Our Country’s Heart and Soul Remembers 9/11

The day came upon me as most business days; full of appointments, phone calls, emails and work tasks.  It was still early in the day, before noon, that I was struck by the realization of what day it was, and what had happened thirteen years ago. As most did that day, I immediately thought of where I was and what I was doing when I first realized that a plane had flown into one of the Twin Towers.  It was more than I could wrap my mind around then and still is more than I can fathom.  Throughout the rest of the day, I went back and forth in my mind, remembering some of the images I thought I had forgotten.  And, trying to hold onto the old adage of, “What doesn’t finish us makes us stronger”.  I would like to think that our nation is much stronger since that terrible day and believe me, I do try to do my part each and every day to contribute.  But…you know, I really needed this reminder; because no matter how hard we try to have the best country in the world, we must continue to learn, grow and strengthen ourselves and therefore, our nation.  September 11, 2014, did come and go as the days of our lives do, but it served to help me hold my head a little higher and recommit to work even harder so that our fellow countrymen and women that died on 9/11/01, did not die in vain.  I hope your memories of that day did the same for you.

FEMA Issues Extension of Limited Waiver of the Single Adjuster Program

Wednesday 9/10/14- The Federal Insurance and Mitigation Administration within FEMA issued a memorandum to all Write Your Own (WYO) Principal Coordinators and the National Flood Insurance Program (NFIP) Direct Service Agent that extended the limited waiver of the Single Adjuster Program (SAP) that was originally granted for the period of 8/31/12 through 12/31/14. The waiver extension granted by the referenced memorandum is for the period of 1/1/2015 through 12/31/2015 and applies to all WYO insurers and the NFIP direct serving insurers.  What this means is that for the waiver period, FEMA will not require or authorize one adjuster to concurrently adjust both wind and NFIP flood losses.  In addition, FEMA will not provide NFIP policy identification and matching information to any wind pool, wind and hail underwriting association, fair plan, insurer of last resort or other organizations/insurers; won’t operate their claims coordinating office; and, if an insurer chooses to use a single adjuster to adjust both the wind and flood loss, FEMA will evaluate the flood claim as normal but will not pay for any liability that arises from using the single adjuster, whether for fees, expenses, judgments, awards or settlements. Of course you know how we feel.  Any time confusion and complications for the insured and/or the insurer can be reduced at claim time, we are all for it.  We also know, as you do, that when (not if) we have another “event” here in Florida, the wind will blow and the waters will flood, so anything to make claims adjusting better for all is a good thing! We would love to hear what you have to say about single adjuster claims adjusting.

Long Awaited Appellate Decisions on Sinkhole Losses are Finally Here

By Jonathon Hall, Esq. with the Groelle & Salmon law firm, Tampa, FL

For years sinkhole losses have taken a heavy toll against our insurance companies with significant legal costs and coverage payments.  The legal battles have focused on a few legal issues for which we are now seeing some appellate guidance.

One issue has focused on whether insurance companies can withhold payment for stabilization when there are disputes over how the property needs to be stabilized.  On August 20, 2014, the 2nd District Court of Appeals issued its opinion in Tower Hill Select Ins. Co. v. McKee.  The court considered whether the trial court had erred in ordering the insurer to pay for subsurface repairs before a contract was entered to perform the work.  The appellate court concluded that it was error, and held that the loss settlement provision permitted the insurer to withhold payment for subsurface repairs until the policyholder entered into a contract to perform the work.  McKee cited to State Farm Fla. Ins. Co. v. Phillips, 134 So.3d 505 (Fla. 5th DCA 2014), which also concluded that the insurer had the right to withhold payment for subsurface repairs until a contract was entered into.

In both McKee and Phillips, the appellate courts were faced with situations where the insurer was withholding payment for subsurface repairs after a lawsuit was filed.  In both cases the policyholder was arguing that the money for subsurface repairs was due and owing under the Loss Payment condition of the policy, whereas the insurer was arguing that the money for subsurface repairs was not due or owing until a contract was submitted as required by the Loss Settlement condition of the policy.  Phillips specifically held that the Loss Settlement condition was not ambiguous and to construe the condition otherwise would render it meaningless.  The McKee and Phillips decisions will be instructive in permitting insurers to rely upon its Loss Settlement conditions permitting them to withhold payment for subsurface repairs until a contract is submitted even in situations where the policyholder is alleging a breach of contract.

Another issue surrounding litigation is whether an insurer can rely upon a statutorily compliant report to deny coverage, but then accept coverage after a lawsuit is filed and after additional testing shows that a sinkhole loss occurred.  On September 5, 2014, the 5th District Court of Appeals issued its opinion in Omega Ins. Co. v. Johnson.  The court considered whether the trial erred in applying the confession of judgment doctrine for purposes of granting entitlement to attorney fees when an insurer initially denied coverage and later accepted coverage after a lawsuit was filed and issued payment.  The court determined that it was error and that the confession of judgment doctrine did not apply when an insurer relied upon a statutorily compliant engineering report to deny coverage.  The court held that an insurer can presume that the findings of the engineer are correct and is entitled to deny coverage if the insurer obtains a report which concluded that there was no sinkhole loss.  The insurer requested neutral evaluation after receiving a lawsuit and a report from a different engineering company that concluded there was a sinkhole loss.  The neutral evaluator concluded there was a sinkhole loss and the insurer accepted coverage and issued payments.  The appellate court found that the insurer had not wrongfully denied the claim and therefore there was no entitlement to attorney fees pursuant to Fla. Stat. 627.428.  The court referenced Fla. Stat. 627.428 (13) (2011) which states there is no confession of judgment if the insurer agrees to comply with the neutral evaluator recommendations.  The policy and the date of loss predate the statutory changes in 2011 suggesting that the specific section of the neutral evaluation statute applies retroactively.  Johnson relied upon State Farm Fla. Ins. Co. v. Colella, 95 So.3d 891 (Fla. 2nd DCA 2012) which held that “compliance with the statutes governing the investigation process goes a long way toward fulfilling the insurer’s obligations under its contract”.  The rationale in Johnson as well as Colella arguably conflicts with one of the holdings in McKee.  In McKee, the insurer had denied the claim based upon a statutorily compliant report.  The insurer argued that there was no basis for filing a lawsuit because the insured did not provide any reports refuting the findings of the insurer’s engineer and thus did not rebut the presumption of correctness which applied.  McKee held that the insureds had the right to sue once the claim was denied.  The trial court in McKee had also granted summary judgment on the grounds that the confession of judgment doctrine applied.  The appellate court did not specifically address the issue but affirmed the remaining portions of the final judgment.  Clarification from the 2nd District Court of Appeals is being sought on the confession of judgment issue.

Another issue which has been addressed extensively by the Middle District of Florida recently is whether the statutory definition of structural damage established in Fla. Stat. 627.706 (k) applies to policies that define a sinkhole loss as structural damage…caused by sinkhole activity but does not define structural damage in the policy.  The federal court has generally held that structural damage means damage to the structure and unless the policy specifically defines structural damage, the statutory definition does not apply.  The 11th Circuit Court of Appeals reversed such a ruling on August 21, 2014, in issuing its decision in Shelton v. Liberty Mutual Fire Ins. Co.  The 11th Circuit, interpreting Florida law, concluded that the statutory definition did apply.  The 11th Circuit relied upon well-established Florida law that existing statutes are incorporated into existing contracts.  The 11th Circuit disagreed with the District Court’s reasoning that undefined definitions should be construed according to their plain meaning without regard to statutory definitions.  The court held that the statutory definition applies in the absence of an alternative policy definition.  The court rejected Shelton’s argument that the statutory definition should not apply because the insurer failed to notify the Shelton’s of substantive changes to the policy.  The court found that “the application of mandated legislative changes is not a change in policy terms”.  See Fla. Stat. 627.43141 (1)(a).  The decision will permit insurers to rely upon the technical definitions set forth in Florida Statute 627.706 (2)(k) in adjusting sinkhole loss, so long as the policy went into effect and the loss occurred after May 17, 2011.

DFS Holds Hearing on Public Adjuster Conduct Rules; Ethical Requirements For all Adjusters

Tuesday 9/ 9/14- The Department of Financial Services (DFS) conducted a rule hearing to discuss and take public testimony on the agency’s proposed amendments to Administrative Rules 69B-220.051, Conduct of Public Adjusters and 69B-220.201, Ethical Requirements that apply to all types of adjusters.  It was an hour of lively discussion and debate, as well as, an opportunity for the Florida Association of Public Insurance Adjusters (FAPIA) and only a couple insurance company representatives (including your very own Lisa Miller & Associates), to sit at the table and have positive communication on how to address some of the issues at hand in the rule.  It was, however, disclosed at the hearing that only a few days earlier FAPIA had filed a challenge to the proposed rule amendments before the Division of Administrative Hearings.  A representative of FAPIA did state that the challenge was as a “place holder” in order to keep the Department’s proposed rule revisions from taking effect. It appears from the rule hearing FAPIA’s biggest complaint has to do with restrictions on solicitation by public adjusters.  We are hopeful that a compromise can be reached between public adjusters, insurers and DFS and will certainly do all we can to help that happen.  The official rule hearing record will remain open until close of business on Tuesday, September 23, 2014, if you are interested in submitting to DFS written comments about the proposed rule revisions.  You can review the proposed amendments to the two administrative rules by going to the following link: Notice of Proposed Rule

Citizens Rate Hearing Provides Crystal Clear Optimism for Floridians

Claims Committee Meeting Held September 8, 2014

The Citizens Claims Committee, chaired by Citizens board member Gary Aubuchon (former legislator, southwest Florida builder and terrific human being), discussed several major topics during its hour long meeting:  sinkhole litigation settlement efforts;  catastrophe adjuster preparedness; claims vendor selections for cat adjusting services, SIU/fraud detection and pursuit services, and claims estimating software; and Citizens overall claims metrics including subrogation and SIU/fraud detection activity from the unit led by Joe Theobald, an incredible fraud fighting soldier. The meeting started with an update about Citizens’ sinkhole legal settlement activity with claims staff reporting that the corporation has entered in to or is finalizing agreements with 9 law firms that represent approximately 1,700 insureds who have a disputed, pending sinkhole claim (Method of Repair and Denials). Page 1 of the Non-litigated Claims Update lists the 9 law firms and page 2 lists the 20 vendors that have been approved to do the repair work.  Insureds that choose to participate in the settlement program will see their pending lawsuits dismissed. In addition, the update  reported that Citizens presently has 26 Independent Adjusting firms under contract with commitments to provide a minimum of 3,250 adjuster resources upon request (see page 3 of the Non-litigated Claims Update).

The committee discussed the 9 page Recovery Cases of Interest addressing Citizens’ subrogation/recovery efforts as well as the 4 page SIU Cases of Interest listing 21 allegedly fraudulent claim fact patterns.  Of those, 18 were referred to DFS’s Division of Insurance Fraud. With respect to subrogation and recovery, many of you have discussed with us that subrogation is one of the most overlooked facets in a claims operation.  It makes so much sense but takes so much time.  Firms offer services to handle subrogation and recovery and often keep a percentage of what they collect but still the effort is a challenge with the insurer having to produce the proof the case has subrogation merit.  We would be interested in hearing your take about the most successful subrogation you have had and we will publish it for our readers!

The Committee concluded with the members reviewing the Claim Metrics which is a fascinating look at claims trends at Citizens. Note for example, that in July 2013, non-cat/non sinkhole claims are down almost half submitted in July 2014.  In addition, three vendor contracts were extended based on purchasing statutes that allow for emergency extension of existing contracts.  To view these contract extensions, please go to the following link HERE.

Consumer Services Committee Meeting Held September 10, 2014 

Citizens have launched an aggressive campaign to reach policyholders, agents, and stakeholders through social media platforms.  Three Twitter accounts have been created: @citizens_fla, @citizens_agents, @citizensflanews and a Facebook page with an expansion of the social media program to include education items, promotion of weather awareness weeks, reference links, and audience focused information have been completed.

The meeting agenda included a Clearinghouse Update with a focus on the launch of Citizens renewal business as of September 2.  The update included a description of the clearinghouse application worksheet (slide 9).  This document is the foundation for policyholders to participate in the clearinghouse and is completed by the agent. Since the launch of the clearinghouse renewal business, there have been 4,000 risks run through the clearinghouse and 10% received offers in the private market.  Agents receive emails on the policies each evening reflecting the interest from carriers for the policies in the agent’s book.  There are three customized emails generated on a nightly basis to insurance agents.  The emails direct the agent down one of three pathways (see slides 10 and 11):

•I. – Consumers who are ineligible for renewal with Citizens. These consumers are identified as having received an offer equal to or less than Citizens and there is a 60 day window to move the customer and effectuate coverage with the new company.

•II. – Consumers who will be renewed with Citizens but the email will go on to inform the agent that there are offers of coverage. The offer may be greater than the current premium of Citizens and it is up to the consumer to move.

•III. – Consumers who had no offers of coverage and the consumer will renew through the normal Citizens process.

Slide 16 includes the sample of the “75 day letter” (75 days in advance of the policy renewal for Citizens policyholders who renew on or after November 1, 2014).  This letter goes out 30 days before the standard 45 day renewal letter.  The 75 day letter includes the following clearinghouse language: In compliance with Florida law, Citizens uses its Property Insurance Clearinghouse to determine whether private-market coverage is available for renewal policies. If the clearinghouse identifies a private-market company willing to offer you comparable coverage with a premium equal to or less than your Citizens premium, your Citizens policy will be non-renewed, and you will receive information about any private-market offers available to you through the clearinghouse. If you receive a nonrenewal notice, contact your agent immediately to discuss your coverage options. Learn more about the clearinghouse HERE.

Citizens staff also updated the committee members on the Mobile Home Re-underwriting Project:  This project, near completion, was designed to bring mobile home risks in line with their actual cash value.  Citizens is working with the insurance consumer advocate and insurers to find the “industry standard” in underwriting mobile home risks.  “We are ensuring that our coverage is not greater than the private market and closely aligned to what the market offers,” said Citizens’ Christine Turner Ashburn.  “We don’t want to incentivize those to choose Citizens” but Ashburn went on to say she knows that the older mobile home population may have no alternatives to Citizens coverage.   The three main goals of this mobile home valuation project are to ensure:

•what do private carriers offer;

•is Citizens coverage aligned with the private market; and

•is Citizens ensuring that the market needs are met for these mobile homeowners.

The committee closed with a discussion by committee member Bette Brown regarding large commercial residential structures. Citizens’ underwriting team indicated that Citizens has changed its definition around short term rentals such that if a dwelling is rented out for more than 3 times in a calendar year for 30 days or less and is regularly rented to guests, then that is considered a “short term rental.” Properties in the wind zone are not eligible for multi-peril but are for wind coverage.

Good News – Bob is Improving Every Day

In the last edition of our newsletter we told you about our colleague and friend Bob Lotane, who was bitten by a mosquito and ultimately diagnosed with the West Nile Virus.  For those of you who are following Bob’s progress, we are happy to report that Bob arrived safely in Atlanta at Shepard’s Center last week for extensive rehabilitation. Doctors are continuing to wean him from the ventilator and though it is a difficult process, he is staying off the ventilator with oxygen assistance more and more each day. When he is off the ventilator, he gets to use a speaking valve on the tracheotomy and it is wonderful to hear his voice.  The doctors are still seeing some congestion in his lungs but time back on the ventilator clears his lungs and continues to train his diaphragm to move properly. We are excited that his senses continue to improve, and in fact, he has had some muscle movement in his left bicep and triceps. Bob is working so hard, both physically and mentally, and we ask for your continued prayers, notes, emails and all the encouragement you can send.  We want our friend back healthy again real soon!

Bad News – Another Florida Victim to West Nile Virus

Can it be true?  Yes, it is…a 34 year old woman in Daytona Beach has contracted the West Nile Virus.  Of course, health officials in Volusia County are urging folks to be extra careful and take all those precautions we advised you of in our last newsletter and more.  The Florida Department of Health also released a reminder last week that the virus was most likely transmitted by mosquitoes, and there is no medication that specifically treats West Nile Virus.  We again urge our readers to be extra diligent by removing ANY standing water in their yards and to please be aware when you or your families are outside during this “mosquito prone” time of the year.  This virus is serious and deadly! We don’t want to see anyone else go through the experience our dear friend is enduring.

Is Election Day Really Only Seven Weeks Away?

Yes it is and all eyes are on the Florida Governor’s race. And I mean all-around the country, as well as our Florida citizens.  Florida has always been a key state in so many ways, and this year’s Florida elections are very important as usual.  We’ve been keeping a watch on some of the polls and have seen interesting movement of late.  A recent statewide telephone survey showed Charlie Crist at 42% and Rick Scott at 40% (a point spread within the margin of error) and there are those who say by Election Day, it will be even tighter.  Scott has outspent Crist by nearly 3:1 on TV ads since March, $27 million to $10 million to be exact.  In this race, we can all be sure that during the next seven weeks, each campaign will pull out its biggest guns and shoot their way to the finish line.  Along with the Governor’s race, we are watching for changes in senate and house seats and soon after, the beginning of committee meetings.  We’ll be there as always and are excited about a new year and a new legislative session.

I Was Humbled and Very Touched

I am so proud of all the folks at LMA and know that it is their work and dedication, hand-in-hand with me and all my colleagues, that allow Lisa Miller & Associates to be a highly successful organization.  I was soooo humbled and proud recently, when those same folks stood beside me, some in person and some in spirit, as I was presented the Founder’s Award at the Annual Florida Association for Insurance Reform (FAIR) Awards dinner on September 4 in Tampa.  What a GIANT surprise….a magical moment and I absolutely had no idea this was going to happen! When it was time for me to accept my award, my cracking voice was only able to share with the audience of friends and loved ones, that all I really do is talk to as many folks as I can, over a “cup of coffee and a biscuit”, about how we TOGETHER can solve any of the world’s problems.  It’s not a complicated science or mathematical formula; it’s just people talking things through.  I know we all can agree with that “simple idea”, so let’s work together to put it into action every day and see what great things are accomplished!

Thanking and thinking of you every day….Lisa