurance Reform, noted the significant consumer protections in the bill, especially a homeowners ability to get out of an AOB contract.

“That’s a dramatic improvement on the way assignments have worked in the past prior to this bill.  Literally, there was no statutory requirement for any rescission period.  If a policyholder, in the middle of the night with an emergency service, signed an AOB, they would effectively have no way of getting out of the contract,” said Handerhan, who is a practicing public adjuster. 

The bill also revises the current one-way attorney fee system which was seen as incentivizing lawsuits and institutes a new formula, based on the disputed amount: the difference between the assignee’s presuit settlement demand and the insurer’s pre-suit settlement offer.  If the prevailing judgment is:

If the insurance company fails either to inspect the property or to provide written or verbal authorization for repairs within seven calendar days after the first notice of loss (FNOL), the insurer waives its right to an award of attorney fees, except for circumstances beyond its control.  The formula does not apply to lawsuits filed by policyholders, who would still enjoy the protections of the one-way attorney fees under 627.428 F.S. 

Kimberly Salmon, a partner with the Tampa firm of Groelle & Salmon, said that under current law, when she and other insurance defense lawyers go to court, if the vendor wins the case by just $1, the vendor is entitled to attorney fees under the one-way fee statute.  She told Lisa that after this law is enacted, vendors will be restricted on what they can recover, together with broader impacts.   

“It’s going to enable the insurance company by the tools that it gives them and by the timeframes that it prescribes, an opportunity to actually evaluate the scope and cost of the repairs, of the damage, and it actually incentivizes both the insurance company and the vendor to resolve the matter as fairly and quickly as possible, which is going to be a direct benefit to the consumer.  So it’s win-win,” said Salmon, whose firm has handled thousands of AOB cases on behalf of insurance companies and their policyholders.

Lisa and her guests discussed various emails and blogs in the marketplace with reaction to the bill’s passage.  Some include concerns of an already-seen ramp-up of marketing efforts by some trail lawyers to encourage the filing of AOB lawsuits before the new law is enacted.  One blog said the bill itself will actually increase the number of lawsuits, referencing the 7-day time period for an insurance company to inspect a property after FNOL, and concern it would leave a window of opportunity for mold to grow.   

Handerhan noted that reference pertains only to insurance companies that don’t choose to inspect and “if they don’t, they may not be entitled to collect attorney fees if the case winds up going to litigation.”   He said their failure to inspect within 7 days in itself, would not be a cause for action.

Lisa and her guests also talked about ways the bill may be exploited.  Salmon noted the bill creates conditions prior to a vendor filing a lawsuit against an insurance company.  One of those (along with examination under oath and recorded statements) is that if appraisal is in the policy and demanded, the vendor is required to go to appraisal.   While appraisal sounds good and is binding, she cautions insurance companies to carefully weigh options before electing appraisal.

“The statute says that for purpose of these post-loss benefits, the vendor is standing in the shoes of the insured.  Under current case law, it looks like an appraisal award could trigger the right to file a bad faith suit and under the wording of this statute, the question is, does the vendor have those same rights?  So I’d be very cautious about the language in an insurance policy if there is a unilateral right to demand for appraisal,” Salmon said.

The other section of the bill that is worrisome to Salmon references a power of attorney that grants a management company, family member, or others the authority to act on behalf of the insured.  “So possibly, with a limited power of attorney, someone in that position could file a lawsuit on behalf of the insured.  That would really be a way around the protections that were intended and all of the work that went into this bill,” Salmon said.  

Host Lisa Miller, a former deputy insurance commissioner, warned “the creative lawyers that have been preying on consumers and causing this insanity” who may be listening to the podcast.  “I would caution you that the legislature was listening to consumers complain about this, that had been victimized by the use of an AOB and the resulting litigation explosion that has occurred because of it, and I believe that any attempt to thwart the intent of this legislation will be dealt with summarily in coming session that starts in January.”

Lisa and guests also discussed the upcoming Florida Supreme Court case of Restoration 1 vs. Ark Royal Insurance Company that we have been following closely.  It will address the question of whether insurance companies have the right to require that all parties with an insurable interest sign an AOB contract, including the homeowner’s mortgage company.

“I have every reason to believe that the Court with everything they have seen thus far, will uphold the Ark Royal decision.  I’m very hopeful and competent,” said Salmon.

Links and Resources Mentioned in This Episode:

Florida House Bill HB 7065

Florida Association for Insurance Reform (FAIR)

Groelle & Salmon law firm

20 law firms that file the bulk of AOB suits (from Citizens Property Insurance Corp.)

Assignment of Benefits webpage (Lisa Miller & Associates)

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

AOB Lawsuits Continue Meteoric Rise (LMA Newsletter of 4-3-19)

Florida’s one-way attorney fee statute (627.428 F.S.)

Bill Watch recap on the 2019 legislative session (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 3/8/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

For the seventh time in as many years, the Florida Legislature this spring of 2019 is considering bills to reform abuses of Assignment of Benefits (AOB) insurance contracts between vendors and property owners.   AOBs allow contractors to take control of a homeowner’s insurance policy and bill their insurance company directly for repair work – sometimes fraudulently inflating the scope and cost of the claim.

When the insurance company refuses to pay or underpays the claim, the vendor sues.  The latest figures show the number of AOB lawsuits continue to rise in Florida, up 18% in 2018 from the year prior – and up 900% from 2008.  The costly lawsuits remain concentrated within a disproportionately small number of lawyers and firms, utilizing a loophole in the state’s one-way attorney fees law.

Host Lisa Miller, a former deputy insurance commissioner, talks with Wesley Todd, CEO of CaseGlide, a claims litigation management firm whose analysis shows AOB abuse is costing each of Florida’s six million property owners $400 a year in added premiums.

Show Notes

Wesley Todd and his firm CaseGlide are managing litigation for 100,000+ claims on behalf of its insurance company clients.  He said his analysis has revealed startling statistics that should be of concern to everyone in Florida.  AOB litigation on average is costing each insurance company doing business in Florida $50 million a year which equates to about $400 for each of Florida’s six million property insurance policyholders. 

Looked at another way: “What if this law and the legislators and lawyers behind this current law were giving to a small set of 10-15 trial lawyers $1 billion per year by lack of reform?” Todd said.

Florida’s one-way attorney fees statute is driving the AOB abuse and the general increase in insurance litigation.  It allows policyholders to recover legal costs if the insurer has been shown in court to have underpaid the claim in any amount – even by just one-dollar.  Past efforts in the legislature to clarify that only a named policyholder would be entitled to file suit have all failed.

“This is a significant problem in Florida and it isn’t complicated.  Insurers are going to be get paid through their premiums and have had to raise rates to do so,” Todd said.

He points out the arguments that supporters of the current AOB and one-way attorney laws are using – that any changes will hurt consumer protection and prevent the little guy from going against the big insurance company – were the same arguments used against sinkhole reform in Florida, which passed in 2011.   None of those dire predictions came true nor will they if meaningful AOB reform passes this session, he said.

The CaseGlide Index is a real-time index containing aggregate industry litigation data that previously hasn’t existed in one database.  It can also serve as a central foundation for rating oversight by regulators, rating agencies, and the reinsurance marketplace.  Todd says part of the focus is to provide evidence required to help the Florida Legislature tackle the AOB problem.

Todd agreed with host Lisa Miller that AOB abuse isn’t an issue the courts can totally resolve.  While the current case before the Florida Supreme Court (Restoration 1 vs. Ark Royal Insurance Company) will be helpful in stemming some AOB and litigation abuse, “we still need to address the one-way attorney fee statute,” Todd noted. 

“They are going to find one way to make it where they recover one more dollar (above the original insurance company settlement offer)…and when they find that, they’re going to get their $300,000 in plaintiff attorney bills with their contingency fee.” 

He and Miller also discussed Florida’s Bad Faith Law, something Miller pointed out is added jeopardy in claims litigation.  “There are Hurricane Irma claims that are still being brought by the same law firms that bring AOB claims.  It’s a problem that one day might end up being bigger than AOB,” Todd shared.

Todd said Hurricane Michael insurance claims will present a wonderful case study on AOB. 

“Michael will be a perfect test case as to what happens when a storm doesn’t hit Tri-County (South Florida) and hits an area with less claims influencers if you will, whether it be attorneys, public adjusters, or loss consultants….and whether there’s a big difference in lawsuits to claims.”

He thanked Miller for her efforts over the years in educating policyholders to better understand before they sign an AOB that there could be negative consequences to doing so.   

Links and Resources Mentioned in This Episode:

CaseGlide webpage

Assignment of Benefits webpage (Lisa Miller & Associates)

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

AOB Lawsuits Continue Meteoric Rise (LMA Newsletter of 4-3-19)

Florida’s one-way attorney fee statute (627.428 F.S.)

Bill Watch on AOB 2019 legislation (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 3/8/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

The Florida Legislature convenes its 2019 session next Tuesday, March 5.  The big insurance issue: the growing cost of property insurance claims litigation.  But there are also bills that would change Florida’s no-fault auto insurance and more than 200 bills funding much-needed Hurricane Michael relief to the 14 Panhandle counties still struggling with debris cleanup and recovery.

But there are other issues of interest lawmakers are addressing, including whether to allow smokeable medical marijuana and how to address ongoing water quality issues.  Host Lisa Miller, a former deputy insurance commissioner, talks with Jim Saunders, Executive Editor of the News Service of Florida for a preview on what to expect this session.

Show Notes:

Calling efforts at Assignment of Benefits (AOB) reform “the main event” for insurance interests before the Florida legislature this year, Jim Saunders of the News Service of Florida said the key component is attorney fees in claims disputes.  He and host Lisa Miller discussed the behind-the-scenes effort by leaders of the Florida Senate’s Banking and Insurance Committee and the Judiciary Committee to rework the current bill (SB 122).  The bill seeks to limit one-way attorney fees to named insureds and beneficiaries only – not contractors and their attorneys operating under an AOB agreement with the insured (policyholder).  A revised bill is expected as soon as this coming week (March 4, 2019).

Another major issue this session is Hurricane Michael relief and recovery funding.   Saunders called Michael a “wildcard issue” in the AOB reform debate.  Hundreds of millions of dollars of appropriations bills have been filed to provide help to the 14 mostly rural Panhandle counties impacted by the October 10, 2018 Category 4 hurricane.   That includes Florida’s devastated timber industry, whose losses are estimated at $1.3 billion.

Other topics discussed include medical marijuana and bills that would allow patients to use a smokeable form of it, as well as refined regulation on its production; algae blooms and water quality in Florida; and efforts to further encourage the testing and use of automated vehicles in the Sunshine State.  Saunders also provided details of Governor DeSantis’ major transportation plan, geared in part to increase highway capacity for evacuations of residents in future hurricanes and other disasters.

Links and Resources Mentioned in This Episode:

Lisa Miller & Associates Assignment of Benefits (AOB) webpage

News Service of Florida

Bill Watch of February 18, 2019 (LMA Newsletter)

AOB Reform bill  SB 122 is scheduled to be discussed on Monday, March 4, 2019 during the 3:30 pm ET meeting of the Florida Senate Banking and Insurance Committee.  To watch the meeting live or later, click on The Florida Channel and search by date and committee.

Hurricane Michael Coverage & Photos (LMA Newsletter)

** 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 2/27/19. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2019 Lisa Miller & Associates, All Rights Reserved

2018 was a tough year for flooding in the United States, and nowhere worse than in the Carolinas, where Hurricane Florence dumped three feet of rain in spots.  Damage is estimated at $13 billion but at least half of that is uninsured – as most residents had no flood insurance.  While some didn’t know they needed it, others took a gamble by going without and lost.

But the bigger folly some argue is federal flood insurance itself which encourages some homeowners to disregard risk, by providing subsidized premiums at a level far below what’s actuarially-required to cover the claims’ costs.  The same program also pays homeowners to rebuild their flooded homes in the same low-lying spots, over and over again.

How can we better protect our lives and property from flood waters?  And what urgency will Florence bring to the debate on providing better flood insurance protection for coastal and inland residents alike?  Host Lisa Miller sat down with a catastrophe risk modeler and a coastal flood scientist to get some answers.

Show Notes:

Lisa’s guests are both PhD’s – one working in private sector flood insurance and the other in public university research on flooded coastlines – and both are focused on mitigating risks. 

Dr. Roger Grenier is Senior Vice President and Global Resilience Practice Leader at AIR Worldwide in Boston.  His team has worked since 1992’s Hurricane Andrew to develop catastrophe modeling as a way to predict the severity of extreme events.  Their data and analytics has helped make the insurance and reinsurance industries more resilient over time.

Dr. Robert Young is a Professor of Coastal Geology and Director of the Program for the Study of Developed Shorelines at Western Carolina University in Cullowhee, North Carolina.  His team of scientists and policy analysts examine how storms and sea level rise are changing America’s coastline and communicate their findings to policymakers.  From individual homeowners to local communities to federal agencies, they have developed tools to protect from and adapt to flood risks.

Dr. Grenier said advances in modeling technology are having a greater influence in assessing and pricing flood risk.  Older mapping technology, largely based on historical data, such as stream flows and hazard areas based on land use, has been used primarily by the National Flood Insurance Program (NFIP) to determine risk and rates.  The NFIP has evolved over its past 50 year history and is now beginning to adopt catastrophe models.

“When you develop a model, you can look forward and assess not only changes in land use but also changes in the climate and that’s how our models are driven, by starting really with a climate model as opposed to relying strictly on historical data,” said Dr. Grenier.  Modeling brings other benefits: its cost and scalability mean more frequent updates and more realistic gray areas of risk in place of black and white maps, where a property is strictly “in” or “out” of a particular flood zone.  

The podcast also discusses policies on pricing risk and funding rebuilding after flood calamities.  Dr. Young said federal policy provides “moral hazards”: incentives to do the wrong thing rather than the right thing.  After storms, federal flood insurance and federal Stafford Act disaster funding pay to restore homes and sometimes elevate properties and structures to help prevent future flooding, something he said is only a partial solution.

“If you lift-up an oceanfront home, you still have to hold the shoreline in place.  And if you raise a community anywhere in the floodplain, you still have to get utilities to that community and get transportation in there.  The biggest problem that I see right now is that there are very few incentives to change the exposure map for these communities, to get some properties out of areas that are in the floodplains,” said Dr. Young.

Case in point: Dauphin Island, Alabama.  This community of repetitive loss properties has received seven disaster declarations in the past 30 years.  There have been properties rebuilt multiple times in the same location following successive storms, thanks to federal and state subsidies that rebuild the infrastructure.  From 1978 through September 2018, the taxpayer-backed NFIP has paid out more than $68 billion in claims – historically, nearly 30% of claims are paid to the 1% of properties classified as repetitive loss properties.

“It’s not the folks on Dauphin Island that are crazy, it’s the rest of us that are crazy for allowing that to happen,” said Dr. Young.   The answer he said is changing incentives by finding a way for the true cost of living in these dangerous places to be incorporated in the cost of these properties.  The imbalance occurs in both high-cost oceanfront investment properties but also in affordable housing communities along our coastline.

The podcast also discusses this year’s White House budget that stressed reforms to bring needed financial stability to the debt-ridden NFIP and expanding the private market to reduce the federal government’s NFIP exposure.  Under budget director Mick Mulvaney’s proposal, FEMA would have authority to discontinue NFIP coverage for extreme repetitive loss properties following future losses. Starting in 2021, coverage for commercial properties would be phased-out, while no policies would be written for new construction inside a special flood hazard area.

FEMA meanwhile is forging ahead and redesigning NFIP’s 2019 rates to more realistically price risk.  Dr. Grenier predicted that any future changes will be by a measured process as the private insurance market evolves, so it can price for it and provide reserves for it. 

“People need to understand the limitations of maps and understand other aspects of the home, such as elevation.  They need to hear the message about buying flood insurance, whether from private insurers or the NFIP, and be realistic about what they can expect when they have no insurance versus having a flood policy.

Private insurance companies, powered by advanced catastrophe risk models, are able to better understand risk.  In Florida, encouraged by model regulation to encourage a vibrant private market, nearly 30 companies are offering coverage as an alternative to NFIP at competitive rates.

Host Lisa Miller, a former Florida deputy insurance commissioner, noted “it’s clear as crystal that when it comes to flood risk, we still build too close to known dangers.  The growing folly of our public policy is encouraging risky human behavior.  And we all pay, some with our own checkbook, the majority through higher taxpayer subsidies, and yet others, sadly, with their lives.”

Links and Resources Mentioned in This Episode:

Private Flood Insurance & Resilience webpage (Lisa Miller & Associates)

IBHS Fortified Home™ Program (Insurance Institute for Business & Home Safety)

Coastal Wind Damage in North Carolina from Hurricane Florence (AIR Worldwide In Focus, 10/8/18)

The Aftermath of Hurricane Florence (AIR Worldwide, 10/18/18)

Flood insurance paid homeowners $100,000 more than FEMA after Harvey, expert says (Houston Chronicle, 6/16/18)

Private flood insurance could fill North Carolina's coverage gap (Lisa Miller column in the Raleigh News&Observer, 11/16/18)

Our View: Federal flood insurance program needs rethinking (Fayetteville Observer, 12/2/18)

North Carolina Flooding Exposes Flaws in Flood Insurance Program (Bloomberg News/Bureau of National Affairs, 9/21/18)

New resilience organization at FEMA aims to build ‘culture of preparedness’ (Global Resilience Institute, 6/5/18)

** 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 12/3/18. Email via [email protected]   Composer: www.TeleDirections.com  © Copyright 2017-2018 Lisa Miller & Associates, All Rights Reserved