Monday March 10, 2014

The Doors of the Capitol Opened Wide for the Beginning of Session

Tuesday 3/4/14- With the norm of flowers, state celebs, families of the representatives, senators and cabinet members, supreme court judges, visiting past legislators and all the pomp and circumstance one would expect, the doors opened for our 2014 Legislative Session.  Even with the protests heard in the hallways from certain groups, the festivities could not be dampened.  It is the work of these dedicated public servants that brings it all together at this time of the year.  While we don’t always agree with the posturing and positioning, we must certainly respect and show pride for our system of government, that still stands heads above all others. Now, let’s take a look at many of the most important insurance issues making headlines during the first week of Session.

Citizens Sinkhole Repair Program Bill Bogs Down In Committee

Wednesday 3/5/14- CS/SB 416 sponsored by Senator Wilton Simpson (R-Hernando/Pasco/Sumter) which would establish a mandatory Sinkhole Stabilization Managed Repair Program within Citizens Property Insurance Corporation bogged down early Wednesday afternoon during a meeting of the Senate Appropriations Subcommittee on General Government and was temporarily postponed. The bill was one of only four heard by the committee, however, it was taken up last on Committee Chairman Alan Hays’ agenda and a flurry of questions and discussion prompted by committee member Jack Latvala (R-Pinellas) caused time to run out before a vote could be taken. Much of the discussion centered on the need for a mandatory managed repair program and what problem the bill is intending to address. Both bill sponsors Simpson and Citizens spokesperson Christine Ashburn testified about past problems with insureds receiving large indemnity payments in connection with sinkhole claims and then never following through with needed repairs, an undesirable outcome for society in general. Senator Latvala seemed to question this concern by citing his own personal sinkhole claim experience with Citizens and the mechanisms in place which required him to have repairs performed on a piece of rental property. Ashburn responded by alluding to the large number of past and on-going sinkhole claims in protracted litigation and a move by many trial bar represented insureds to hold out for large indemnity payments. Such in-depth back and forth discussions normally occur in a bill’s primary committee of reference where members usually have meaningful technical expertise. Interestingly, on February 4th the bill was overwhelmingly approved by the Senate Banking & Insurance Committee and its companion (HB 129) sponsored by Rep. Jake Raburn (R-Hillsborough) won strong approval by the House Insurance & Banking Subcommittee on February 11th. We’ll continue to closely monitor this important legislation and keep you updated as session progresses.

Senate Committee Polishing Proposed Citizens Reforms

Wednesday 3/5/14- The Senate Banking & Insurance Committee today went a long way towards finalizing a list of significant reforms to Citizens Property Insurance Corporation in the form of Senate Proposed Bill (SPB) 7062.  Chairman David Simmons (R-Seminole/Volusia) and members of the committee have been working for several weeks to develop a list of reforms which might be palatable during this election year. Their efforts come on the heels of last year’s major Citizens reforms (SB 1770, 2013 Session) that gave rise to the residential clearinghouse and other reforms impacting eligibility for coverage in the state-run insurer. This Session’s reforms will likely focus on a reduction in maximum coverage for businesses, condominiums and apartment complexes as well as a provision applying to Citizens and private market insurers raising from $500 to $1,000 the required minimum deductible on non-hurricane coverage in personal lines residential policies. As of Wednesday’s committee meeting one thing appears certain, SPB 7062 will not include any attempt to increase from 10 percent to 15 percent the cap on annual Citizens rate increases for commercial non-residential policies or a reduction in the current statutory cap on public adjuster fees from 20 to 15 percent. Provisions in the bill making these two reforms were amended out of the bill during Wednesday’s meeting. Also adopted were two amendments by Sen. Alan Hays (R-Lake/Marion/Orange/Sumter) aimed at bringing relief to property owners in the Florida Keys and Monroe County. One of Hays’ amendments requires Citizens to create an addendum to the uniform mitigation verification form for use in a county that has implemented a building code much stronger than the toughest code recognized on the uniform mitigation verification form. This should result in increased building code discounts from Citizens for Keys residents. The other Hays amendment would restore Citizens coverage on Monroe County structures residing within the Coastal Barrier Resources System. Although the committee ran out of time and no vote was taken, it appears when the committee meets tomorrow (Tuesday, March 11), at 4:00 p.m. it will continue to debate SPB 7062’s key provisions:

•Requiring Citizens to include commercial residential buildings within the existing Citizens eligibility Clearinghouse Program (clearinghouse) by October 1, 2015.

•Allowing surplus lines insurers meeting increased financial and disclosure standards to make offers of similar coverage through the Clearinghouse if no authorized insurers participating in the clearinghouse make an offer of coverage. (Debate is strong on this issue as there is a strong admitted market so questions are being raised if surplus lines carriers are really necessary in this segment).

•Revising two of the three Citizens policyholder surcharges. The maximum surcharge would be increased from 15 to 20 percent for Coastal Account deficits, but decreased from 15 to 10 percent for Personal Lines Account deficits.

•Mandating that Citizens issue an annual report of its estimated bonding capacity, estimated claims paying capacity, and estimated year-end cash balance.

•Requiring Citizens to cease writing new commercial residential multi-peril policies in the Coastal Account. In the alternative, Citizens will issue separate Wind and All-Other Perils (AOP) policies.

•Increasing from $500 to $1,000 the minimum residential property insurance deductible for non-hurricane losses that must be offered by insurers.

Your LMA team will be covering tomorrow’s (March 11, 2014) Senate Banking & Insurance Committee meeting and will bring you the latest Citizens developments in our next newsletter.

Florida Policymakers Seeking Flood Solution Regardless of Congressional Action

Wednesday 3/5/14- Today during a meeting of the House Insurance & Banking Subcommittee Rep. Ed Hooper’s (R-Pinellas) legislation (PCS/HB 879) creating a regulatory framework for private insurers to sell flood insurance in the market now dominated by the financially strapped NFIP won critical committee approval. Coincidentally, the night before (Tuesday 3/4/14) the U.S. House after months of wrangling passed legislation that would roll back some of the harsh rate increases imposed on Floridians by the federal Biggert-Waters Act of 2012. Rep. Hooper’s bill contains some significant differences from flood Legislation (CS/SB 542) sponsored by Sen. Jeff Brandes (R-Hillsborough/Pinellas), likely most significant of which is that Brandes’ bill allows policyholders to limit their flood coverage to the balance owed on their home loans to help reduce premiums. Hooper’s House plan requires consumers to purchase replacement cost coverage. During the House committee meeting he expressed concern about Brandes’ Senate plan and said that it will result in some damaged homes going unrepaired. There are additional differences as well in that the Senate’s bill provides private insurers more alternatives to implementing flood insurance rates without prior approval of the Florida Office of Insurance Regulation whereas Hooper’s House bill grants expanded authority for surplus lines carriers to write flood insurance. Regardless of what Congress ultimately does it is clear that both House and Senate bills create a roadmap for private market insurers to sell flood insurance coverage for consumers who desperately need options other than policies through the NFIP. Hooper noted that it is unclear what will ultimately be in the federal bill and under provisions set out in the U.S. House bill likely to be approved by the Senate, NFIP rates will be increasing 18 percent a year for the immediate future. The Representative went on to say, “There will never be cheap flood insurance in this state again, just as there will never be cheap wind insurance. It’s gone.”   “I hope that rates from private insurers in Florida will be less for many risks than what would have been required by Biggert-Waters or what will probably result from the final new federal flood package. No insurance company in the world can compete with the subsidized rates which have been charged by NFIP in the past but competition can produce lower rates under some circumstances. Florida consumers will have an opportunity to make an informed choice.” According to the House staff analysis, PCS/HB 879 contains the following major provisions:

•The proposed committee substitute creates laws governing the sale of insurance policies, contracts, or endorsements providing flood coverage. The laws created by the PCS only apply to personal lines residential coverage for flood written by insurers outside of the NFIP. The PCS allows insurers providing this coverage to write only two types of flood insurance: standard flood insurance and preferred flood insurance.

•Standard flood insurance under the PCS provides the same coverage as standard flood insurance under the NFIP. Preferred flood insurance under the PCS, however, provides additional coverage than standard NFIP coverage in three areas: the definition of “flood,” additional living expenses, and replacement cost for personal property.

•The PCS allows insurers providing personal lines residential coverage for flood to develop rates for the coverage two ways: use the rate after filing with and approval by the OIR or use the rate without filing with or approval by the OIR.

•Insurers can only use the latter rate practice referenced until October 1, 2019. After this date, all insurers must use the first option which requires a full rate review and approval by the OIR before a flood insurance rate can be used.

•The Florida Commission on Hurricane Loss Methodology (Commission) is required to adopt, by July 1, 2016, actuarial methods, principles, standards, models, or output ranges for flood loss to be used in setting rates for personal lines residential flood coverage.

•The PCS allows primary flood coverage for personal lines residential property to be written by a surplus lines insurer without the agent obtaining three declinations for insurance from Florida licensed flood insurers only if the premium for the insurance written by the surplus lines insurer is at least ten percent less than the flood insurance premium charged by a Florida licensed insurer.

•The PCS requires insurers taking policies out of the NFIP to notify the consumer that if the policy returns to the NFIP, a full-risk rate could be charged and puts additional regulatory requirements on insurers who want to write flood insurance.

The legislation also makes it clear that Citizens Property Insurance Corporation would be prohibited from providing flood insurance and the Florida Hurricane CAT Fund would be prohibited from providing reinsurance as well.

The Senate flood legislation (CS/SB 542) by Jeff Brandes has been returned to the Senate Banking & Insurance Committee. It won approval in that committee during a pre-session meeting several weeks ago and was then approved by the Senate Appropriations Committee. However, substantive amendments were adopted in Appropriations and several members requested that Senate Banking & Insurance take another look. The bill has been placed on the agenda for the committee’s meeting tomorrow (Tuesday, March 11) at 4:00 PM. If Brandes’ bill passes as is, it could set up a clash between the House and Senate over flood insurance. The LMA team is closely monitoring these bills and will keep you apprised of developments.

 FIGA Reform Legislation Moving Again-Wins House Committee Approval

Wednesday 3/5/14- Nearly eight weeks after it was sabotaged by opponents in a House Insurance & Banking Subcommittee meeting, HB 143 making common sense and fair reforms to the FIGA assessment process was revived and won critical approval by the same committee. Accomplishing this feat was its hard working and energetic sponsor, Rep. Jake Raburn (R-Hillsborough). Working closely with the bill’s companion legislation (CS/SB 346) sponsor, former Senate President Tom Lee (R-Hillsborough), both versions of the measure have now been amended to resolve opposition and focus on what’s most important, simplifying a bureaucratic process to the advantage of both policyholders and the property & casualty industry. As now amended, the bills establish an improved process for insurers to remit emergency and regular assessments to FIGA and repeal the requirement for insurers to make a rate filing with the Office of Insurance Regulation to recoup assessments. They also improve current assessment methodology to provide a uniform percentage assessment on all policyholders, regardless of other factors. Insurers must make an initial payment of the assessment to FIGA by the date in the Order from the Office of Insurance Regulation (OIR) levying the assessment. Insurers begin collecting the assessment from their policyholders no sooner than 90 days from the OIR Order and collect the assessment for 12 months. They then reconcile the difference between their initial assessment payment total and the total amount collected at the end of the 12 month assessment period and report the reconciliation to FIGA. If an insurer collects more from policyholders than it initially paid to FIGA, the insurer pays the excess to FIGA. If an insurer collects less from policyholders than it initially paid, FIGA credits the insurer on future assessments. This remittance method is similar to the method under current law where insurers prepay assessments and later recoup them from policyholders over time, however, the proposed new reconciliation process is different than under current law. The reconciliation process removes the need for insurers to do a rate filing to recoup assessments from policyholders to streamline and improve the process. Alternatively, FIGA can use a monthly installment method for insurers to remit regular and emergency assessments. The monthly installment method will only be used if FIGA projects it has cash to pay six months of claims. Under the monthly installment method, insurers remit assessments to FIGA each month in the amount they collect from their policyholders. The monthly installment method of remittance can also be used in conjunction with the initial payment method described above. Current law allows for emergency assessments to be paid to FIGA over a 12 month period, but requires regular assessments to be paid within 30 days of the OIR Order. LMA will remain focused on this legislation and report critical developments as they occur.

 One of Several CAT Fund Proposals Sails Through Committee Stop

Wednesday 3/5/14- As we reported in an earlier newsletter, changes to Florida’s Hurricane CAT Fund seem to be a very popular topic this Session for many legislators. This was very evident last Wednesday afternoon when Rep. Bill Hager’s (R-Palm Beach) proposed measure (CS/HB 391) which could reduce the Florida Hurricane Catastrophe Fund’s $17 billion initial season coverage easily won unanimous support from the House Insurance & Banking Subcommittee. Hager’s newest approach unveiled Wednesday would make insurance carrier participation in the top $3 billion of the CAT Fund’s $17 billion coverage optional. Carriers could continue to participate in this layer with the state-run CAT Fund or seek coverage in the private reinsurance market. Under Hager’s plan, residential carriers would still be required to purchase their share of a $14 billion CAT Fund program, however, participation in the $3 billion upper layer would be optional. HB 391 as Hager originally filed would have reduced the CAT Fund from $17 billion to $14 billion over a three year period, $1 billion per year. He believes under his current proposal that some carriers will access private reinsurance at the $14-$17 billion layer and that there will be savings for their policyholders. For the CAT Fund, such private reinsurance purchases translate into reduced exposure and the assessments which would be imposed after a major storm. Earlier this year during pre-session meetings the Senate Banking & Insurance Committee approved SB 482 sponsored by Sen. Alan Hays (R-Lake/Marion/Orange/Sumter) which reduces the CAT Fund from $17 billion to $14 billion over three years. If Hager’s current proposal were to end up before the Senate Banking & Insurance Committee it will likely run into rough water as it will be competing with measures sponsored by two ranking members of the Senate committee to lower the CAT Fund retention from $7 billion to $5 billion and expand the categories of insurance carrier payouts reimbursable by the CAT Fund. Similar conflicts occurred last session resulting in no CAT Fund legislation passing during the 2013 Regular Session. We’re watching all of the CAT Fund legislation like a hawk and updates will follow as developments occur.

Business Friendly ‘Stop-Work-Order’ Legislation Steaming Ahead

Thursday 3/6/14- Legislation supported by the Department of Financial Services (Department) and business groups addressing significant concerns about workers’ compensation division stop-work orders and other workers’ comp enforcement provisions won approval Thursday from the House Regulatory Affairs Committee. CS/HB 271 sponsored by Rep. Travis Cummings (R-Clay) provides employers with additional time to produce evidence of workers’ compensation coverage before being hit with a stop-work-order and grants the Department more flexibility in how it enforces and disposes of stop-work-orders. Additionally, the measure reduces the look-back period for failure to comply with coverage requirements but ups the penalty multiplier. Further, Rep. Cummings’ bill attempts to clarify the calculation of the average weekly wage indemnity benefit and the Special Disability Trust Fund (SDTF) assessment, and reduces the SDTF assessment cap from 4.52% to 2.5%.  During the meeting two amendments to the bill were adopted by the committee; the first clarifying the method of calculating credits for employers using PEOs and the second requiring the Division of Workers’ Compensation to make available stop-work order records on its website for a period of five years. CS/HB 271 is now ready for action on the House floor while its companion legislation [SB 444 by Sen. Bill Galvano (R- DeSoto/ Glades/Hardee)] must still be approved by the Senate Appropriations Committee.

Hearing Held on Florida Workers’ Compensation Reimbursement Manual for Hospitals

Tuesday, March 4 – The Florida Division of Workers’ Compensation (DWC) held a public hearing at the Hartman Building in Tallahassee to provide an opportunity for attendees to discuss the proposed Florida Workers’ Compensation Reimbursement Manual for Hospitals- 2014 Edition  (insert the Link here Hospital Manual Draft 2014 revised post workshop and routed for hearing). Representatives of the DWC provided an overview of the most current changes to a full conference room of folks from multiple organizations interested in the most recent version of the draft manual.  Eric Lloyd, Program Administrator of the DWC Office of Medical Services, began the hearing with a quick and concise overview of the changes to the manual.  Some of the changes noted were inpatient reimbursement schedules (specifically, the proper use of procedure codes ICD-9-CM and ICD-10-CM); outpatient reimbursement schedules; disallowed, denied and disputed charges (specifically per diem payments); charge master, medical record review or audit; and, and hospital bills and submission forms.  The questions and comments from attendees included what target date will be set for the adoption of the manual and the concern that providers need adequate time to update their systems to reflect the new manual and specifically asked for a 60-90 day window of time for those updates.  DWC representatives advised that they have the discretion to consider the timing request and allow that window if possible.  Andrew Sabolic, Assistant Division Director, also advised the group that the Division is trying to move toward the approach of, as the manual is submitted to the Three Member Panel (each May), and if legislative ratification is required, it can go before the next session and hopefully only run one year behind in data. The hearing closed with a five day window for further comments before the manual moves forward to the next stop, however, another hearing will not be held.

Division of Insurance Agents and Agency Services Bill Passes the House Government Operations Appropriations Subcommittee

Tuesday, 3/4/14-CS/HB 633 Division of Insurance Agents and Agency Services, was heard in the Government Operations Appropriations Subcommittee (Chaired by Representative Clay Ingram (R- Escambia) on Tuesday afternoon.  This bill is sponsored by Representative Ingram and came out of the House Insurance and Banking Subcommittee. The overall content of the bill is as follows: Revises name of Division of Insurance Agents & Agency Services; revises original appointment & renewal fees related to certain insurance representatives; provides requirements relating to agents in charge; 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 prohibition against unlicensed transaction of life insurance; 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. There was limited discussion on the bill, however, the Division Director of the A&A Division, Greg Thomas, provided testimony on how the bill will streamline the licensing process overall. He also explained the basis for the bill eliminating the requirement that insurance agencies that are owned and operated by a single licensed agent, who conducts business in her/his own name and does not employ or use other insurance licensees, to have a separate agency license. The bill was passed unanimously and moved forward to its next stop at the House Regulatory Affairs Committee.

This Year’s Insurance Omnibus Bill Passes through the Government Operations Appropriations Subcommittee

Tuesday 3/4/1 4 – CS/HB 565, the Insurance Omnibus bill for this year, was heard in the Government Operations Appropriations Subcommittee (Chaired by Representative Clay Ingram (R- Escambia) on Tuesday afternoon.  This bill is sponsored by Representative David Santiago (R-Volusia) and came out of the House Insurance and Banking Subcommittee. The overall content of the bill is as follows:  Defines “authorized inspection agency”; revises & provides provisions relating to the state boiler inspection program; revises original appointment & renewal fees related to certain insurance representatives; revises specified time period applicable to certified examination that must be filed by foreign or alien insurer applying for certificate of authority; prohibits an insurance agency from conducting insurance business at location without designated agent in charge; provides agency license requirements; revises qualifications for approval as mediator by DFS; provides grounds for department to deny an application, or suspend or revoke approval of mediator or certification of neutral evaluator; authorizes department to adopt rules; revises date by which title insurance agencies & certain insurers must annually submit specified information to OIR; requirements relating to contractual liability policies that insure warranty associations; provides effective dates.  There was limited discussion on the bill and, specifically, a representative from OIR was asked to give clarification on the changes to the bonding requirements of surplus lines agents.  The bill was passed unanimously and moved forward to its next stop at the House Regulatory Affairs Committee.

So, Let’s “Continue the Work”

As the 60-day session began, House Speaker Will Weatherford, Senate President Don Gaetz and Governor Rick Scott delivered their addresses to their respective groups, with the Governor’s State of the State address contrasting his four years in office with those of his predecessor Governor Charlie Crist.  Now that the opening has happened and the speeches have been delivered, it is now the lawmakers’ jobs to get busy and spend the next 60 days addressing the issues of the people of our great state.  As always, we are there listening, watching and most of all, making good things happen for our devoted clients, friends and the folks who really care.

As always, our very best from Lisa and the folks at LMA