Is it Real or Just a Little Teaser?

As we write today’s newsletter, the cool breezes are gently blowing through my office windows.  Yes, I have been waiting and waiting and waiting for the opportunity to open all the windows and have my morning tea as the windows stay open. So, the moment a little bitty breeze blew, the personality of my office changed to fall! Putting out the pumpkins and anything gold, orange and crimson is the plan for next week. It’s wonderful and refreshing for those of us who live in Tallahassee after those miserable, hot and humid dog days of summer.  We love living in Florida, but don’t get those ocean breezes throughout the year like lots of you who live on the state’s Atlantic coast; we hope that even our friends in the southern regions of our great state are feeling some sense of change in the weather.  We love this time of year and are excited about all the upcoming festivals of fall, as well as the upcoming political season before us.  We are ready to be a part of it all and hope you are as well!

Let’s Knock on Wood and Keep Tip Toeing Through Hurricane Season

Friday 10/3/14- We watch the weather just like you and were again happy to see these words last week from a weather service:  “Move along, there is nothing to see here. Accuweather noted that Tuesday, September 30, was the beginning of fall…the Weather Channel starts talking about the Gulf of Mexico and Western Caribbean as being the next centers of development. As of late Friday (10/3/14) afternoon however, there are no tropical depressions, tropical storms, or hurricanes in the Atlantic Basin. It’s great news for Floridians!  Another year of no CAT events would be a blessing for us all.  But, while we count our blessings, let’s do be aware of what our friends and fellow American’s are dealing with in California as those devastating fires destroy homes, families, businesses and the economic security of that state.  We’ve been there, haven’t we!

Industry’s Positive Impact on Florida Economy Highlighted by OIR Annual Report

As many of you know, the Florida Office of Insurance Regulation (OIR or the office) publishes an annual report of OIR activities covering the prior year. The report describes, in part, OIR roles and responsibilities, major activities and accomplishments, the Florida insurance market, insurance complaints, the impact of the national insurance industry on Florida’s economy, company financial information, market shares, and overall insurance company statistics. Below are a few data points we think you’ll find extremely interesting:

•Insurance and insurance-related entities provided 193,124 jobs, or 1.9% of all jobs in Florida.

•Florida insurance industry employees received $11.8 billion in total compensation, or 2.8% of all compensation received by workers in Florida.

•The Florida insurance industry generated approximately $19.8 billion in total economic output, or 2.5% of Florida’s gross state product.

•Florida ranked 11th internationally in total premium volume, with insurers collecting $117 billion in premium (including Citizens’ premium).

In addition, according to the Florida Department of Revenue (FDOR), premium taxes remitted by insurance companies totaled $704.8 million in fiscal year 2012, or 2.6% of all FDOR-administered General Revenue Fund sources available to meet the needs of this state as determined by the Legislature. Florida’s domestic property insurance companies continued to grow and strengthen financially in 2013 (They ARE an economic development success story!) and many have expanded their operations into other states. Finally, Florida domestic insurers remitted over $1.081 billion in dividends in 2012, with Life and Health insurers at $1 billion and Property and Casualty insurers at $81.7 million. We are pretty dang proud of our Florida-based insurance companies for sure and are so glad to be sharing a role in their success.  If you liked these few facts, there’s lots of other cool stuff there. Please click on OIR Annual Report to see the complete details.

No Breach of Contract Action Necessary for Bad Faith

-By Curtis Hutchens, Esq…

About Our Author: Mr. Hutchens severed for 20 years as legal counsel for Nationwide Mutual and Citizens Property Ins. Companies and is now a full time mediator. He welcomes your comments at [email protected]

Can an insurer be liable for bad faith under §624.155, F.S., after appraisal when there is no underlying breach of contract lawsuit? The 4th DCA, in Cammarata v State Farm allowed the insured to proceed with a bad faith suit although the insured never filed a breach of contract suit. The 4th DCA ruled that resolution of a breach of contract suit in favor of the insured is only one of several alternative prerequisites necessary to perfect a statutory cause of action for bad faith. The opinion determined that an appraisal award in an amount more than offered by the insurer was tantamount to a favorable resolution necessary to proceed with a bad faith action.

The Cammaratas suffered damaged to their home from the 2005 storm, Hurricane Wilma. State Farm estimated the damage as below the policy deductible. The Cammaratas demanded appraisal. Both parties petitioned the court to appoint a neutral umpire. The umpire issued an award in an amount above the State Farm deducible, but less than the Cammarata’s estimate. State Farm paid the award and the court dismissed the underlying petition to appoint an umpire. The Cammaratas then sued State Farm for bad faith.  A breach of contract suit was never filed.

In reaching its decision in Cammarata, the 4th DCA recognized two of its earlier decisions, Lime Bay v State Farm, 2012, and Trafalgar v Zurich, also issued in 2012, were in conflict. To resolve the conflict within its district, the 4th DCA reviewed Florida Supreme Court decisions from Blanchard v State Farm in 1991 to Vest v Travelers in 2000. Based on this review, the 4th DCA receded from Lime Bay, and confirmed its decision in Trafalgar which held an appraisal award “constitute[d] a favorable resolution of an action for insurance benefits [and] satisfied the necessary prerequisite to filing a bad faith claim”.

Based on  Trafalgar, Cammarata, and the 4th DCA’s understanding of Vest, it is not necessary for an insurance company to breach the conditions of its insurance  policy contract in order for an insured to move forward with a statutory bad faith action under §624.155. According to the 4th DCA, the three prerequisite elements necessary to bring a bad faith action are: 1) a determination of the insurer’s liability; 2) the amount of the damages; and 3) satisfaction of the notice requirement of 624.155(3)(a). The 4th DCA understands the Vest decision to mean that the first two conditions may be established when a settlement determines the existence of liability and the extent of the damage.

Eleven of the twelve 4th DCA judges concurred with the en banc Cammarata opinion, with one judge recused. Judge Gerber wrote a special concurring opinion to request the Florida Legislature review the Court’s decision. Judge Gerber is concerned that the majority opinion creates a slippery slope allowing an insured to seek bad faith damages subsequent to any settlement or alternative dispute resolution including appraisal, when the insurer pays more than its initial offer. He reminds litigators of the Vest decision in which the Supreme Court held that, “The insurer has the right to deny claims that in good faith it believes are not owed on a policy”. (Vest v Traveler’s Ins. Co, 753 So.2d 1289 (Fla. 1991).

The limits of the expansive nature of the Cammarata opinion will be determined by future bad faith litigation. The opinion raises potential issues applicable to any settlement agreement in which the insurer pays more than its initial offer. Whether, and how, the decision applies to negotiated settlements is unclear. Litigators and claims staff should consider the opinion in resolving claims and suits and in drafting releases. Please click HERE if you would like to read the 4th DCA’s entire ruling.

Citizens to Remove Hurricane Surcharge Beginning July 1, 2015

Thursday 9/25/14- During the meeting of the Citizens Board of Governors last Thursday in Winter Park, the Board agreed it was time to remove the 1 percent surcharge on homeowner’s policies.  The surcharge is ending two years earlier than previously planned since Citizens is expected to have sufficient funds to pay off monies borrowed in 2007 to help pay claims from Hurricane Wilma.  Thankfully, Citizens and most of Florida’s insurance industry, has been able to build up surplus monies since we haven’t had a direct hit from a hurricane since 2007. This is the second set of good news for policyholders following the announcement by state officials earlier this year to end the 1.3 percent FHCF surcharge that was also placed on insurance bills to pay off claims resulting from Hurricane Wilma. That surcharge will come off insurance bills this coming January. All in all, this news further demonstrates that Florida’s economy IS on the rebound. We are thankful, and we know you are as well.

OIR Approves Yet Another Large Take-Out Plan for Citizens Policies

Wednesday 10/1/14- The Florida Office of Insurance Regulation (OIR) has approved the removal of up to 211,080 personal residential policies and 4,408 commercial residential and non-residential polices from Citizens Property Insurance Corporation (Citizens) as requested by the following nine companies:

•American Colonial Insurance Company – approved to remove up to 22,050 personal residential policies from the Personal Lines Account (PLA)

•Cypress Property & Casualty Insurance Company – approved to remove up to 23,000 personal residential policies 20,337 PLA and 2,663 from the Coastal Account (CA)

•Heritage Property & Casualty Insurance Company – approved to remove up to 20,000 personal residential policies (17,000 PLA/3,000 CA) and up to 600 commercial residential polices from the Commercial Lines Account (CLA) and CA

•Homeowners Choice Property & Casualty Insurance Company – approved to remove up to 69,000 personal residential policies (24,150 PLA/44,850 CA)

•Mount Beacon Insurance Company – approved to remove up to 29,515 personal residential policies (19,515 PLA/10,000 CA)

•Olympus Insurance Company – approved to remove up to 10,000 personal residential policies (7,793 PLA/2,207 CA)

•SafePoint Insurance Company – approved to remove up to 18,000 personal residential policies (15,000 PLA/3,000 CA)

•United Property & Casualty Insurance Company – approved to remove up to 2,027 commercial residential policies (1,824 CLA/203 CA)

•Weston Insurance Company – approved to remove up to 19,515 personal residential policies in the CA and up to 1,781 commercial residential and non-residential policies in the CA

Citizen’s Personal Lines and Commercial Lines Accounts are mostly non-coastal properties and the Coastal Account are coastal properties. The take-out periods are December 16, 2014 for personal residential impacting both the PLA/CA policies and December 9, 2014 for commercial residential impacting both the CLA/CA policies. This is part of the state’s ongoing effort to reduce the number of policies in state-backed Citizens and transfer them to the private insurance market. This take-out approval brings the total number of policies approved for take-outs this year to 1,109,644.  The actual number of policies removed from Citizens this year as of August 30, 2014 is 124,995.

High Profile Workers Comp Case Set for Oral Argument on November 5, 2014

Many of our friends and colleagues who follow the world of workers’ compensation insurance will be interested to know that the high profile Castellanos v. Next Door Company workers’ compensation case has been set for oral argument before the Florida Supreme Court at 9:00 a.m. on November 5, 2014.  You will recall that in Castellanos vs. Next Door Company (Case No. 1D12-3639) decided by Florida’s First District Court of Appeal, the claimant challenged the workers’ compensation act as unconstitutional in its restriction, under the formula set forth in section 440.34 (1), F.S., (2009), to an attorney’s fee of only $164.54 where the attorney had expended 107.2 hours on the claimant’s behalf to obtain the benefit. The Court noted and did the following:

•Even though the Judge of Compensation Claims (JCC) described the statutory fee as inadequate, the District Court approved of the JCC’s determination they had no jurisdiction to consider the constitutional question.

•Even though the constitutional question was properly before the 1st DCA, the Court determined that it was “bound to conclude that the statute is constitutional, both on its face and as applied.”

•The District Court noted that in the landmark Murray case, while the Supreme Court essentially dodged the constitutional question, the Supreme Court certainly seemed to indicate the statute was not unconstitutional.

Thus, the first DCA certified the question of the constitutional adequacy of the fee to the Supreme Court. We will absolutely be there for you and let you know what happens.  If you can join us, great and if not, you can stream the live video of the Court’s session by clicking HERE.

Roofing Firm Employees Arrested in Alleged Insurance Fraud Scheme

Wednesday 10/1/14- The Department of Financial Services (DFS) has announced the arrests of five NBRC Roofing Company employees for allegedly organizing a $525,000 insurance fraud scheme. The Tampa-based company is accused of leaving 97 homeowners in Hernando, Hillsborough, Manatee, Pasco, Pinellas and Sarasota counties with unfinished roof repairs and liens on their homes after supposedly stealing insurance money intended to pay subcontractors.

An investigation by DFS’s Division of Insurance Fraud discovered the potential insurance scam involved visiting homeowners following a storm, convincing the homeowner’s roof repairs were necessary, helping the homeowners file insurance claims for repair and finally convincing the homeowners to give NBRC the sole right to make the repairs and the assignment of benefits for the insurance claim. But once NBRC was paid for insurance claims, the repairs would not be completed and the insurance money would be allegedly pocketed by NBRC employees. The defendants are each charged with organizing a scheme to defraud, a first degree felony punishable by up to 30 years in prison. The defendants arrested last Wednesday include:

* Frank Martin Pureber, Apollo Beach

* Carlton D Dunko, Tampa

* Stacy Lynn Dunko, Tampa

* Joel Samuel Deserio, Tampa

* Alexander Josue Gomez, Riverview

Additional arrests are expected to be made of the following individuals:

* Eric Shane Johnson, Bradenton

* Christopher Michael Rios, Brandon

* Benjamin Zebulon Matthews, Lakewood Ranch

The cases will be prosecuted by the Office of Statewide Prosecution which reports to Florida Attorney General Pam Bondi.

 California Voters to Address Med Mal Cap and Drug Testing of Physicians

In the upcoming November 4th general election voters in California will have the opportunity to approve California Proposition 46, a measure commonly referred to as the Medical Malpractice Lawsuits Cap and Drug Testing of Doctors Initiative.

If approved by voters, the initiative will:

•Increase the state’s cap on non-economic damages that can be assessed in medical negligence lawsuits to over $1 million from the current cap of $250,000.

•Require drug and alcohol testing of doctors and reporting of positive tests to the California Medical Board.

•Require the California Medical Board to suspend doctors pending investigation of positive tests and take disciplinary action if the doctor was found impaired while on duty.

•Require health care practitioners to report any doctor suspected of drug or alcohol impairment or medical negligence.

•Require health care practitioners to consult the state prescription drug history database before prescribing certain controlled substances.

Supporters of the initiative refer to it as the Troy and Alana Pack Patient Safety Act of 2014, after two children who were killed by a driver under the influence of alcohol and abused prescription drugs.  The measure, if approved, would create the first law in the United States to require the random drug testing of physicians.

Register and Attend the 2014 Insurance Conference on Financial Reporting

– 15 hours of Continuing education for CPAs

In every edition of our newsletter we try to inform you about as many  upcoming industry events (listed on the right side of the newsletter’s first page) we can identify in the event you wish to attend along with us. LMA endeavors to be everywhere as you all know, even if it’s a tag-team effort by our staff and associates. We think many of these events are worthy of your and our time, (otherwise they wouldn’t be on the first page) however, there is one we particularly recommend you attend in October if you can. It’s the Insurance Conference on Financial Reporting set for October 15 &16 in Winter Park, Florida.  If you haven’t registered already, check it out by clicking the following link:  2014 Insurance Conference on Financial Reporting.  We’ll certainly be there and hope to see you as well.

An Update to Set the Record Straight

In our June 24, 2013 newsletter edition we shared with you information from a Department of Financial Services press release about a Division of Insurance Fraud investigation and resulting arrest of three individuals for allegedly acting as public adjusters without a license. If proven,  engaging in public adjusting activities in Florida without a license constitutes a 3rd degree felony. The state’s investigation in this instance focused on a number of residential roof damage claims caused by a severe thunderstorm event impacting Northeastern Tallahassee on February 24, 2013. One of the individuals arrested and charged was Richard Allen Wilbur, a salesman for AAA Roof masters, Inc. based in Jacksonville. LMA has since learned that on or about April 23, 2014, the state attorney in Tallahassee dismissed all charges against Mr. Wilbur and closed the case. We believe this development serves as a good reminder for us all that defendants charged in criminal investigations are innocent of any wrongdoing until such time as they are convicted in a court of law or plead guilty to the charges. It’s our American system of justice and we wouldn’t want it any other way.

Until next time, be safe, be strong, and be kind to one another….Lisa and the Team