How to Influence Legislators    
As most of our readers have noticed, we publish our newsletter every week during the eight-week legislative session in Florida.  Dozens of readers call or write and ask “how can we help LMA influence legislators?” to either help pass good bills or stop bad ones.  As luck would have it, I turned to an old friend and veteran political reporter, Bill Cotterell. In reading Bill’s bio, this is his 50th year as a reporter, growing up in Miami, working in the southeast in the mid 60’s to the mid 80’s and joining the Tallahassee Democrat over 30 years ago. I had the pleasure of working with his wife at the then-Department of Insurance and the both of them are passionate about good public policy.  So to answer the question, “how do I make a difference to the legislator?” simply spend five minutes and read Bill’s article in the Democrat this past week!  Then call me so we can talk about when you plan to join the fight!


Bill Watch
Last week’s legislative activity was limited with the House and Senate members only being in town on Wednesday and Thursday in observance of Passover and Easter. Each chamber debated their appropriations bills with a huge distance between the two with some estimating as much as a $4 billion difference. That is the largest difference between the House and Senate most political observers have ever seen and in order for the budget to be adopted and on its way to the Governor to review (and the legislature to adjourn on its schedule May 5 date), the $$$ have to match.

Here’s our weekly Bill Watch on the major legislation we’re following so far:

Assignment of Benefits (AOB) – Sen. Gary Farmer’s proposed AOB legislation (SB 1218) passed out of the Senate Banking and Insurance Committee on Monday April 3 and has not had a committee hearing since. The bill includes a requirement that the Department of Business and Professional Regulation (DBPR) license water extraction firms and sanction firms who violate provisions in the proposed legislation. Several other provisions are aimed at providing consumer protections but eliminate insurer “repair networks” of vetted contractors who have been pre-screened to repair the damage.  In the House of Representatives, Rep. Jamie Grant’s AOB reform bill HB 1421

didn’t move but we anticipate it will, most likely in the powerful Commerce Committee on Wednesday, April 19.  Sen. Farmer’s SB 1684 passed its first committee stop that would prevent insurance companies from including insurance defense legal fees in their rate filings. This bill hasn’t moved further. Sen. Farmer believes that his push to require water extraction company licensing as provided in SB 1218 will “ratchet down” lawsuits so there won’t be a need for including the legal insurance defense fees in rate calculation.

Flood InsuranceSB 420 (Brandes) extends rate deregulation from 2019 to 2025 and relaxes eligibility requirements to write flood lines.  It allows commercial lines coverage (residential & nonresidential), excess flood coverage, and more surplus lines participation by removing the capital/surplus requirement in favor of a stronger financial strength rating.  Note that this and Diligent Effort represent a strong push this year by the unregulated lines to gain a stronger foothold in Florida’s currently stable P&C market.  HB 813 (Lee) contains elements of both the Flood and Diligent Effort bills.  Both bills still await hearings in their next committee of reference.

Insurance FraudSB 1012 & SB 1014 (Brandes) and HB 1007 & HB 1009 (Raschein) are being pushed by outgoing CFO Atwater as providing needed tools to help DFS stay ahead of criminals who seek to defraud Floridians.  The measures would create a dedicated Insurance Fraud Prosecutor grant funding program, require insurers to adopt an anti-fraud plan and designate primary anti-fraud employees, and require that those plans and statistics be submitted to DFS annually.  SB 1014 and HB 1009 are significant as currently when a consumer or insurance company sends information to the Department of Financial Services insurance fraud authorities, that information is a public record.  This bill removes that provision from the law which addresses the concerns of those who report insurance fraud practices from being a target of retaliation from parties interested in “getting back at” the person or entity who made the effort to report the fraud or abuse. Neither of these bills made a committee agenda but SB 1012 and HB 1007 are scheduled to be heard in committees this week. We will watch closely to see if these important bills progress.

Insurance Litigation/Prejudgment InterestHB 469 (Harrison)/SB 334 (Steube) establish a requirement for an insurer’s interest payment and the timeline those monies are due.  The Senate bill, sponsored by Senator Greg Steube, is a priority of the Senate President’s according to sources familiar with the bill.  The primary supporter of this bill is the Florida Justice Association/trial bar.   SB 334 is awaiting action on the Senate floor but the House bill has one more committee stop before it is heard by the full House and has not moved since February 28.  SB 334 is only two pages with the gist of the bill reprinted here:  (1) In any action in which a plaintiff recovers economic or noneconomic damages, the court shall include interest on each component of damages in the final judgment. (a) For economic damages, interest accrues from the date of the loss of an economic benefit to the plaintiff.  (b) For noneconomic damages, interest accrues from the date the defendant received notice of a claim from the plaintiff. (2) If the plaintiff recovers attorney fees or costs, the court shall include in the final judgment interest on such fees or costs beginning on the date the entitlement to attorney fees is fixed through an agreement, an arbitration award, or a court.  LMA will closely watch these bills.

Insurance Premium TaxSB 378 (Flores) repeals the insurance premium tax credit of up to 15% on the salaries that insurers pay to their Florida-based full-time employees. This is a long-standing priority of the Senate President who has stated the credit was a good jobs incentive when enacted 30 years ago but is unnecessary now.  The $297 million in resulting savings was originally going to go to pay for a 2% reduction in the Communications Services Tax but instead would now go to reducing the Business Rent Tax on building leases by 1% (from 6% to 5%).  While there was no action on the bill this week, another bill SB 484 that would reduce the Business Rent Tax but doesn’t affect the premium tax credit passed the Senate Community Affairs Committee.  There was no movement with either bill last week.

Medical Marijuana – Senator Rob Bradley presented SB 406 in the Senate Health Quality Committee  on April 3 and there was no action last week.  Some key points of the bill:

  • Would create a coalition for medical marijuana research through Tampa’s H. Lee Moffitt Center and Research Institute and another would allow a 90-day supply versus 45 days in an earlier version of the bill;
  • Would allow Florida nonresidents to access the drug as long as the prescription originates in their home state;
  • Would require a seed-to-sale tracking system overseen by the Department of Health who would also oversee independent labs to test the drug before distribution; and
  • Would allow for more licensees in addition to the 7 already doing business in the state. Senators debated this provision heavily with some senators opposing any additional licenses while others said there needed to be more.As a reminder, the House has a vastly different bill with no provision for additional licenses or any of the above provisions.  That bill, HB 1397 by Rep. Ray Rodrigues (R-Estero) would ban smokeable marijuana as well as prohibit edibles and vaping and did not advance last week.

Personal Injury Protection (PIP) – Florida has been a no-fault (PIP) state since 1972, yet despite significant reforms in 2001, 2003, and most recently under 2012’s HB 119

intended to reduce fraud, rates keep rising – up 25% in 2015.  HB 1063 (Grall) repeals the Florida Motor Vehicle No-Fault Law & eliminates the requirements for PIP coverage, along with a series of other provisions.  Rep. Grall’s bill passed Thursday April 13 in the Commerce Committee. The bill would take effect Jan. 1 and requires at least $25,000 in coverage for bodily injury or death and $50,000 for bodily injury or death of two or more people. Many critics claimed jobs will be lost and other concerns that Rep. Grall said underscore the problems with PIP. She said it is not Florida’s responsibility for PIP coverage to provide jobs but those who claim it is a job creator are the very reason PIP needs repealing. The House Bill is different from the Senate version that was heard earlier that morning. The Senate version, SB 1766 (Lee) requires drivers to have $5,000 in medical payments coverage (just like with PIP) and $20,000 in personal bodily-injury coverage and $40,000 for multi-person bodily-injury coverage. The minimums would grow two years later to $25,000 and $50,000 and to $30,000 and $60,000 in 2022. The MAJOR difference between the House and Senate bills is the medical payment provision. The House sponsor called the Senate’s idea of $5,000 in medical payment nothing more than PIP renamed and refused to include this provision in her bill.Senator Lee’s bill had a hearing in the Senate Banking and Insurance Committee Thursday April 13 and passed but not without much debate with a majority of stakeholders opposing it.

For an in-depth conversation on these latest developments and their impacts to consumers, we invite you to listen to LMA’s CEO Lisa Miller on WMFE-FM Orando public radio’s Intersection program by clicking here.

Workers’ Compensation – By far one of the most contentious – and by court rulings, most immediate – issues facing the legislature after the state Supreme Court last year ruled our workers’ comp system unconstitutional.  A couple weeks ago, the Senate Banking and Insurance Committee passed a bill (SB 1582) by Sen. Rob Bradley that was…well, let’s say most weren’t happy with it and in the legislative world, if no one is happy, some would say it’s a good bill!  The bill aims to restore the balance to the “grand bargain,” a phrase Bradley uses to describe Florida’s worker’s compensation system of covering valid employee injuries in a comprehensive and with relatively little fuss manner.  Two 2016 Florida Supreme Court decisions ruled parts of the current work comp law invalid causing an almost 15% rate increase because parts of the law simply “went away,” as on observer noted.  “Poof – in two court opinions, the worker’s comp system was turned on its head,” according to a former regulator.  The bill addresses the Court’s attorney fee cap issue by keeping the current fee schedule but allowing a judge to decrease or increase attorney fees to a maximum hourly rate of $250.  The bill also increases temporary total disability benefits and temporary partial disability benefits from two years to five years, the Court’s other point of contention, and converts Florida to a loss cost state to encourage greater competition among carriers. The hourly attorney fee maximum caused angst during the committee meeting with one group saying that the rate shouldbe dynamic to reflect the geography of the attorney.  There was also concern voiced by a labor union representative who said the bill doesn’t allow injured workers to choose their physician.  SB 1582 was unanimously approved in its last committee stop and is on its way to the Senate floor with ONE MAJOR change in the work comp statute: multiple myeloma and non-Hodgkin’s lymphoma are deemed to be compensable and occupational diseases that arise out of a firefighter’s work performed in the course and scope of employment. The House version (HB 7085), sponsored by Insurance & Banking Chairman Danny Burgess, R-Zephyrhills, is ready to go to the full House.  Rep. Danny Burgess, smart young gun lawyer, has done a marvelous job of navigating all the parties in the workers’ comp debate.  He ended his almost hour presentation in the House Commerce Committee recently with this quote: “It’s been said that this workers’ compensation issue and the bill that we have before us today in general is an egg on a spoon on a tightrope over a whole bunch of molten lava.”  Well put Chairman Burgess.  So now the negotiations begin. Workers Comp like so many other public policy issues will need to be hammered out and unless there’s House and Senate agreement, there will be no bill.    For a full briefing on these bills and the differences between the two, please let us know.

General Insurance BillsSB 454 (Brandes)/HB 359 (Santiago) are insurance “catchall” bills, also called “omnibus” bills.  They provide insurers a $15 insufficient funds fee when a customer’s electronic payments bounce with some exceptions and add electronic checks and drafts to the list of allowable e-premium payments; allow medical malpractice insurers flexibility on their annual rate filings and a permanent exemption from having to pay assessments into the Florida Hurricane Cat Fund; and specifies procedures for insurance companies to send documents electronically to policyholders.  Both bills passed a committee stop this past week and it appears they will pass the full Legislature in the coming weeks.

Bills We’re Monitoring But Have Had No Action – Include SB 1746 (Flores) Comprehensive reform of insurance regulation and practices; HB 1271 (Trumbull) “Right to Repair” construction defect claims law; SB 614 (Brandes), SB 1388 (Antiles), and SB 1472 (Galvano) all medical marijuana regulation; and HB 191 (Beshears) and related SB 208 (Passidomo/Mayfield) on diligent effort.


NAIC Study Calls for NFIP Overhaul and Greater Private Flood Market       
While the Florida Legislature considers further ways to encourage a private flood market here, state regulators across the nation are hopping on board. Last week, the National Association of Insurance Commissioners (NAIC) at its spring meeting hosted more than 280 regulators, consumer representatives, and others in a forum coordinated by the Center for Insurance Policy and Research (CIPR).

The event, The Future of Flood Insurance , was chaired by Mississippi Insurance Commissioner Mike Chaney and examined the National Flood Insurance Program (NFIP) and the market’s state. An in-depth discussion was held on CIPR’s recently released Flood Risk and Insurance study which examined the rising flood risk in the country and the need to overhaul the NFIP while encouraging greater growth in the private flood insurance market.

To provide a stable environment and reduce uncertainty in the flood insurance market, state insurance regulators said they support a long-term reauthorization of the NFIP and further development of the private market as a comprehensive approach to address the country’s flood risk. Also noted were the advances in flood modeling capability that are leading the way to better price risk down to the individual property level – a key to a fairer, more competitive market. To view the speakers and agenda for the forum,click here

and please let us know if you would like more information about this informative event.


The Blurring Line of Surplus Lines   
Currently, much of the private flood insurance written is through surplus lines companies, although more admitted carriers are getting into the market each season. This legislative session, as reported in Bill Watch, there are efforts to relax the diligent effort requirement in Florida law that allow surplus lines be utilized only as a last resort behind admitted companies in other lines.

As LMA travels the insurance market and listens, there is much discussion about the “encroachment” of surplus lines, also called excess and surplus companies (E and S) into the space that admitted, regulated insurance companies are writing. There are many reasons why there are two, distinct types of insurance companies: E and S, who do not have their forms and rates approved by regulators and admitted companies who do – and a recent court opinion underscores why consumers should understand the difference.

This situation was recently addressed by the Eastern District of Pennsylvania in Berenato v. Seneca Specialty Insurance Company. The court ruled that Seneca was not liable to pay for the total fire loss on a commercial property insurance policy because the insured disabled their fire protection sprinkler system, violating the policy’s requirement to “maintain” the protective mechanism.

Seneca, as a surplus lines insurer, was under no duty in Pennsylvania to deliver the policy to the insured. Seneca was only required to deliver the policy to the broker, which it did. Would this case have turned out differently if the insured had the policy in hand? Would having the policy versus the broker having it “on file” made a difference in this case? It didn’t in this case, for the insured admitted they knew they needed to maintain an active system. But there are other cases where the policyholder didn’t know the policy. The point of this discussion is that an admitted insurer must provide the policy to its policyholder by law while the E and S company doesn’t have this requirement. And there is no downside for the policyholder to have their policy in hand. E and S insurers have a place in the market…in a certain “swim lane” according to a seasoned insurance agent. And keeping the lanes distinct is what’s best for all involved.


The Devil’s in the Details  
The granddaddy of surplus lines companies is Lloyds of London. On March 30, 2017, in the California case of Saddleback Inn L.L.C. v. Certain Underwriters at Lloyd’s London et al, a Santa Ana appeals court upheld $1 million+ in attorney fees against Lloyd’s for denying a fire claim based on a mistake in listing the insured.

In 2009, the insured on its property policy with Lloyd’s was listed as “J.K. Properties dba Saddleback Inn.” On previous insurance policies, the property was insured through Lloyd’s as “Saddleback Inn, LLC and J.K. Properties, Inc. dba Saddleback Inn,” and according to the ruling, Saddleback didn’t notice the error.

After a $2 million fire loss, Lloyd’s denied coverage “because Saddleback owned the property and J.K. Properties did not have an insurable interest in the damaged property,” according to the ruling.

J.K. Property and Saddleback filed suit against defendants including Lloyd’s in January 2012, charging breach of contract, professional negligence and bad faith. An amended complaint added a reformation cause of action to add Saddleback as an additional insured on the policy at issue. A reformation is a remedy available when an otherwise valid insurance policy does not reflect the parties’ true intentions.

Ultimately, Lloyd’s paid Saddleback $2,884,583, reflecting the $2,150,00 for the fire damage and $734,583 in interest and during the second phase of the trial, a jury determined Lloyd’s had unreasonably denied payments and awarded Saddleback $50,000 in punitive damages, plus $1,062,117 in attorney fees and expenses.

Lloyd’s appealed the punitive damages and attorney fees awards, but the appeals court sided with Saddleback saying, “Ultimately, a claim for bad faith liability hinges on whether the insurer’s refusal to pay policy benefits was reasonable at the time.”

“The record supports the jury’s determination Underwriters’ investigation was not complete or objective,” said the decision and in the discussion upholding the attorney fee award, the ruling said: “The trial court properly awarded Saddleback the full amount of fees incurred for the Underwriters’ failure to pay the policy benefits.”

Source:  March 31, 2017 Business Insurance Daily Briefing


Drugs and their Abuse – Killing almost 100 Folks a Day  
We in Florida read every day about the staggering growth of opioid abuse.  The Centers for Disease Control (CDC) released a report stating 91 people die every day due to an opioid overdose. Congress has increased funding for prevention programs, like the 21st Century Cures Act that appropriated $500 million to expedite aid. The 2018 White House budget also includes funding initiatives. Between the Comprehensive Addiction and Recovery Act (CARA) and the 21st Century Cures Act, $1 billion has been allocated to combat opioid abuse. Earlier this month, the U.S. House Appropriations Committee’s Labor, Health, and Human Services, Education, and Related Agencies Subcommittee held a hearing entitled “Federal Response to the Opioid Abuse Crisis.”  Discussion focused on how to pay for education and prevention of prescription and non-prescription abuse, federal guidelines for proper usage, and drug abuse treatment programs.

Chairing the meeting was Tom Cole (OK), with committee members from Arkansas, Alabama, Indiana, Maryland, Washington, New Jersey, Connecticut, Massachusetts, Wisconsin and New York expressing what it’s like in their state, with opioid abuse affecting the workplace, families and law enforcement like never before.  Presenters included the Vermont Department of Health, advocacy groups Parents Helping Parents and Operation UNITE, as well as the Rand Corporation.

Chairman Cole stated that the issue of abuse is multifaceted and there must be coordination between state and federal governments in order to limit the impact. Representative DeLauro explained that in 2016, the Subcommittee approved funding increases to the Substance Abuse and Mental Health block grant and the Prescription Drug Overdose Program by $50 million and she likened this epidemic to a natural disaster, recommending our country treat it as such.  She also put in a plug for Medicaid expansion citing that Medicaid pays 35 to 50 percent for opioid abuse treatment.

Barbara Cimaglio, Deputy Commissioner of the Vermont Department of Health is moving towards treatment on-demand and stated the approach saves money, by reducing more expensive interventions such as emergency room visits, as intervention and recovery programs are best suited to fight this epidemic.  Oklahoma Advocacy group Parents Helping Parents’ director Bill Guy talked about his 34 year old son who died of a heroin overdose and that 700 addicts in Oklahoma cannot find treatment. He advocates for a strong school-based drug abuse education program.

Nancy Hale, leader of Operation Unite said her organization, Unlawful Narcotics Investigations, Treatment and Education aims to cut off supply and introduces users to life without the drugs.  The Rand Corporation representativesaid the use of medication-assisted treatments (MAT) has been proven to be an effective method.   You can  watch the entire hearing here and to learn more about the opioid abuse epidemic in Florida, read this recent Sun-Sentinel story.


Governor Scott Orders Opioid Workshops 
Not only are the feds grappling with opioid abuse and drug overdoses, Florida Governor Rick Scott held a press conference last week (read his press release here) announcing a series of workshops to deal with this public health disaster particularly hitting central and south Florida. In fact two pharmaceutical companies have agreed to lower the cost of overdose (OD) treatment medicine for those on the scene of addicts who OD. The workshops are scheduled in Palm Beach, Manatee, Duval, and Orange counties.

Attorney General Pam Bondi was with Governor Scott and has been named to President Trump’s Opioid and Drug Abuse Commission.  Saying, “Kids don’t get it. Twenty-something’s don’t get it. A lot of adults don’t get it,” Bondi warned that taking even a single pill can lead to addiction or death.  And Palm Beach Senator Jeff Clemens clamored for an emergency declaration about the problem likening it to the Zika pandemic.

Officials from Palm Beach and Martin counties have requested a public-health emergency declaration to heighten awareness of the situation and to advance state general-revenue money in anticipation of $52 million that Florida is scheduled to receive this fall from the federal government to combat the epidemic.

There are bills in the legislature attempting to tackle the problem including ones dealing with Sober Homes who appear to masquerade as residential treatment clinics but are a ruse to advance the drug addiction and pocket the costs for the so called “treatment.”  We will keep you apprised.


What’s Happening in the Bayou State 
We had a reader ask, “Hey, what’s going on in Louisiana’s legislature? We are thinking about opening an office there.”

Well, our response is mixed.  We did a review of the legislative happenings in the Bayou state as its session is underway and ends the first of June.  Just like Florida, it will have a lively budget debate and several bills affecting the insurance industry and small businesses.

As we just reported on the federal and Florida level, Louisiana is also a victim of opioid abuse.  There are a number of bills to address it with some relating to workers compensation coverage and some affecting the entire healthcare arena. Louisiana Governor John Bel Edwards is in full support.

In addition, there is a tax proposal to create a Commercial Activity Tax (CAT) and bills to expand the state’s revenue collection through sales and use tax application to more businesses since the state sales tax will go down next year.   The CAT, which would go into place at the start of next year, would be used to replace revenue lost when the state sales tax is lowered on July 1, 2018. Companies would either pay their corporate income tax or the new commercial activity tax, whichever is higher.

The Governor said 129,000 of 149,287 corporate tax filers in Louisiana paid “absolutely nothing” in state income taxes.   The CAT would also help offset a cut the Governor wants to implement for 90 percent of people who pay Louisiana income taxes. In all, the CAT is expect to produce somewhere between $800 million and $900 million.

Insurance-specific bills include one that would establish a 12% flex band for personal lines rate increases and allow aggregate rate increases (or decreases) within the 12% band once a year.  The Louisiana Insurance Commissioner attempted recently to limit rate filings to once a year but was not successful when the Legislative Oversight committee said there was no statutory authority for the limitation.

If there’s a state you want to track, we can help you…LMA isn’t just about Florida, so give us a shout if you have a specific interest!


A Good Thought      
Thank you for taking the time to read this week’s edition of our weekly publication.  There’s a lot of love that is put into this effort and we get such great encouragement from our readers.  Last week I had the pleasure of being featured on WMFE-FM, Orlando public radio and was interviewed by the Florida Business Observer, a southwest Florida magazine.  Both wanted my perspective on all things insurance and I shared this with both of the reporters that we have the greatest form of government in the world – Democracy!  But with democracy there is often uncertainty so I shared with them “When it comes to this year’s legislative session, all I can say is I am keeping a good thought”!  Blessings for a wonderful week!  My best and stay strong!

Lisa & the Team