It’s Back to School Time for Kids, Young and Not So Young
Good grief, is it just me, or does everyone think time is moving way too fast? With the blink of an eye, the 2014 legislative session was over and our kids, grandkids, nieces and nephews were out of school for the summer. Now, summer is coming to a close and school is BACK IN. Just as a friendly reminder, keep close eyes out for those flashing yellow school zone signs. Before we know it, elections will be over and legislative committee meetings will crank back up. We’ve had a great summer traveling around and about visiting with lots of you, but we know what’s coming very soon. We’ll be making those trips to and from the Capitol building, carrying your thoughts and needs to the folks that you have elected to serve. In the meantime, hurricane season is almost half over and we continue to say our prayers for another few months of no hurricanes. If it does blow however, we just hope we learned some lessons from past years and will apply those if the worst happens. So, as we watch a low-pressure disturbance in the central Atlantic Ocean, Invest 96L, churn southeast of Miami, we are including just a just few reminders in this newsletter publication.
Hopefully we won’t Have to Go Back to Hurricane School too Soon
Gosh, I really, REALLY hope we have learned some good lessons during our hurricane events here in Florida. You know, it’s been ten years since the hurricane winds blew and Hurricane Charley ravaged southwest Florida and beyond. Also, nearly ten years ago Hurricane Wilma drowned the state in October of 2005, causing over $20 billion in damages. The Atlantic hurricane season runs from June 1 through November 30, however, statistics from the NOAA tell us that the peak of hurricane season is mid-September, with 85% of the action being between August 15 and October 15. That is the HEART of hurricane season for us and the time when many of the rapidly developing Gulf of Mexico hurricanes are born. So here we sit on August 25, about to enter the most severe of the hurricane months, saying those prayers and hoping for the best. Our fair state has certainly been blessed with an abundant period of recovery and growth over these last nine years of gentle wind, but we who live here and have lived here for most of our lives, know it only takes one big storm for us to be back at the beginning of rebuilding lives and livelihoods.
Thankfully, we’ve seen growth in the property insurance market and a reduction in Citizens’ policy counts. Rates are somewhat within reason all around and even with the slow rebound of the building industry; things do appear to be looking better. But as we know, when sinkholes form and windstorms blow, all Florida citizens pay, either through insurance assessments or increased rates, we are all in this together. So as we tip toe quietly through these next few months, let’s not forget that while we can’t stop the hurricanes from blowing, we can have an impact on the results by building safer homes (improved building codes have helped), strengthening the homes we have and of course, stocking up on hurricane supplies, including generators. We know for a fact that the property insurance industry has been working very hard to be prepared in the event of another catastrophic storm. So, we urge you to take the precautions we all know about and last but absolutely not least, support your insurance carriers, legislative leaders and folks like us at LMA, who work very hard to keep you safe and prosperous in every way, all the time.
Dade Circuit Court Decision in Comp Case Captivating Industry, Watchers
Wednesday 8/13/14- Miami Circuit Court Judge Jorge E. Cueto has issued a ruling stating that Florida’s Workers’ Compensation Act is “facially unconstitutional as long as it contains Section 440.11 as an exclusive replacement remedy.” The exclusive remedy provision “is no longer an adequate exclusive replacement remedy in place of common law tort.” While the act may have been a reasonable alternative to tort litigation 40 years ago, “the benefits in the Act have been so decimated since then,” according to the ruling, “that it no longer provides a reasonable alternative” to civil court. “The Act is the most intrusive way to compensate citizens for injuries on the job by taking away access to courts and removing the inviolate right to trial by jury.” Judge Cueto went on to state that a workers’ compensation act should provide some level of permanent partial disability benefit, which is absent from the Florida Workers’ Compensation Act as a result of the 2003 comp reforms. As a result of these findings, the Judge ruled that the Act is “unlawful, invalid and unconstitutional.” Although the ruling may only impact one of the state’s judicial circuits, it has created huge ripple effects throughout the comp insurance industry and employer trade groups, and may be the impetus for legislative action in the 2015 Regular Session. For those watching the case closely Attorney General Pam Bondi had 10 days from the date of the ruling to request a rehearing and is entitled to 30 days to appeal to the 3rd District Court of Appeal. LMA will continue monitoring this extremely important case and bring you updates as developments occur. Stay tuned!
Another Successful Workers’ Compensation Educational Conference
Last week the LMA Team spent three days at the 69th Annual Workers’ Compensation Education Conference held again this year at the Orlando World Center Marriot. The conference had over 9,000 registrants and an astounding schedule of educational events. Shall we say, up early and to bed late, was the agenda for each day as we did our best to cover as much as we could over those three days. This year’s event included breakout events from workplace safety, regulators roundtables, medical cost drivers, pain management, multi-state laws, risk management and many, many more. Believe us, it was tough to decide how to manage our time inasmuch as everything looked interesting. We wanted to be everywhere! And we can’t neglect to mention how great it was to spend time with old friends in the biz and make some new friends that we were blessed to meet and get to know. We did our best to take copious notes for the clients we were there to serve and provide good information back to them. We so appreciate their support for our business as we work hard to support theirs. If workers’ compensation is a part of your business, this is certainly a conference you will want to consider attending next year. Hope we see you there.
And, Speaking of Workers’ Comp…Is it time to Change the Payroll Calculation Methodology?
For all of our readers, we thought it useful to share the method for calculating basic workers’ compensation premiums…it has forever been the manual rate x the payroll x the experience mod. And of course, the manual rate is based on the classification code that is assigned to that particular payroll amount. Since all of this is done on an estimated basis, what happens then is the need for a review/ audit of the factors that go into the premium calculation at the end of the policy period. The number that most often changes is the dollar amount of the payroll, as well as, the proper classification of that payroll. At the conclusion of the audit, one of three different outcomes occurs: 1) an additional premium is owed to the carrier; 2) a return premium is owed from the carrier; or, 3) it was a great guess and nothing changes. Number 3) seldom occurs. When questions arise to why there is a premium difference, it is commonly because of how “payroll” is defined, and if the actual wages of the workers were considered. However, the term “payroll” in workers’ compensation premium calculations goes way beyond wages. The term can include vacation pay, holiday pay, bonuses (including stock), sick pay, auto allowances, commissions and more. To make the system a bit more relative to today’s work styles, there is an effort underway to change the way payroll is defined, since payroll rules may be outdated based on the reality of the U.S. workforce today. This issue is currently being discussed by the National Council on Compensation (NCCI) Underwriting Committee and if the NCCI were to recommend such a change, it would most likely have a sweeping impact on premium calculations and the need for carriers to adjust their rates to ensure adequate premiums are being collected. The workers’ compensation industry’s combined ratios have been over 100% for a number of years. Because of this, carriers have to be cognizant of the impact any changes in premiums would have on their surplus. Workers’ compensation is a constantly evolving business and those involved should stay on top of this important issue. We will watch this closely and let you know what we know.
Four Insurers to Remove 97,000 Citizens Policies in October
Friday 8/8/14- The Florida Office of Insurance Regulation (OIR or Office) has approved the removal of up to 91,499 multi-peril personal residential policies and 5,732 commercial lines polices from Citizens Property Insurance Corporation in the upcoming October Take-out. The following four domestic property & casualty insurers will be sharing in the close to 100,000 policies identified for removal:
•Heritage Property & Casualty Insurance Company has been approved to remove 17,000 policies from Citizens’ Personal Lines Account, 3,000 from Citizens’ Coastal Account, and 2,400 from Citizens’ Commercial Lines Account;
•SafePoint Insurance Company has been approved to remove 30,000 policies from the Personal Lines Account and 5,000 from the Coastal Account;
•Tower Hill Preferred Insurance Company has been approved to remove 17,797 policies from the Personal Lines Account and 4,449 from the Coastal Account;
•Weston Insurance Company has been approved to remove 14,253 wind-only policies from the Personal Lines Account and 3,332 from the Commercial Account.
Citizens’ Personal Lines Account contains non-coastal properties and the Coastal Account contains coastal properties. The take-out periods are October 21, 2014 for Personal Lines and Coastal Account policies and October 14, 2014 for Commercial Account policies and are at the request of the above companies. This announcement brings the total number of policies approved for take-outs this year to 466,572. Policies approved for removal by the OIR are not all necessarily eliminated from Citizens’ inventory. The policyholder has the choice to remain with Citizens. Policyholders choosing to be transferred have a lower risk of being charged higher amounts for Citizens assessments. To date, 119,434 policies have been removed from Citizens.
Citizens’ Foreign Travel Seeking Reinsurance Deal….Enough Said!
Often stories in the press have what media experts call a life cycle. The story about Citizens and its overseas travel to negotiate needed reinsurance has reached the end of its cycle in our opinion and as such, rather than taking ink space, we thought we would share one of the more balanced opinions about this topic and call it the end of the story for LMA newsletter purposes.
State Farm Contends Quarterly Report Data to OIR a Trade Secret
Data mining and web surfing, practices we continually engage in here at LMA searching for information of value to our clients is routinely a source of interesting happenings. During a recent web excursion we came across on the insurancenews.com web site the August 9th article written by Charles Elmore with The Palm Beach Post. The article concerns State Farm’s writing of new homeowners insurance policies in Florida and their court efforts to have certain data contained within their quarterly report filings with the Office of Insurance Regulation (OIR) deemed a trade secret and therefore, unable to be released to the public. The outcome of State Farm’s court action could have far reaching impacts on data and other information insurers commonly submit to the OIR. Accordingly, we have obtained State Farm’s circuit court filing and the OIR’s response in the event you wish to read them. We will monitor this court case and bring you updates as the case moves along.
DBPR to Conduct Workshop on Mold Remediator & Assessors Rules
The Florida Department of Business & Professional Regulation has issued notice of its intent to hold a rule workshop addressing Rule 61-31.701, Minimum Standards and Practices for Mold Assessors and Rule 61-31.702, Minimum Standards and Practices for Mold Remediator. The workshop is scheduled for Friday, September 5, 2014, from 10:00 a.m. – 12:00 p.m. via conference call. The Dial-In number is: (888) 670-3525, participant pass code: 7489217568, followed by the # sign. For a copy of the workshop agenda and additional information you may contact Richard Morrison, Executive Director, 1940 North Monroe Street, Tallahassee, Florida 32399. (850) 487-1395.
OIR to Provide Important Rate & Form Filing Training this Fall
October 30, 2014, is a date you may want to jot down. Insurance Commissioner Kevin McCarty and staff with the Office of Insurance Regulation will conduct its 2014 Industry Conference, “Navigating the Changing Insurance Environment” for company officials and other insurance professionals. The conference will focus on providing members of the industry with guidance on the form and rate filing process, as well as the application process. Presentations and Q&A sessions will be conducted by members of the OIR team. If interested, you may attend in-person or via live video stream online. The event will be held at The Florida State University Conference Center from 7:30 am – 4:00 pm on October 30, 2014.
Registration officially opens August 29. OIR will soon release further details regarding the conference and we will share those with you in an upcoming newsletter.
COURT RULES FOR INSURER IN DECOMPOSED BODY DISPUTE
Reprinted with permission from the News Service of Florida©
Wednesday 8/19/14- An appeals court sided with State Farm Florida Insurance Co. in a dispute about a claim stemming from a decomposed body in a condominium building. The lawsuit was filed in Palm Beach County circuit court after a condominium resident died and the decomposing body leaked bodily fluids that infiltrated the walls of a neighbor’s unit. The plaintiff in the case, Judy Rodrigo, contended that State Farm should pay for damage to her condominium and its contents. In part, the court found that Rodrigo failed to properly submit what is known as a “sworn proof of loss.” But part of the case also involved an argument that the insurance policy covered personal property damaged by an explosion. “While acknowledging that the insured (policyholder) made a claim for personal property damage, the insurer argued the policy covered personal property damage only for named perils, and a decomposing body was not one of them,” last Wednesday’s ruling by a three-judge panel of the 4th District Court of Appeal said. “The insured responded that the claim resulted from an ‘explosion,’ a named peril under the policy. She supplied an affidavit of a licensed physician, who attested that the deceased’s body ‘underwent advanced decomposition’ and ‘the internal contents of her body explosively expanded and leaked.’ “But the appeals court, which upheld a decision by a Palm Beach County circuit judge, rejected the explosion argument.”Rather than stretching common sense, the trial court correctly gave the term ‘explosion’ its ‘plain and unambiguous meaning as understood by the man-on-the-street,’ ” said the opinion, written by appeals-court Judge Melanie May and joined by judges Robert Gross and Alan Forst. “The plain meaning of the term ‘explosion’ does not include a decomposing body’s cells explosively expanding, causing leakage of bodily fluids. In short, although novel in her attempt to do so, the insured could not establish that the decomposing body was tantamount to an explosion.” The appeals court issued a similar opinion in the case in April but said it was substituting Wednesday’s ruling for the earlier decision.
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Parkland, Florida Chiropractor Sentenced in Federal Fraud Case
Friday 8/8/14- Lawrence Schechtman, 46, a chiropractic physician from Parkland, Florida has been sentenced to four years and four months in federal prison for his role in a staged accident insurance fraud conspiracy in South Florida. In addition to imprisonment, Schechtman was also ordered to make restitution of more than $2.4 million. This past December Schechtman pleaded guilty to one count of mail fraud conspiracy and four counts of mail fraud that occurred between 2009 and 2012. U.S. Justice Department prosecutors said that Schechtman worked at clinics in Palm Springs and Miami and signed off on treatments for people who fraudulently claimed they were automobile crash victims as part of a staged-accident fraud ring that operated in several counties. According to investigators, they recorded co-conspirators damaging vehicles with sledgehammers before the people they recruited to pretend to be “victims” called authorities. Also on August 8 the federal judge in the case sentenced Sircy Sacerio, also known as Sisi or Sircy Santos, 31, of Palm Springs, to four years in federal prison. Sacerio, who worked as a receptionist and office assistant, pleaded guilty to mail fraud conspiracy and five counts of mail fraud, prosecutors said. Sacerio was ordered to pay more than $1.14 million in restitution. Clinic owners filed false insurance claims through 21 chiropractic clinics that were owned and controlled by members of the conspiracy and got medical professionals, including Schechtman, to prescribe and bill for unnecessary treatments or services that were not actually provided, investigators said. Thus far, Operation Sledgehammer has charged 92 defendants in federal and state court, and federal judges have ordered defendants to pay more than $5 million in restitution to insurance companies.
Another Scam Lurks- Windshield Repairs
Last week we read an article about the owners of two windshield repair shops in Pleasant Grove, Utah being arrested for racketeering, insurance fraud and identify theft/fraud, and subsequently pled guilty to insurance and identity fraud. The two businesses allegedly worked together to solicit rock-chip windshield repair jobs by going door-to-door telling vehicle owners that they would take care of claims with their automobile insurance company without any cost to the owners. After they obtained the owners’ personal information, they contacted the insurance companies and impersonated the policyholders to obtain payment for repairs. In cases where multiple rock chips were repaired, they allegedly filed follow-up claims without owners’ knowledge days, weeks or months later. Utah officials stated that the two filed 1,674 claims with insurance companies, who paid them $102,000….for windshield glass!
Of course after reading this, we immediately wondered if windshield chip repair scams are another form of insurance fraud that lurks here in Florida. So with those questions and many others, we took a deeper look into “windshield repair scams and fraud” and found some very interesting information. In addition, we contacted our friends at the DFS Division of Insurance Fraud to get their input on what, if anything is going on with this type of fraud in our state. We were particularly interested in the kinds of referrals they are receiving and if/when those have turned into investigations or prosecutions.
All of you know how a scam works. You’re getting your car cleaned at the carwash and someone walks up and tells you that he can get you a brand new windshield with no cost to you. And you know the rest of the story! This is serious business and we assure you, these crooks will quickly disappear once they get an insured’s insurance information and finish the job. We talked to those hard working folks at the Florida Division of Insurance Fraud (DIF), they shared a windshield scam case with us that resulted in the arrests of four people in Jacksonville who were part of a scheme that resulted in almost 1,000 fraudulent insurance claims. In this particular case 15 different insurance companies received the nearly 1,000 auto glass claims and paid out over $775,000 to the perpetrators. The investigation revealed that employees at three Lee and Cates Glass Company stores allegedly overbilled for windshields and associated parts by billing insurance companies for a dealer windshield but using a less expensive, aftermarket item. Convictions followed and some monies were recovered, but this is only one case of folks paying the price for their crime. According to sources, this scam occurs frequently and we as citizens must stay alert to the fraud that is lurking in the shadows!
Before We Move too Fast from Summer to Fall
Like you, some of those days that flew by this summer, moved way too fast considering the tasks that we had on our list for that day, but then, there were those days that we wished would move a little faster so we could take that badly needed trip to the mountains for a short reprieve from Florida’s summer heat! We hope you did take a break from busy work worlds and had some R and R. It is as important, or maybe even more so, that getting all those tasks completed. Taking care of ourselves by taking a well-deserved break from it all brings us back with a fresh perspective and a hopefully, clearer focus on what is really important.
Until next time, do stop and take a break, you’ll be glad you did….Lisa and the Team