| Monday, February 1, 2016 |
| Mother Nature Says “Come on Down to Florida” |
| Considering all the dollars we spend in Florida on tourism, Mother Nature saved us lots of green (pun intended) last week. We were very concerned about all those folks in the cold northeast who were stranded on the New Jersey turnpike, as well as other roadways, for hours during the bitter storms. We may think the folks that live in those bitter cold climates are used to it, and even if they are, there is certainly great danger being locked into a traffic jam covered in snow and ice for even a few minutes. Are we fortunate and greatly blessed here in our Sunshine State? Oh yes. In fact, as an LMA Team member traveled to south Florida on the Friday that it was so bad and encountered the torrential rain and threat of tornadoes, she told us it was still nothing compared to the times she had traveled in the northeast of our country during winter months of snow and ice. Our hearts go out to our northern neighbors, and we see why so many are beckoned to Florida, not through ads and soundbites, but the real story that Mother Nature tells. Our capital city took advantage of the great weather last week by announcing a “Zero Snow” resolution here in Tallahassee. It was a timely reminder of why we live in Florida or maybe an invitation for those tired of scraping windshields and shoveling driveways. “This proclamation obviously is tongue in cheek, but it brings attention to the fact that while much of the country is buried in snowdrifts, we have beautiful weather,” was said by one of Tallahassee’s city commissioners. And we say to our northern friends, come on down to Florida and enjoy the sweet sunshine with us. You may never leave. |
| And While We Are Talking About Snow and Ice |
| We read a report last week by the Insurance Information Institute that says U.S. insurers paid out $2.9 billion in winter-related insured losses in 2015. Even with those losses, the property market remains well-positioned financially to weather the significant storms expected this winter. “Insured losses caused by severe winter weather are on the rise,” said Dr. Robert Hartwig, economist and president of the I.I.I., noting that both 2014 and 2015 were well above what the insurance industry has typically experienced at this time of year. The $2.9 billion in losses for 2015 were up sharply by 26%, from $2.3 billion in losses in 2014 and up $1 billion, or 53%, from $1.9 billion in 2013. “Despite the sharp escalation in winter storm losses in recent years, insurers entered 2016 with near-record claims paying capital on hand and are financially prepared for anything Mother Nature has in store,” added Hartwig. Auto claims also tend to spike during the winter months, due to slick roads. In 2014, collision claim frequency rose 8.5% from a year earlier. In 2015, collision claim frequency stayed high – 7.3% higher than in 2013. Between 1995 and 2014, winter storm claims accounted for 6.8% of all insured U.S. catastrophe losses, placing the category third behind hurricanes and tropical storms (40.8%) and tornadoes (39.1%) as the costliest natural disasters, according to Verisk’s Property Claim Services. |
| Legislation Reverses Florida’s Energy Code (part of the Building Code) 5 years |
| Guaranteed energy costs will not be validated according to HB 535 by Rep. Dane Eagle (R-Southwest Florida)/SB 774 by Sen. Travis Hutson (R-Duval/Northeast Florida). These bills will have a drastic effect on mold claims. The bills eliminate an air infiltration test that is designed to validate if a homeowner will get the energy savings guaranteed by many homebuilders. The test detects a home’s ventilation and we all know if a home is leaking air, humidity can set in causing mold and if a house is too tight, then stale air that does not filter can cause health problems. The bill also reverses Florida’s energy code version to the 2010 version (that didn’t require the test) from the 2015 version that does. We find it odd that homebuilders do not want to be required to prove to their buyers that the energy savings claimed can be realized by those who will ultimately live in the home. Please let us know if you want to help defeat this bad legislation. |
| As Times Change, So Do Views and Positions |
| In an interesting twist, the Florida Association of Insurance Agents (FAIA) used its obvious prowess to prompt the introduction of legislation that would make it easier for surplus lines agents to place commercial residential (CR) business in surplus lines markets, even when the risks are eligible for admitted coverage. Many readers have shared with us stories of where CR risks have been “poached,” meaning the CR risk was insured by an admitted carrier only to have the risk transferred to a surplus lines policy, midterm. FAIA contends that agents who lack appointments with admitted insurers writing CR business cannot complete the statutorily required due diligence form (which proves they tried first to place the CR risk in the admitted market before “exporting” it to the Surplus Lines market). Many carriers have shared that they are willing to write CR policies for agents who don’t have an appointment if only the agent would be willing to share the risk with the carrier. If the risk is bound by the admitted carrier, the agent will likely receive an appointment or the risk can be written under the Exchange of Business statute which we will discuss in our next newsletter. In talking with old timers who helped write and pass the majority of past amendments to Section 626.916, Florida Statutes, “back in the day,” the intent of the statute was to keep Surplus Lines reserved for the truly hard to place risks and admitted markets would be primary in the vast majority of circumstances. Today, admitted commercial residential markets are stronger and more robust than any other time in the history of our state and LMA is working with FAIA and others to craft language to meet a shared goal of keeping Surplus Lines poised to fulfill its historical mission, and encouraging DFS to hold those accountable who violate the spirit and intention of laws enacted to support a strong admitted market. |
| Assignment of Benefits Reform Update |
| We anticipate that before this week’s end, the Office of Insurance Regulation will be releasing its results from the data call required of Florida’s top 25 property insurance companies. We have no doubt that the data will speak for itself, namely that water damage claims and AOB litigation are increasing in the private market, and also apparently it will report that there are a small number of trial attorney firms that are driving much of the litigation. Last week, the House of Representatives heard its version of the assignment of benefits (AOB) bill (HB 1097). If you missed the House Committee debate you can view it at http://thefloridachannel.org/videos/12516-house-insurance-banking-subcommittee/. Scroll to marker 8:00 where Representative Matt Caldwell, the House bill sponsor, is introduced to present the bill, and you can see our own Lisa Miller present a “face of AOB” at marker 1:31:14. She discusses a consumer who was a victim of AOB abuse at 1:32:30. Because the Senate sponsor of the bill (SB 596) had the flu, the Senate bill deliberation was postponed until Monday, February 1, at 1:30 p.m. in the Senate Banking & Insurance Committee. John Rollins, Citizens Chief Risk Officer, warned of a “looming financial catastrophe” pushing up rates when they should be going down. In one phrase, Rollins crystallized the problem when he said AOBs are like “gas on a fire” in driving up rates. His testimony can be viewed at time stamp 38:00 at the above link. The current bills moving through the House and Senate don’t ban assignments but they require a 3-day insurer notice for claims beyond emergency repairs, and provide consumers 3 days to cancel the contract. In addition, a vendor can’t put a lien on a policyholder’s home, and a written estimate of the damages must be provided before the first dehumidifier is turned on. There are actually two AOB bills with the second one prohibiting licensed contractors from offering referral fees, which stemmed from claims by insurance companies that water damage repair companies offer incentives of $1,000 or more to plumbers to alert them about policyholders with plumbing emergencies.
Rep. David Santiago (R-Volusia) asked one of the presenters, a lawyer and member of the Florida Justice Association (who represents trial lawyers), if his specialty was to sue insurance companies regarding windshield claims and the presenter said yes…and Rep. Santiago mentioned the almost 500 cases filed by this particular speaker to make the point that these lawsuits are just that – lawsuits for the sake of attorney’s fees. If one were to look at the legislative session as a whole, the theme of lawsuit factories is prevalent – multiple lawsuits against insurance companies, multiple lawsuits against cities and counties and private vendors who contract with government, and multiple lawsuits against doctors. Whether our legislature will attempt to rein in these frivolous lawsuit factories remains to be seen. Our firm believes in ensuring the proper balance for all 6 million property insurance policyholders in our state – those entities who drive unscrupulous claim activity causing a disadvantage to premium payers who are innocent victims of this activity. Many of these policyholders don’t know they are involved in a lawsuit because the AOB doesn’t require the vendor to tell the insured they are suing the carrier. That is exploitation if I have ever heard of it. When you can, read the Consumer Protection Coalition’s release about it. You will find the link to the press release at the end of this article. In addition to the earnest legislative efforts this session to finally curb abusive AOB practices, recent events in Florida’s Judicial Branch may also stiffen headwinds against AOB lawsuit factories, if not clip their wings entirely. I’m referring to last week’s appellate court victory by St. Johns Insurance Company based on Florida’s Homestead Exemption. In One Call Property Services, Inc. a/a/o Carl & June Schlanger v. St. Johns Ins. Co., the Fourth DCA affirmed the trial court’s summary judgment, which invalidated the assignment of benefits secured by the contractor based on Florida’s homestead exemption. Florida employs a strong public policy in favor of protecting homestead property, which extends not only to the property itself, but also to any insurance proceeds obtained as a result of damage to that property. Because an assignment of benefits is an unsecured agreement that seeks to divest the homeowner of insurance proceeds from homestead property, it should be deemed null and void as being against public policy. The DCA ruling is extremely important because it could invalidate AOBs seeking the transfer of homeowner’s insurance policies, benefits, and proceeds on constitutional grounds. If the Fourth District affirms the trial court, then the effect of this decision may be profound and far-reaching. It could invalidate thousands of AOBs at the center of pending lawsuits throughout Florida. Congratulations to the Groelle & Salmon insurance defense firm for their hard work in accomplishing this verdict. In the past few days, there have been multiple news stories about the AOB issue, the Consumer Protection Coalition and the AOB reform bills pending in the Legislature. The last article shown at this link (2.1.16 AOB Articles) indicates opponents to AOB reform are challenging Citizens Property Insurance executives, particularly on whether the explosion of lawsuits has any fraud components. You decide by reading and studying the debate we provided above and reviewing these news stories! Consumer Protection Coalition news release: |
| Update On Other Bills We Are Following |
| HB 671 Prohibited Insurance Practices by Rep. Doug Broxson (R- Okaloosa)/SB 1248 by Sen. Diaz de la Portilla (R-South Florida). This is one of the bills we told you about in our January 18 newsletter that is aimed at stopping kickbacks, rebates or other gifts to put a big dent into the AOB abuse problem. The bill was passed by the House Insurance and Banking Subcommittee last Monday, January 25 and heads to its next committee stop. The Senate companion for this bill hasn’t been heard yet.
HB 1317 by Rep. Mike Miller (R-Winter Park). This bill has no Senate companion but has made it to its first committee of reference in the House as it will be heard today in the House Insurance and Banking Committee. The bill will undoubtedly be controversial because it allows health insurance companies who have are licensed in any of the other 49 states, and are not licensed in Florida, to solicit and sell health insurance policies to Floridians. Some say it promotes competition and choice, while opponents say it allows health insurance companies who are not regulated as heavily as their Florida-licensed counterparts to sell inferior health insurance products to Floridians. The debate will be introduced and we will be watching. HB 509-Transportation Network Companies (TNC) by Rep. Matt Gaetz (R-Okaloosa). This bill, which provides requirements for operating as a transportation network company or operating as transportation network company driver and directs the DHSMV to issue permit was passed by the House and on its way to the Senate.
SB 1118-Transportation Network Company (TNC) Insurance by Sen. David Simmons (R-Volusia/Seminole). Senator Simmons has some different ideas about TNC oversight. His bill passed its first committee stop and much of it differs from the House version. In fact, one of the TNC company lobbyists said she and her TNC client had not studied the bill and would need to go back over it, as it departed significantly from the national agreement between the insurance industry and the TNC industry. This bill is awaiting a hearing in the Senate Judiciary committee. With respect to both TNC bills, the passage of these does not seem to inhibit those who use UBER, Lyft and other ride-sharing services. Seems to be a thriving enterprise everywhere we travel! HB 577-Liability Insurance Coverage by Rep. Larry Lee Jr. (D-St. Lucie)/SB 774 – Liability Insurance Coverage by Sen. Bill Montford (D-Leon and North Florida). These bills appear to be stalled – the House version was not considered by its last committee of reference and the Senate version was passed over too in its last committee stop. As we have reported in past newsletters, both bills seem to be harmless – they simply add an insurance adjuster to the list of those responding to “discovery” or other request for documents/information in an insurance lawsuit. We know much of the behind the scenes with these bills and will discuss with you for those that have an interest. SB 584-Flood Insurance by Sen. Jeff Brandes (R-Pinellas)/HB 929 by Rep. Larry Ahern (R-Pinellas). This bill, which authorizes the Division of Emergency Management to administer a matching grant program to provide up to $50 million in technical and financial assistance to local governments to implement certain flood risk reduction policies and projects, and authorizes the Florida Communities Trust to undertake, coordinate, or fund flood mitigation projects and to acquire and dispose of real and personal property or specified interest when necessary or appropriate to reduce flood hazards. Both bills have been heard in both their first committee stops and appear to be moving. |
| Chinese Drywall Case Now in FL Supreme Court |
| After losing in lower courts, a couple is asking the Florida Supreme Court to take up a dispute about whether a Florida-based insurance company must pay for damage related to Chinese drywall in a Tampa home. The court brief posted online asks the Supreme Court to overturn a September decision by the 2nd District Court of Appeal, which found that the insurance company was not responsible for covering the damage. The appeals court denied a rehearing Dec. 31, 2015 which involved the couple’s assertion that the new home they purchased in January 2009 had a sulfur odor and later that year, the smell had forced them to vacate the home. They asserted that the corrosion had occurred in the copper coils of an air-conditioning system and other electrical components of the house. The insurer denied the claim, pointing to several factors including a coverage exclusion for “latent defects.” The couple filed a lawsuit alleging a contract breach and contending that humidity was a “concurrent cause” of the damage, which could have resulted in coverage. A circuit judge and the appeals court ruled against the couple and we will follow the Supreme Court action. |
| State Supreme Court Will Hear Allstate’s Challenge of 4th DCA Ruling |
| In a closely watched case by many in Florida’s automobile insurance industry, a sigh of relief could be heard when this past week the Florida Supreme Court agreed to take up Allstate Insurance Company’s appeal of a Fourth District Court (4th DCA) ruling that said Allstate was incorrectly limiting personal injury protection policy provider reimbursements under Medicare fee schedules. This case first came about when 32 health care providers initiated a county court action against Allstate saying the insurer’s PIP policy language was obscure as to whether payments to providers would be limited under a provision in law covering applicability of Medicare fee schedules. The county trial court ruled in favor of Allstate, granted the insurer’s motion for summary judgment and asked the 4th DCA whether the auto insurer’s PIP insurance policy language was sufficient to authorize Allstate to apply the reimbursement limitations set in the Medicare fee schedule. A party in the original suitthen appealed to the 4th DCA and the Court overturned the initial ruling. The Fourth District ruled that Allstate must provide clear notice to policyholders that Allstate was electing to employ Medicare fee schedules for PIP claims. A recent brief filed by Allstate indicates its appeal to the state’s highest court is based partially on a contention that the 1st DCA has ruled differently. That case involved Allstate Fire & Casualty and Stand-Up MRI in Tallahassee, wherein Stand-Up relied upon 14 consolidated cases that questioned the legal sufficiency of Allstate’s fee schedule election notices. In this case the 1st DCA ruled that it could “find no ambiguity in this provision’s notice of Allstate’s election to use the fee schedules.” Allstate is also asking the high court to review its own prior ruling in Geico v. Virtual Imaging Services, a ruling that set standards the 4th DCA rejected. LMA will keep a close eye on this case and provide more information as developments occur. |
| Senate Drone Legislation Flying Fast to the Upper Chamber’s Floor |
| The measure we reported on last week (SB 642) sponsored by Sen. Diaz de la Portilla (R-Dade) significantly expanding civil liability for negligence in the use of drones is now ready for landing and consideration on the Senate floor. In a recent committee meeting the bill underwent considerable revision when an amendment succeeded in defining a drone as a dangerous instrumentality. The amended version of the bill also requires that the owner and operator of a drone must exercise reasonable care to prevent injuries to others. As reported in last week’s newsletter, placing drones in the dangerous instrumentalities grouping broadens the conditions under which a person may be held liable for the negligence of another person by attaching strict vicarious liability upon owners of drones. As the measure presently appears, owners of drones weighing more than 0.55 lbs., who voluntarily share their drone with another person, will be held liable for injuries that occur as a result of negligent drone operation. The plaintiffs’ bar obviously supported the amended version of the measure when its representative testified in committee that applying the dangerous instrumentality doctrine to drones is consistent as the FAA classifies drones as aircraft and aircraft are subject to the dangerous instrumentality doctrine. Standing in opposition to the amended measure in committee was the Florida Justice Reform Institute, drone industry representatives, Florida Farm Bureau and representatives for the surveying and mapping trade association. We will continue closely monitoring this bill and let you know as soon as it’s taken up by the full Senate. |
| It’s Good News: Citizens Property Insurance Corporation Policy Count Reaches Lowest Level on Record |
| Citizens Property Insurance Corporation announced on January 20 that it has reduced its policy count to under 500,000. The company said in a statement that its policy count on Jan. 19 was 484,788, the lowest level recorded since Citizens was created in 2002, and total exposure has shrunk to $143.53 billion. Citizens said it is benefiting from a reinvigorated private insurance market, affordable reinsurance and favorable weather, and has been able to return to its role as the state’s insurer of last resort. “Much of the credit needs to go to the private property insurance market, which under the watchful eye of the Office of Insurance Regulation, has grown strong over the past several years. State leaders also need to take a bow,” said Chris Gardner, chairman of the Citizens Board of Governors. In October 2015, all 67 Florida domestic property insurers passed a stress test administered by OIR that simulated various hurricane scenarios including a repeat of the 2004 hurricane season. |
| Some Of Us Traveled And Some Stayed On Watch |
| Some of the LMA Team hit the road last week, but we always leave team members behind to keep the home fires burning when travel is necessary during the busy legislative session. We are here, there, and everywhere thanks to the team of hard working folks who keep their eyes and ears open all the time. We can’t stand to miss a thing, ever, as you all know. And we so very much depend on the entire team, which includes all of you, to keep us keen to everything that is important to Floridians. We love hearing from you and will always be available. So stay in touch and have a great week!
Always, Lisa and the Team |
