LMA Is Expanding
We are so very proud to share the exciting news with you first. We have grown out of our walls and in fact, have added a great new service under our umbrella of offerings. “The Conference Room” is our new pride and joy and offers a great place to host small to medium size meetings in downtown Tallahassee! The Conference Room lives right next door to our LMA office and mirrors the warm and inviting environment of our business offices. We offer a comfortable 10-20 person conference room with all the latest technology which provides the ability to host small training groups, interviews, sales meetings, corporate breakfasts or lunches, and meetings. In addition to the natural and easy ambiance of The Conference Room, we also offer additional benefits of having professional event staff on site to make a meeting or gathering a smooth and inviting event. There are other advantages to using The Conference Room, including no gratuities, no setup charges, no food and beverage minimums, complimentary Wi-Fi, beverages, snacks, and much more! Yes, we are excited and hope you will take a moment to check out our virtual tour at The Conference Room Tab of our website HERE. Be one of the first of friends, clients, and business organizations to take advantage of this beautiful venue and of course, pop by and check us out when you can. We would love to brag in person.
Leading Reinsurance Broker Analyzes Landscape, Reports Major Findings
Major reinsurance broker Guy Carpenter recently released “The Reinsurance Landscape Mid-Year Reinsurance Report” which can be read in its entirety HERE. The report confirms what many of you already know: reinsurance buyers continued to purchase more catastrophe limit to take advantage of the lower prices that have already occurred in most business segments and geographies. In June and July, for the first time over the last three renewal seasons, many markets were in a position of dwindling aggregate for U.S. wind-exposed zones. Moreover, reinsurance premiums decreased as a result of the influx of new capital, overcapacity and the benign catastrophe environment. Calling it a “challenging market,” the report said these conditions are likely to continue to act as a spur for new capital. From 2012 to 2014, the broker estimated that 34% of the capital entering the market was “new”. The market has received new capital of about $18 billion in the previous 18 months in the form of insurance-linked securities with funding coming from pension and sovereign wealth funds, sidecars and reinsurance companies that are supported by hedge funds.
The reinsurance market, the report said, retains a strong appeal for customers interested in “access to innovative new products and improved terms and conditions. Clients continue to evaluate the effectiveness of their reinsurance purchasing to determine if there are more cost-effective and efficient means to reinsure risk by extending programs across different lines, changing the definitions of coverage and reconsidering the length of contracts.
The expansion of limit has occurred on U.S. wind exposed business and solutions shifting risk from government entities to the private market. Decreasing reinsurance costs for example, have allowed companies to take out significant numbers of risks from Florida Citizens, shifting responsibility for these policies to private insurers and their reinsurers. Increases in limit purchased are also the result of expanded use of reinsurance by large pools. Flood Re and Pool Re in the UK and the Florida Hurricane Catastrophe Fund are significant first time buyers of reinsurance in 2015. We are happy to put you in touch with Guy Carpenter’s experts if you have any questions about risk transfer or this midyear report.
Guest Author and Attorney Reports on Latest in Fight against AOB Abuses
LMA guest author Wesley Todd, Esq. is an attorney and the founder of CaseGlide. CaseGlide’s claim and litigation management software enables insurers to obtain results that are smarter, more cost effective, and quicker. Through CaseGlide, Wesley provides insurers and their attorneys with predictive analytics, automated documents, and custom workflows. His daily involvement in the property and casualty claims industry provides him with unique access and exposure to the ever-increasing AOB abuses harming policyholders and the worst present day cost driver swamping insurers. Wesley has graciously allowed us to re-publish his most recent article highlighting the AOB abuse battle.
By Wesley Todd, Esq
In a few years, we are all going to look back on these last few months as the biggest turning point in assignment of benefits-related homeowner’s insurance claims in Florida.
You might be surprised as to where we believe the new turn will lead us.
We’ve seen this before in the Florida homeowners’ insurance industry: late notice hurricane claims, mold claims, and sinkhole claims. Advocates for one side take it too far, and it gives the insurance industry just enough ammunition to get the legislative change they need.
We believe that this just happened for water mitigation AOB claims in Florida. We’re about to tell you why.
First, some housekeeping:
If you don’t know what we are talking about, then please review our prior articles here:
Recent News on the Florida Assignment of Benefits Issue in Homeowners Insurance
Here are the three key events that have occurred in the last couple of months:
- Florida’s legislature failed to act on the insurance industry’s efforts to take legislative action click HERE for Scott Johnson’s article on the death of that bill.
- The Fourth DCA issued its opinions rejecting insurers’ arguments against the ability of a water mitigation contractor to obtain AOBs from homeowners.
Click HERE for a good analysis of those decisions from Bressler Amery & Ross.
In short, the Fourth DCA looked at insurers’ newest arguments against the assignability of an insurance policy. The insurers’ attorneys crafted unique perspectives on an issue that most believed had been settled for quite some time.
Ultimately, the Fourth DCA reviewed the same provision that had been in these policies for decades. Naturally, the Fourth DCA issued the same ruling on that provision that other courts had issued: homeowners can assign their claims.
The First DCA recently determined insurers cannot rewrite the insurance policy to limit the ability of a homeowner to assign a claim. Here is a copy of this decision: Security First v. OIR
Let me repeat the overall conclusion of the First DCA’s decision: insurers cannot rewrite their insurance policy to limit the ability of a homeowner to assign a claim. Why not? Because the new provision would confuse the policyholder.
This leads us to some logical questions here:
- Does the First DCA and OIR think that homeowners understand the current Florida law on AOBs?
- Does the First DCA think Florida homeowners consider whether a claim is assignable when they call a contractor to help them dry out their home?
- Couldn’t we just email the new provision to the law firms representing these AOB contractors and ask them to forward the email to their clients – the water mitigation contractors?
O Once they know it’s the law; they wouldn’t waste their time trying to get an unenforceable AOB from homeowners.
O They would ask to be paid.
O The homeowners would never even know anything happened.
O How could this be confusing to homeowners?
Setting aside this very unique “confusion” standard, the First DCA ignored Security First’s best argument: that old Florida law on an old insurance provision doesn’t apply to a new insurance provision.
The First DCA didn’t waste one word addressing this logical follow up. Instead, the First DCA said that the entire issue is for the legislature to decide.
Let’s back up for a moment. Here is a quick synopsis of how homeowners insurance statutes impact insurers’ abilities to write their policies: insurers have to offer the minimum coverage required by the legislature. They can offer more, but they can’t offer less. Viewed another way, if there is not a statute with a minimum coverage on an issue, insurers should be free to amend their policy any way they want on that issue.
So where is the bare minimum coverage in Florida statutory law that restricts Security First from taking this action? Nowhere!
The legislature has already addressed AOBs. The first sentence of Fla. Stat. 627.422 states that “[a] policy may be assignable, or not assignable, as provided by its terms.” (Emphasis added!).
Why is it that we need to bother the legislature again? It sounds pretty clear that the legislature has already addressed this exact issue: insurers can write whatever they want in their insurance policy with respect to the assignment of benefits issue.
What else does the legislature need to say about this to convince a court that an insurer may rewrite its policy to limit AOBs?
We could dive even deeper into this legislative obstacle that the First DCA placed in front of Security First; however, if you want more information on this, the best source would be to review Security First’s arguments here: Security First v. OIR Brief
Let’s think about what the First DCA might be saying here: if insurers have a provision in their policy that results in an adverse ruling, they cannot change the provision without the legislature passing a law.
One more time: if it turns out that an insurance policy provision isn’t good for the industry, insurers need to change the provision before getting any adverse rulings on the provision.
Otherwise, homeowners would be confused…
Well, if they are confused, homeowners wouldn’t be alone. Everyone is confused about this ruling.
Accordingly, Florida lawyers and lawmakers have hit the insurance industry hard. Not once, not twice, but three times in the past couple of months. What does this mean as we move forward?
This is Another One of Those Turning Points
We can’t help but draw the parallels between this and many similar issues in recent Florida homeowners insurance history, including late notice hurricane claims, mold claims, and sinkhole claims. If you don’t know what we’re referring to, then that answers your question. Eventually, claimants continue to push and push insurers until the problem becomes so large that insurers have enough leverage to solve it.
It’s pretty obvious that the AOB proponents just pushed insurers to that brink.
First, the AOB industry just obtained a ruling that says insurers cannot amend their insurance policies. This is something that no insurer is going to stand for.
Second, given the number of AOB related civil suits that have been filed in recent years in Florida courts, one can readily assume that attorneys representing homeowners and insurers have shared voluminous complaint information and data with insurance regulators. Such information and data represents just the type of evidentiary material legislative staffers often pick up the phone and request from the OIR and DFS. So, you can just about bet investigators with both agencies have been diligently following up on such leads to determine for certain whether the AOB industry is taking unfair advantage of consumers and unreasonably driving up claims costs to the detriment of consumers and the insurance industry as a whole.
Now that Florida lawyers and lawmakers have forced insurers’ hands, we believe there will be much more creative solutions to the AOB problem next legislative session, and mountains of data-based evidence to support the urgent and compelling need to do something.
Guest Contributor Reports on USDOL Independent Contractor Interpretation
This past Thursday (July 16) the U.S. Department of Labor’s Wage and Hour Division (WHD) issued an important interpretation of its regulations relating to the identification of employees who are misclassified as independent contractors. Workers’ Compensation expert and LMA guest author Steve Solomon has graciously provided us with an article he wrote explaining the recently issued WHD interpretation. Mr. Solomon is the Founder and President of WorkComp Partners, a Florida based insurance agency exclusively dedicated to Workers’ Compensation Insurance. Steve assists business leaders with implementing a unique process to reduce the number, cost and duration of employee injuries.
Steve’s approach is to engage with business owners and their teams in a knowledge based relationship with supportive leadership, tools and capabilities. As a former Navy Seal, Steve’s tenacity and will to achieve the best outcomes make him and his team at WorkComp Partners a great asset to a wide range of companies.
And now, in Steve Solomon’s own words:
The Wage and Hour Division (WHD) of the U.S. Department of Labor has today issued Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors. The misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers, and the entire economy.
Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces. Employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It hurts taxpayers and undermines the economy.
WHD supports the use of legitimate independent contractors, who play an important role in our economy, but when employers deliberately misclassify employees in an attempt to cut costs, everyone loses. As misclassification has spread, providing workers and employers a clear understanding of what makes a worker an employee becomes even more important. Administrator’s Interpretation 2015-1 analyzes how the Fair Labor Standards Act’s definition of “employ” guides the determination of whether workers are employees or independent contractors under the law. It discusses the breadth of the FLSA’s definition of “employ,” as well as provides guidance on the “economic realities” factors applied by courts in determining if a worker is indeed an employee.
WHD wants to give employers all the information they need to comply with the law, and we believe that this document, with its discussion of the relevant law and inclusion of numerous examples, will be helpful to both employers and employees. Additional guidance on misclassification is available on the WHD’s webpage: Misclassification of Employees as Independent Contractors. Please also see our blog post: Employee or Independent Contractor?
WorkComp Partners strives toward workplaces with decreased misclassification, increased compliance, and more workers securing a fair day’s pay for a fair day’s work.
The Doctors Company Challenges OIR Medical Malpractice Rates Order
The Doctors Company is challenging the OIR’s Order to reduce medical malpractice rates by 15 percent, according to newly filed documents in the state Division of Administrative Hearings. The company made their annual rate filing in December, which did not request a rate change, although an analysis by OIR showed that rates should be reduced 11.9 percent to 17.3 percent. In a June 2 Order, the OIR directed the company to make a new filing to reflect rate cuts of 15 percent. “The office finds that the (company) filings did not provide sufficient documentation or justification to demonstrate that the proposed rates were not excessive, inadequate, or unfairly discriminatory,” said the Order signed by Insurance Commissioner Kevin McCarty. The company responded to the Order by requesting a formal hearing, saying that The Doctors Company disputes facts cited by regulators in alleging that rates were excessive. The company is seeking a dismissal of the OIR’s Order. In our many years in the biz, we have seen medical malpractice rates skyrocket and drop. It will be interesting to see how this challenge unfolds and how other medical malpractice insurers will respond.
Medical Malpractice Caps in the News Again
Medical malpractice caps took a big hit on July 6 when a South Florida appeals court ruled that the law’s limits on pain-and-suffering damages (non-economic damages) are unconstitutional in personal-injury cases, such as the case of Susan Kalitan. Ms. Kalitan, a dental assistant, went into surgery for carpal-tunnel syndrome and ended up suffering a perforated oesophagus after tubes were inserted into her mouth and oesophagus as part of an anaesthesia process. The 4th DCA’s decision followed a Florida Supreme Court opinion last year that similarly rejected the malpractice law’s limits on non-economic damages in wrongful-death cases. The appeals court cited the Supreme Court’s opinion and said the damage limits violate equal-protection rights under the state Constitution. The 14-page decision stated, “caps are unconstitutional not only in wrongful death actions, but also in personal injury suits as they violate equal protection. … Whereas the caps on non-economic damages in (the section of state law) fully compensate those individuals with non-economic damages in an amount that falls below the caps, injured parties with non-economic damages in excess of the caps are not fully compensated.” The judges’ ruling said the appeal presented an issue of “first impression,” which means it is the first time the constitutional question has been decided. This ruling could be another blow to a controversial 2003 law that limited the amounts of money injured patients can receive in medical-malpractice cases. Under the law, damages were capped at different amounts, depending on factors such as the numbers of claimants in lawsuits and the types of defendants.
Citizens Board Member Wants to Explore More Risk Transfer Initiatives
Citizens Board member John Wortman is asking Florida’s Citizens Property Insurance Corporation to explore risk transfer initiatives for its inland and commercial accounts, as well as its coastal account. Mr. Wortman, former chief executive officer of Louisiana’s Citizens from 2007 to 2010, recommended a comprehensive risk transfer for 2016, while Citizens’ landmark catastrophe bonds and private insurance have been targeted at its coastal account. In response to Mr. Wortman’s recommendation, Lori Rodriguez, Florida Citizens Project Manager, Legislative and External Affairs, stated that there aren’t any plans to discuss the recommendation at this time and but it can be a future discussion for comprehensively focusing on all three accounts. Ms. Rodriguez said, “Focusing on the Coastal account has been our strategy up to this point as that was where there was a potential deficit in the event of a 1-100 year storm.”
Insurance Premium Tax Credit Extended Until 2018
The Florida Department of Revenue issued this tax information publication (click here) about the community contribution tax credit to the insurance premium tax, corporate income tax, and sales tax. Legislation enacted during the 2015 Special Session (click here) extended the tax credit until 2018 and expanded the types of donations that qualify for the credit to include donations relating to housing opportunities for persons with special needs. Additional information about this change can be found in the staff analysis of the bill (click here).
I’m Mad as Hell and I’m not Gonna Take it Anymore
I wonder how many of you remember the 1976 movie, “Network”? There is a scene in the movie where Peter Finch’s character Howard Beale ignores the teleprompter and lets out all of his frustrations of the world and his life by ranting “I’m as mad as hell and I’m not going to take this anymore!” and urges all viewers to open their windows and do the same. You can watch the scene at Youtube HERE but the rant went something like this:
“I don’t have to tell you things are bad. Everybody knows things are bad- worse than bad. They’re crazy. It’s like everything everywhere is going crazy, so we don’t go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is: ‘Please, at least leave us alone in our living rooms.’
Well, I’m not gonna leave you alone. I want you to get MAD! I don’t want you to protest. I don’t want you to riot – I don’t want you to write to your congressman, because I wouldn’t know what to tell you to write. All I know is that first you’ve got to get mad. (Shouting) You’ve got to say: ‘I’m a human being, %@!%*&$#*@% , My life has value!
So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell: ‘I’m as mad as hell, and I’m not gonna take this anymore!’ Things have got to change. But first, you’ve gotta get mad!…You’ve got to say, ‘I’m as mad as hell, and I’m not gonna take this anymore!’ Then we’ll figure out what to do…
A few days ago, I had the privilege of traveling to Orlando to address about 100 insurance fraud fighters who attended the quarterly Property and Casualty Insurance Fraud Task Force meeting. As I spoke to the audience I saw soldiers …every day soldiers who handle claims for insurance consumers who, for the most part, didn’t know what they signed, didn’t know about the lawyers who are taking advantage of them yet are “representing them,” and worse, didn’t know their perfectly good roof would be torn off and replaced with an inferior roof or their interior sheetrock would be ripped out so that unsavory roofers, plumbers and water extraction con artists could profit from the claim. And I said to these insurance company soldiers, “I’m mad as hell and I’m not gonna take this anymore”! I told the group that I was not going to let bad actors take advantage of me or take advantage of them and that we have to FIGHT this assignment of benefits/litigation for profit scheme that is an ever growing cancer that the courts seem to have condoned and the legislature doesn’t understand. I told them we have to stop the con artists by warning policyholders about them; strategizing with the media to expose them; talking to the attorney general’s office and the insurance regulators to penalize them; and educate prosecutors and law enforcement to jail them. Please call me and tell me what you are going to do after you have finished shouting from your window!
My Best, Lisa Miller