For the Heart to be inspired, the Mind must be informed

Week before last I had the pleasure of attending a gathering of 200 young insurance agents. (I say young because I turned 55 in January and hanging out with this generation continues my zeal and “youngness.”)  As I listened during the networking sessions, I was inspired by the passion and dedication these professionals have for our industry. They face the threat of the Internet, the uninformed buying public (in many cases), and the challenges of running small businesses. And even with all that, they shared their secrets and their dreams with me, the prior generation. Many of them are in family- owned businesses where their mothers and/or fathers laid the foundation years ago for their success today. One such young man commented that he and his 11 producers work very hard so that when the agency achieves certain goals, his mom and dad can go on the trips and excursions that are designated as rewards for high level production!  We know in this business that the insurance agent/agency process changes constantly and we also know that as it has always been the case, relationships, integrity and knowledge remain the keys to success in any industry and is certainly paramount in the insurance business.

Also during the first week of February, I was a speaker at the Space Coast Communities Association meeting, an organization representing over 400 condo associations and thousands of residents. Space Coast Communities Association is a DBA of Space Coast Condominiums Association, incorporated on June 17, 1975, and celebrating over 40 years of representing condo associations.  The organization provides educational services to condominium associations and their boards, as well as, welcomes homeowners’, cooperative and time share associations. Currently the number of common interest ownership housing association members is at approximately 19,000 residential units. The Association membership also includes many businesses that provide goods and services to the common interest ownership housing. The Association is proud to be a provider of service, knowledge and guidance to their members and the communities they represent.

As I and my LMA Team continue our travels across the state and country, we often think of the upcoming 2015 hurricane season and what may be ahead for the citizens of our state.  We have been so very blessed to escape those winds of tragedy and loss that come when the wind and water blows at our state border, but we must be prepared for the next event.  With that in mind, I want us to begin thinking about doing things a little differently going forward.  We are a close knit family and we will, as always, pull together when, not if, the next storm hits.  I have some specific ideas about how we can leverage our information, strengthen our relationships, and continue our great reputation of serving and keeping our promises to our policyholders. For those of you that I’ve met with personally, I’ll be sure to be in touch again in the coming weeks, and for those of you that I didn’t get to chat with face-to-face, I am making every effort to make that happen sooner rather than later.  In the meantime, call or email me, if you don’t hear from me first!

And speaking of hurricanes, most of us who live in Florida or who are otherwise familiar with the state’s topography know that when those storm winds blow, storm surge and other types of flooding will soon follow. On another of our team’s recent stops around the state we attended the Florida Chamber of Commerce’s Annual Insurance Summit in Orlando which hosted a variety of topics and one in particular was titled, “2015 Session Preview: Key Legislators Forecast The Issues Ahead”. State Senator Jeff Brandes (R- District 4) led the discussion, passionately sharing with the audience his desire for 40 years of NFIP claims data to be available to modelers, mappers, insurers, etc. As Sen. Brandes explained, he wants to knock down barriers to a private, primary flood insurance market-both admitted and surplus lines. The discussion focused on the day that Florida policyholders have options to NFIP and we are not held hostage to the federal government. Sen. Brandes will be introducing a bill this session to clarify some of the ambiguities from last year’s 2014 flood insurance legislation. As soon as its released we will share with our readers. We salute Sen. Brandes for his continued leadership in developing workable, accessible and affordable flood insurance solutions for all Floridians. Now, let’s recap some of the other items of interest that occurred over the last couple of weeks.

McCarty Announces Koon’s Departure; Altmaier Tapped as Successor

Friday 2/13/15- Insurance Commissioner Kevin McCarty has announced that on March 6 Richard Koon, OIR’s Deputy Commissioner of Property & Casualty will be departing to accept an opportunity in the private sector. In making the announcement, McCarty referred to Koon as a long-serving advisor and friend as well as a nationally recognized and highly respected expert in property and casualty insurance. In the same announcement the Commissioner revealed that David Altmaier, Director of Property & Casualty Financial Oversight, will be assuming the role of Deputy Commissioner of Property & Casualty effective March 9. Altmaier began his career with OIR in 2008 as an analyst, with much of his focus on the financial condition of insurers conducting business in Florida.

Prior to joining OIR, David worked as a licensed agent and high school math teacher. He graduated from Western Kentucky University with a degree in Mathematics.

AOB Crisis Takes Early Center Stage-May Become Session Hot Topic

What began in the summer of 2013 and identified by the former Insurance Consumer Advocate’s Homeowners’ Insurance Policy and Claims Bill of Rights Working Group as one of numerous topics perhaps needing significant attention, the Assignment of Benefits (AOB) crisis may well become a major hot topic during the upcoming 2015 Legislative Session. If early indications are a good predictor, fasten your seatbelts because this could be an interesting ride over the next few months. Coupled with out of control water damage claims, unlicensed public adjusting by water extraction and other damage mitigation firms and a gaggle of plaintiffs lawyers ready to do their bidding for manufactured “bad faith”, property insurers in Florida are besieged with skyrocketing AOB-related claims litigation costs which ultimately result in higher insurance costs for Florida consumers.

Fortunately, over the past two weeks finding some effective, common sense solutions to curb the AOB crisis has been a topic of discussion in a number of forums. Most importantly may have been an AOB Workshop held on February 9 and called by Rep. John Wood John (R-District 41), Chairman of the House Banking & Insurance Subcommittee. Prior to the workshop, Chairman Wood tapped a number of panelists with competing views about the AOB issue to speak and offer potential solutions for curbing AOB fraud and placing appropriate parameters around the use of AOBs. Some panelists strongly supported allowing insurers to incorporate into their policy forms strict prohibitions against the use of AOBs where policyholders give up any rights or ownership in their claims. While a trial bar representative argued that such policy language would be unconstitutional, another attorney representing Florida businesses made a compelling argument otherwise. The long and short is that well-spoken representatives for all sides of the AOB issue were allowed to speak and argued strongly why their positions held the most merit. To view the Monday, February 9, House Banking and Insurance Subcommittee 35 pages of documents which include discussions on ideas to reform assignment of benefits, please click HERE and scroll to the February 9 meeting packet. Also, for further information please see  Groelle & Salmon attorneys David Salmon and Andrew Labbe’s  article entitled “AOB’s Have Been Valid Since 1917 And If You Like Your Health-Care Plan, You Can Keep It.” by clicking HERE. It is this firm’s most recent article on the history of the Assignment of Benefits.

Meanwhile, also getting into the act on February 9 was Rep. John Tobia (R-District 53) who filed HB 669, the first bill of the session addressing AOBs. The bill contains two sections: It provides that “post-loss benefits provided by an insurance policy, may be assignable, or not assignable, as provided by the terms of the insurance policy.” Secondly, it prohibits third parties like contractors from being awarded attorney’s fees in cases where they are seeking payouts from insurance companies based on an assignment of benefits. The prohibition against attorney’s fee awards for contractors and other remediation vendors taking AOBs will surely be strongly opposed by the trial bar and others who are involved in and utilize post-loss AOBs.

We here at LMA are of course all over the AOB issue and will be involved in every aspect of decisions made by our legislators. Please call me if you would like to discuss these most recent events and we will keep you posted on developments as they materialize.

Commissioner Issues Informational Memorandum-Warns Against Sliding

Monday 2/3/15- Insurance Commissioner Kevin McCarty has issued Informational Memorandum OIR-15-01M reminding all insurers that the practice of “sliding” constitutes an Unfair Insurance Trade Practice. The Office said it issued the Informational Memorandum because it became aware that some insurers, offering travel insurance through retail travel agencies in conjunction with travel purchases made via websites, require consumers to opt out of purchasing ancillary travel insurance. If consumers did not opt out they would be automatically charged for the ancillary product(s). The entire Informational Memorandum can be viewed by clicking HERE.

Florida Supreme Court to Decide Important Dispute Over Scope of Coverage

Also referred to as the Sebo v. American Home Assurance Company case, the major question before the Court is whether Florida should follow the “concurrent cause” doctrine to find that an insured is entitled to property insurance coverage when multiple perils cause damage, including some perils that are excluded from the policy. When the case originally went to trial a jury awarded the policyholder about $8 million for property damage cause by wind, rain, and construction defects.  An appeal was filed by the insurance company in Florida’s Second District Court of Appeal (DCA).  On appeal, the policyholder asked the DCA to apply the “concurrent cause” doctrine to allow him to recover for damages that could have been caused by either weather events (a covered peril) or construction defects (an excluded peril).  The doctrine holds that when “multiple perils act together to cause a loss, and at least one of the perils is insured and is a concurrent cause of the loss, even if not the prime or the efficient cause, the loss is covered.”

The DCA refused to apply the concurrent cause doctrine in the case and ruled that construction defects, which were not covered by the policy, may also have contributed to the damage.  Therefore, the DCA overturned the $8 million jury award and sent the case back to the trial court to apply the efficient proximate cause theory to determine if a covered peril was the efficient proximate cause of the loss. Although the “concurrent cause” doctrine was rejected by Florida’s Second DCA, this doctrine has been adopted by a different state appellate court, Florida’s Third DCA.  Because the appellate courts differ, the insured appealed the case to the Florida Supreme Court, to settle the dispute and decide whether efficient proximate cause or concurrent cause should be used to determine property insurance coverage when damages are the result of multiple causes, including excluded perils. This is an extremely important case and the outcome will obviously impact Florida’s property insurers to a significant degree. We will follow the Supreme Court’s handling of the case and notify you of the outcome when the Court rules.

Disparate Impact/Disparate Treatment – What’s It All About?

We’ve been hearing quite a bit recently about the disparate impact rule and the case that was won in November 2014 by the American Insurance Association. Click LINK to review the case: (American Insurance Association v. HUD, 13- cv-966, U.S. District Court, District of Columbia).  In fact, one of the panels at the recent Florida Chamber of Commerce Insurance Summit discussed this in detail and while we thought we had fairly good knowledge of the topic, we were spurred to do a little research for both us and you. Knowledge is certainly powerful and we want you to have the power!  First, we wanted to take a look at the doctrine which says, the disparate impact doctrine holds that an organization may be found guilty of discrimination if its practices disproportionately disadvantage a protected group (even if the effect is unintentional) and it cannot provide a sound justification for the practice. We found an article from the Insurance Journal that reported on the November 2014 case. “Property/casualty insurer trade groups won a court victory Monday when a federal judge ruled in their favor that the U.S. Fair Housing Act does not prohibit housing practices including the pricing of homeowners insurance that have a disparate impact on minorities” was the lead sentence. The ruling, however, does bar disparate treatment, or intentional discrimination, toward minorities. U.S. District Judge Richard Leon of the U.S. District Court for the District of Columbia agreed to vacate the contested Department of Housing and Urban Development rule on disparate impact. The judge found that HUD exceeded its authority when it drafted the rule. “This is yet another example of an administrative agency trying desperately to write into law that which Congress never intended to sanction,” Leon wrote and called the rule  “nothing less than an artful misinterpretation of Congress’s intent that is, frankly, too clever by half.” Leon wrote that the Supreme Court has said that statutes prohibit disparate impact in the absence of discriminatory intent only when the statutes explicitly say so and that the FHA law has no such “effects-based language.” He also noted that applying the FHA law to insurance raises “serious concerns regarding widespread federal encroachment upon state insurance regulation” since the McCarran-Ferguson Act reserves insurance regulation for the states.

We understand that the Supreme Court is set to hear a disparate impact housing case over whether citizens may sue by showing a disparate impact on racial minorities, or whether they must prove intentional bias. The case slated to be heard by the court is Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. You can be sure we will absolutely keep our eyes on this topic and keep you informed about developments.

Suit against Insurers for Alleged Auto Repair Price-Fixing Dealt Major Blow

Wednesday 1/21/15- Gregory Presnell, a United States District Judge in Central Florida has issued an order dismissing the vast majority of allegations, including a critical component that auto insurers were allegedly fixing prices for automobile repair claims. The judge’s ruling on January 21 comes after similar lawsuits had been filed by auto repair shops in five other states and consolidated with the Florida case. It is believed that Orlando was selected as the centralization point for the lawsuits because Gunder’s Auto Center in Lakeland was one of the first repair facilities to initiate such court challenges to automobile insurers. Even a similar law suit filed by Louisiana Attorney General Buddy Caldwell has been transferred to Florida for hearings. The consolidated case in Florida has drawn tremendous industry attention with dozens of lawyers attending court hearings, representing 80 insurers and hundreds of automobile repair and collision centers.

The various complaints auto repair facilities filed in federal courts asserted State Farm had conspired with other insurance companies to keep auto repair payments dangerously low, leading to unsafe repairs. However, State Farm, Allstate, GEICO and Progressive insurance companies have been vigorously defending the suits. Further, this past August in a written statement State Farm noted that it has a long and proud history of achievements in advancing vehicle safety and that the company ranks well in customer satisfaction surveys. At one point in his 22-page order, Judge Presnell noted, “It is not illegal for a party to decide it is unwilling to pay a higher hourly rate than its competitors have to pay, and the fact that a number of the [insurers] made statements to that effect does not tip the scales toward illegality”. The federal judge’s order did leave open the possibility for the plaintiffs to re-file their cases and allowed one of the central allegations to go forward, a claim that State Farm is holding money it should have paid to the automobile repair facilities. Even though Judge Presnell allowed this one allegation to survive, he stated in his order that, “it seems unlikely that the Plaintiffs can ever state a conversion claim.” We will continue monitoring this important case and bring you updates as they occur.

Congressional Committee to Focus on Insurance Issues

The US House of Representatives’ Committee on Financial Services for this session of Congress released its “Oversight Plan” and the specific insurance topics listed include:

  • National Flood Insurance Program (NFIP): The Committee will conduct oversight of the NFIP and will study proposals to increase the participation of the private sector in the flood insurance market.
  • Terrorism Risk Insurance Program (TRIA). The Committee will monitor the Terrorism Risk Insurance Program, which was reauthorized on January 13, 2015.
  • Federal Insurance Office (FIO). The Committee will monitor the Treasury Department’s Federal Insurance Office, which was created by the Dodd-Frank Act to provide the Federal government with information and expertise on insurance matters.
  • Impact of Dodd-Frank Act Implementation on the Insurance Sector. The Committee will monitor implementation of various provisions in the Dodd-Frank Act and various international regulatory initiatives for their potential impact on the insurance sector.

We will be watching all these federal topics and much more, and share with you congressional actions impacting Florida’s insurance market and nationally.

As we close out this edition of the newsletter we want to remind you that our next newsletter will be largely focused on everything “session”. We’ll provide helpful information on how to track bills and remain up-to-date on the status of every issue you want to monitor. We’ll also let you know about the bills that have already been filed and the ones we believe will garner the most attention and stir up the most controversy. With another session of public policymaking just around the corner it’s a good time to remind you of just how important you are to us in making your positions known and giving us direction on the changes you would like to see made by our legislators. We will thrive off the energy you send our way and fight the good fight to make things better for your businesses, our industry and all the citizens of Florida. Until next time, thank you for all that you do to make our team members’ lives exciting and fulfilling! It’s our pleasure to serve you.

All my best, Lisa