Monday March 17, 2014
Are We Very Sure the Olympics are over?
I don’t know about the rest of you folks, but this week at/in/around the Capitol felt much like the running of a marathon for our team at LMA. We were all over the place, all the time; from early morning until dark-thirty. And of course, figuring out the new “spring forward” time didn’t help with the efforts in keeping it all together. However, with all that said, we did keep it together, and were in those committee meetings, listening, testifying and taking copious notes so we can continue to provide the details to our clients, friends and those who love our great state as we do. So, with that “color” of how the week went, here are some major topics of interest for your reading pleasure.
Battle over Assignment Of Benefits (AOBs) Reaches Feverous Pitch-Committee Action Occurs In Both House and Senate
Thursday 3/13/2014- Supposed consensus legislation born out of this past summer’s Homeowners Insurance Policyholder Claims and Bill of Rights Working Group (Working Group) has proven to be anything but consensus in the early weeks of the 2014 Legislative Session. Initiated by former Insurance Consumer Advocate (ICA) Robin Westcott, the Working Group in its final report recommended legislative action addressing a number of issues including seven new restrictions (parameters) on Assignment of Benefits (AOB), insurer post claims underwriting, tweaks to current alternative dispute resolution processes (claims mediation and neutral evaluation), as well as the creation of a homeowners insurance policyholder Bill of Rights. While some of the issues have proven controversial, the AOB issue has become highly volatile with water remediation firms, trial lawyers, and public adjusters seeking to remove from the legislation, restrictions on the use of AOBs. The controversy has, in response, drawn heavy involvement from CFO Atwater, current ICA Steve Burgess, and other stakeholders promoting the enhanced consumer protections. However, on Thursday 3/13/14, Sen. Aaron Bean (R-Nassau/Duval), sponsor of the Working Group’s legislative proposal (CS/CS/SB 708), removed the seven new parameters around the use of AOBs, with some calling the reforms draconian and others saying it is the ultimate in consumer protection. The Senate Appropriations Committee adopted Sen. Bean’s amendment that he reluctantly offered completely striking the bill’s section addressing AOB reform. Sen. Bean said, “The Assignment of Benefits language in this bill was an attempt to bring clarity to the assignment process; however, we are unable to bring all parties together, so I offer this amendment to strike this portion of the bill.” The bill passed the committee and is headed to the Senate floor. Sen. Bean’s measure now consists of a Bill of Rights which homeowners insurers would be required to provide to policyholders within 14 days after a notice of claim, a prohibition on post-claim underwriting and definitions, and prohibitions on conflict of interest in mediation, arbitration and neutral evaluation. The AOB controversy is far from over however. A House bill (CS/HB 743) sponsored by Rep. Charles Hood (R-Volusia), includes language authorizing insurance companies to prohibit assignment of benefits in many circumstances. On Tuesday (3/11/14) the House Insurance & Banking Subcommittee unanimously adopted an amendment by Rep. John Tobia (R-Brevard) to CS/HB 743 that bans post loss assignment of rights, benefits, and causes of action with the exception of naming a contractor a loss payee, payment of attorney’s fees, and public adjuster fees. Rep. Tobia’s adopted amendment read as follows:
(2) A property insurance policy may prohibit the post-loss assignment of rights, benefits, causes of action, or other contractual rights under the policy, except:
(a) An insured may assign the right for payment to a person or entity providing services or materials to mitigate or repair damage directly arising from a covered loss. The assignment is limited solely to the right to be named as co-payee for the benefit of payment for services rendered and materials provided.
(b) For the limited purpose of compensating a public adjuster for services authorized by s. 626.854(11).
(c) For the payment of attorney fees for representation of the insured.
(3) Except as provided in subsection (2), any post-loss assignment of rights, benefits, causes of action, or other contractual rights under a property insurance policy that prohibits such assignment renders the assignment void.
The House bill has two remaining committee stops where it could be amended further; however, if the AOB prohibitions adopted Tuesday survive, it will set the stage for a continuing battle over the issue. Your LMA team remains all over the AOB issue and will quickly report developments as they occur
OIR Likely To Seek Statutory Extension for Form Approval
LMA has learned that there’s a good chance that Insurance Commissioner Kevin McCarty will, this Session, seek legislative authority for an extension of time for the Office of Insurance Regulation (OIR) to approve form filings. Should this occur, McCarty will likely ask the Legislature for 90 days to consider insurer form filings instead of the current statutorily allowed 45 days. Because the bill filing deadline for the 2014 Regular Session has already passed, the Commissioner would have to secure an amendment to an existing insurance bill, one that appears to have a good chance of passing and becoming law. As you will recall, in a newsletter earlier this year, we informed you of the expiration of OIR Order 137063-13 which from June 24, 2013, through December 31, 2013, exempted certain form filings from the advanced filing requirements in Section 627.410, Florida Statutes. Effective January 1, 2014, all personal lines form filings subject to s. 627.410 became subject to prior review and approval by the Office of Insurance Regulation. However, since January, because of the time required to properly review and respond to form filings, OIR has been waiving the 45 day deemer clause in statute. Recently, however, OIR heard from certain legislators that the Office lacked the authority to waive deemer dates and as a result, the Commissioner’s office has been issuing Notices of Denial if it had not reached the decision to approve a form filing within 45 days. If the Office can secure legislative authority for 90 days to review and approve personal lines P&C form filings, it will match the 90 days the Office has in law to review and respond to rate filings. The Office appears comfortable that 90 days is an adequate amount of time to address both form and rate filings. LMA will continue monitoring this issue and let you know if OIR is successful in having an amendment adopted.
Flood Insurance Dilemma Continues Garnering Major Attention
Friday 3/14/14- This past week, the flood insurance crisis brought about by skyrocketing premium increases courtesy of the federal Biggert-Waters Act of 2012 (BW12), continued to attract major attention from Florida Legislative and U.S. Congressional leaders, as well as the media. On Tuesday, (3/11/14) Sen. Jeff Brandes (R-Hillsborough/Pinellas) again presented his amended flood insurance bill (CS/SB 542) before the Senate Banking & Insurance Committee where it quickly won overwhelming approval. Because the Brandes bill has already successfully navigated its other committees of reference, the measure is on Thursday’s (3/20/14) Senate floor agenda of bills to be heard. However, there remain differences between SB 542 and the House’s legislation addressing flood insurance, CS/HB 879, sponsored by Rep. Ed Hooper (R-Pinellas), which was passed by the House Banking & Insurance Subcommittee on March 5th. The major difference, and one quickly becoming particularly contentious, is a provision in Sen. Brandes’ bill that allows policyholders to purchase flood insurance limited to the amount of their outstanding mortgage. House Insurance & Banking Subcommittee Chairman Bryan Nelson has stood firmly against the provision with House bill sponsor Ed Hooper and other members joining the chorus. In fact, as late as this past Thursday, Nelson assertively restated his position. “That will never happen if I have anything to say about it,” Nelson said of mortgage coverage. The mortgage would get paid, but there would not be money to repair the home and “you could have blighted block after block.” LMA has also learned that Sen. Brandes is sticking to his position and intends to vigorously support his bill’s option for consumers to purchase flood coverage sufficient only to cover their mortgage(s). In related news, Thursday (3/13/14) afternoon the U.S. Senate moved relief from the major rate impacts of BW12 a major step forward by passing The Homeowner Flood Insurance Affordability Act by a vote of 72-22. This is the bill the U.S. House passed on March 4th. The legislation will now move directly to the President’s desk for signature, and if signed, will bring major relief to Floridians in the following ways:
•Reinstates Grandfathering – This bill permanently repeals Section 207 of the Biggert-Waters Act, meaning that grandfathering is reinstated. All post-FIRM properties built to code at the time of construction will have protection from rate spikes due to new mapping – for example, if you built to +2 Base Flood Elevation, you stay at +2, regardless of new maps. Also importantly, the grandfathering stays with the property, not the policy.
•Caps Annual Rate Increases at 18% – This bill decreases FEMA’s authority to raise premiums. The bill prevents FEMA from increasing premiums within a single property class beyond a 15 percent average a year, with an individual cap of eighteen percent a year. Pre Biggert-Waters, the class average cap was 10%. Currently (Post Biggert-Waters), the class average cap is 20%. The bill also requires a 5% minimum annual increase on pre-FIRM primary residence policies that are not at full risk. The updated legislation also states that FEMA shall strive to minimize the number of policies with premium increases that exceed one percent of the total coverage of the policy (e.g., 1% of $250,000 = $2,500).
•Refunds policyholders who purchased pre-FIRM homes after Biggert-Waters (7/6/12) and were subsequently charged higher rates
•Permanently Removes the Sales Trigger – This bill removes the policy sales trigger, which allows a purchaser to take advantage of a phase in. The new purchaser is treated the same as the current property owner.
•Allows for Annual Surcharges – This legislation applies an annual surcharge of $25 for primary residences and $250 for second homes and businesses, until subsidized policies reach full risk rates. All revenue from these assessments would be placed in the NFIP reserve fund, which was established to ensure funds are available for meeting the expected future obligations of the NFIP.
•Funds the Affordability Study and Mandates Completion – This legislation funds the affordability study required by Biggert-Waters and mandates its completion in two years.
•Includes the Home Improvement Threshold – This bill returns the “substantial improvement threshold” (i.e. renovations and remodeling) to the historic 50% of a structure’s fair market value level. Under Biggert-Waters, premium increases are triggered when the renovation investments meet 30% of the home’s value.
Whether Florida’s House and Senate can come to an agreement on the mortgage coverage issue and pass a flood insurance bill this Session remains to be seen. However, even in light of last Thursday’s Congressional action, there will likely remain considerable pressure on Florida policymakers to pass a measure creating a private market alternative to purchasing flood insurance from the National Flood Insurance Program. The current Florida Legislature likes to tout that it’s all about creating consumer choice and what better way to walk the talk than to establish a Florida-based private market alternative to the NFIP. LMA will continue closely covering the flood insurance issue in both Tallahassee and Washington and bring you updates as soon as they occur.
Citizens Board of Governors Meeting: Execs Announce Major Sinkhole Settlement
Wednesday 3/12/14- The Citizens Property Insurance Corporation Board of Governors met this past Wednesday where a massive settlement of more than 300 sinkhole claims was announced by the insurer’s general counsel. The unique settlement will allow the homeowners to receive professionally recommended repairs and could save the claimants and Citizens upwards of $30 million in avoided litigation expenses and related costs. Under the settlement, Citizens will pay for underground repairs as recommended by a professional engineer, who will monitor repair work and order any additional underground repairs deemed necessary. Policyholders will be allowed to choose a contractor from a pre-approved list. Citizens also will pay for any additional above ground damage caused by the sinkhole repair. The corporation will pay the law firm representing the claimants $2 million for legal fees and expenses already incurred. Under the global settlement, Citizens has agreed to pay $10,000 for cases in the early stages of litigation and $5,000 each for cases in which discovery has begun but litigation has not yet been filed. Chris Gardner, chairman of the Citizens Board of Governors, said the settlement will provide closure to property owners by helping them repair and protect what, for many, is their most valuable investment. Local communities and future buyers also will benefit from increased property values and the knowledge that professional repairs have been completed. The sinkhole settlement is one of many efforts being spearheaded by Citizens’ coordinating council, which is overseeing Citizens’ legal efforts on sinkhole, water damage, and other litigated claims.
Citizens Sinkhole Managed Repair Program
Wednesday, 3/12/14- On the same day as the Citizens board proudly announced its “win” by having 300 of its outstanding 1200 sinkhole claims enter its voluntary sinkhole repair program, another sinkhole discussion occurred during a spirited Senate General Government Appropriations Subcommittee meeting. The Citizens Sinkhole Managed Repair Program (MRP) passed this subcommittee but not without a major change driven by Sen. Jack Latvala (R-Pinellas) which continued the practice of Citizens paying the policyholder for sinkhole repairs versus paying the contractors performing the work. The bill, SB 416, by Senator Wilton Simpson (R-Pasco) creates a structured sinkhole repair program, whereby Citizens would establish a contractor list and ensure sinkhole claimants’ homes are repaired – no questions asked. There had been rumblings that certain senators were questioning the logic behind this bill but nothing was more obvious than seeing Sen. Jack Latvala (R-Pinellas) huddle with the Florida Justice Association/trial lawyer lobbyists in the back of the room, while he led the charge to have Sen. Rob Bradley (R-Clay) file an amendment to strike language agreed to by Citizens regarding repair dispute remedies, and insert language many say will simply continue the nefarious practices Citizens currently experiences in managing disputed sinkhole claims. Almost 90 minutes of the two hour meeting saw exchanges between actual homeowners who had been duped by attorneys promising to have their Citizens sinkhole dispute resolved, only to find out it wasn’t, to members of the trial bar questioning whether this law was even needed, citing that the reforms in SB 408 were working (Citizens continues to experience a 400% loss ratio in the personal lines account when it comes to sinkhole claims). Supporters of the bill and Sen. Simpson are working hard to ensure the bill’s current provisions can be restored to codify the Citizens voluntary repair program in statute. The bill’s next stop is the Senate Appropriations committee and then the Senate floor.
Senate Banking and Insurance Committee: Senate Bill 7062, Citizens Reform Bill Further Debated
Tuesday 3/11/14- The Senate Banking and Insurance Committee passed SB 7062 which is this year’s Citizens reform bill, focusing primarily on reducing its exposure of commercial residential risks. The reforms, driven primarily by Committee Chairman David Simmons (R-Seminole/Volusia), have been the subject of almost two months of discussion. This week the debate focused on an amendment offered by Sen. Jeff Clemens (D-Broward) to strike the language allowing surplus lines carriers in the Citizens’ clearinghouse if no admitted company offer was available for Citizens policyholders. Sen. Tom Lee (R-Hillsborough) and other senators expressed grave concern that surplus lines companies are unregulated and unsuspecting policyholders will not know the consequences of being placed in this unregulated market. Readers will recall that surplus lines companies who attempted to be included as a Citizens takeout option in 2011 were summarily defeated because of a failed campaign to convince legislators they should be included. So the label “surplus lines” immediately draws concern. Sen. Simmons gave an impassioned plea to leave the surplus lines options in the bill, but said if two or more senators asked to have the language removed, he would remove it at the bill’s next stop. We will keep you apprised of the progress of this Citizens reform bill. There is no bill in the house with similar Citizens reforms so it is unclear if any Citizens changes will occur this session.
Two House Bills and Two Senate Bills Work on Improvements in Workers’ Compensation Insurance
HB 271, sponsored by Rep. Travis Cummings (R-Clay) and SB 444, sponsored by Sen. Bill Galvano (R- Desoto, Glades, Hardee, Charlotte, Highlands, Hillsborough and Manatee) are companion Department of Financial Services, Division of Workers’ Compensation/Industry bills that address getting employers back up and running more quickly after a stop work order is issued, and at the same time continue the Division’s work of making sure employers provide the required workers’ compensation coverage at all times. At the last two stops, HB271 was read in the Regulatory Affairs Committee on 3/10/14 and placed on the House calendar on 3/12/14. SB 444 didn’t see any action this week. HB 1351, sponsored by Rep. Charlie Stone (R-Levy/ Marion) and SB 1580, sponsored by Sen. Alan Hays (R-Lake/ Marion/Orange/ Sumter) are identical bills that address workers’ compensation fees, revise maximum reimbursement allowance for inpatient hospital care, revise the date by which panel shall approve allowance, and revise maximum compensable charges for hospital outpatient care. Of most interest in the bill are the changes that will revise the maximum reimbursement allowances for inpatient hospital care from a schedule of per diem rates to 140 percent of the rate allowed under the Medicare hospital inpatient prospective payment system; as well as, all compensation charges for hospital outpatient care shall also be reimbursed at 140 percent of the rate allowed under the Medicare hospital outpatient prospective payment system. A national rating organization was quoted as estimating that implementation of a hospital inpatient and hospital outpatient fee schedule based upon 140% of Medicare reimbursement rates as provided in both bills will result in a preliminary cost impact of -7.0% (-200M) on overall workers’ compensation system costs in Florida.
The committee had planned to hear another workers’ compensation bill, HB1007, sponsored by Rep. David Hood (R-Volusia), but it was temporarily postponed without being presented. This bill speaks to major contributing causes and the use of pre-existing conditions as a determining factor, as well as, drug testing, in advance compensation payments, and light-duty assignments as a bar to benefits for permanent total disability.
Division of Insurance Agents and Agency Services Bills Moving Forward Through Committees
Tuesday 3/11/14 – Late Tuesday afternoon, CS/SB 1210 Division of Insurance Agents and Agency Services, was heard by the Senate Banking and Insurance Committee [Chaired by Sen. David Simmons (R-Seminole/Volusia)]
and passed with 11 yeas and 0 nays, without debate. The companion bill to SB 1210, CS/HB 633, sponsored by Rep. Clay Ingram (R-Escambia), passed the House Government Operations Appropriations Subcommittee on Tuesday March 4, with 12 yeas and 0 nays. The only debate that has been raised was on HB 633, was during the House Regulatory Affairs Committee by Rep. Matt Gaetz (R-Okaloosa) when he questioned how misconduct and wrongful acts would be defined. (If passed, the bill will make the agent in charge at the insurance agency responsible for wrongful acts and misconduct committed by the agents at the agency.) When Rep. Matt Gaetz questioned the sponsor about the difference between misconduct and wrongful acts and was not provided with an answer from the sponsor or the DFS, he decided to offer an amendment, which passed the committee, to delete that particular language from the bill. Ultimately this bill passed the House Regulatory Affairs Committee with 17 yeas and 0 nays. Both A & A bills appear to reflect CFO Atwater’s efforts to have all the divisions under the Division of Financial Services undergo internal reviews to make sure that the laws within the Florida Statutes, administrative rules, and policies/procedures, respond to the needs of the industry regulated under his watch, with efficiency, effectiveness, and conciseness. Because of the rapid pace of these bills through the committee process, it looks like they will be ultimately passed both the House and Senate floors. In general the bills do the following:
CS/SB 1210 revises the name of the division; requires a branch place of business to have an agent in charge; limits the types of business that may be transacted by certain agents; revises terminology relating to investigations conducted by the Department of Financial Services and the Office of Insurance Regulation with respect to individuals and entities involved in the insurance industry; and, revises a prohibition against unlicensed transaction of life insurance. CS/SB 633 does much of the above with the addition of, revises original appointment & renewal fees related to certain insurance representatives; prohibits an insurance agency from conducting insurance business at certain locations; revises licensure requirements & penalties; revises requirements relating to applications for insurance agency licenses; revises scope of examination for limited agent; requires department to suspend certain licenses & appointments; revises requirements for licensure of nonresident surplus lines agents; revises qualifications for approval as mediator; authorizes DFS to adopt rules; prohibits persons seeking to be licensed by division from denying or failing to acknowledge certain expunged or sealed records.
Robleto Returns as Office of Insurance Regulation, Life & Health Deputy Commissioner
Wednesday 3/12/14- Insurance Commissioner Kevin McCarty today announced the appointment of Rich Robleto to serve as Life and Health Deputy Commissioner. “Rich Robleto is a seasoned professional with more than 30 years of insurance experience and knowledge,” stated Commissioner McCarty. “I am pleased that Mr. Robleto has accepted this appointment, bringing his proven skills to the Office as we work on the complex issues surrounding the life and health insurance marketplace.” As the Deputy Commissioner for Life and Health, Robleto will oversee the Life and Health Product Review and Financial Oversight Units, which provide regulatory oversight of insurers operating in Florida, including life and health form and rate filings, licensure, and financial solvency.
Prior to joining the Office, Robleto served as the Executive Director of the Florida Healthy Kids Corporation, where he was instrumental in Florida KidCare’s milestone of six consecutive years of enrollment growth and an overall 35 percent reduction in the number of uninsured children. He also previously worked eight years for the Office and received the highest recognition given by the National Association of Insurance Commissioners – the Robert Dineen Award – which is presented annually to an individual in honor of his or her exceptional success as an insurance regulator. Before moving to Florida, Robleto spent 26 years at Blue Cross and Blue Shield of Delaware. Robleto earned a Bachelor’s degree in Mathematics from Temple University and a Master’s degree in Business Administration from the University of Delaware along with numerous industry certifications. Robleto’s appointment will be effective on March 24, 2014. Congratulations Rich!
This Session’s Fair Claim Settlement Act Wins House Committee Approval
Wednesday 3/12/14- Today during a meeting of the House Civil Justice Subcommittee enough members showed support to pass Rep. Kathleen Passidomo’s (R-Collier) Fair Claim Settlement Act (HB 187). By an 8-4 vote the Subcommittee for the second session in a row passed this important legislation addressing the state’s perilous bad faith laws. Under the current system, claimants who are not policyholders are not required to tender a demand or succinctly convey the amount of money required to reach a fair settlement. The lack of defined guidelines has allowed trial attorneys to leverage the judicial system frequently resulting in large payouts that grossly exceed policy limits. Passidomo’s measure creates a safe harbor for third-party bad faith claims. The bill requires that carriers must be provided a written notice of loss from the claimant or anyone acting on the claimant’s behalf as a condition precedent to a third-party bad faith claim. Afterwards, if the carrier provides the limits of liability notice under section 627.4137, Florida Statutes, and pays the demanded amount or policy limits, whichever is less, within 45 days of the notice, the carrier is not liable for bad faith under common law or the statutes. The bill is strongly supported by numerous insurance trade associations in addition to the Florida Chamber, Associated Industries, and Institute for Legal Reform and the Florida Justice Reform Institute, among others. As our readers can well imagine, it’s likewise strongly opposed by Florida’s trial lawyers. The industry supported bill now must clear the House Insurance & Banking Subcommittee and Judiciary Committee before seeing House floor action. HB 187’s companion legislation, SB 1494 sponsored by Sen. John Thrasher (R-Duval) is headed to the Senate Banking & Insurance, Judiciary and Rules Committees. As was the case last Session, the effort to bring a degree of sanity to Florida’s bad faith environment will be a hard fought battle and LMA will continue closely monitoring each round bringing you updates as developments occur. Stay tuned!
And the Race Goes On-A New Week
So, let’s do a quick recap of this week’s marathon: At the starting line, flood insurance, Citizens, workers’ compensation, FIGA, sinkhole managed repair, agents/agencies, more workers’ compensation, the insurance omnibus bill, and at the finish line? We won’t know that till the proverbial sine die handkerchief is dropped ceremoniously between the house and senate chambers. We’ve “only just begun” as the song goes. It’s crazy, fun, invigorating, exhausting and mostly, it’s what we do at LMA to put our little dent in making things better for the working people of our great state and country. Stay tuned and we’ll have more fun and frolics to report next week.
Always, Lisa and the LMA Team