A Long Way to Go and a Short Time to Get There

You can feel the momentum in the air….  With only 21 days until the opening of the 2014 legislative session, things are getting a little more hectic during pre-session committee meetings.  This past week we saw evidence of things not moving forward, moving forward with trepidation and even moving backwards sometimes.  We can always count on the movement.  Tracking it is what we like to do for you. Lots of issues on the table and an election year will make this a special session in its own unique way.  Politics in Tallahassee…always a hoot!

Here are some things that happened over the last two weeks.

Sinkhole Repair Measure Wins Committee Approval But Trial Bar Taking Aim

Tuesday 2/4/14-  Despite the Florida Justice Association’s intense opposition citing that consumers lose their choice or potential monetary damages, the Senate Banking and Insurance Committee last Tuesday gave Sen. Wilton Simpson’s  (R, Hernando/Pasco) legislation (SB 416) establishing a Citizens Sinkhole Stabilization Repair Program overwhelming approval. After stating that Citizens fully supports the sinkhole repair program legislation, Corporate CEO and President Barry Gilway and others refuted assertions by the Florida Justice Association-FJA (trial attorney trade association) that Citizens would simply use the sinkhole repair program to deflect liability and leave claimants at the mercy of incompetent contractors. Under the proposed program, stabilization repairs must be conducted by a stabilization repair contractor selected from an approved stabilization repair contractor pool established by the corporation pursuant to an open and transparent process. Each contractor within the pool must be licensed, qualified, bonded and approved by the corporation, and must demonstrate experience in the stabilization of sinkhole activity pursuant to requirements set by the corporation.  The FJA and Pasco/Pinellas County representatives from trial lawyer firms argued that SB 416 is unnecessary because of the great results from 2011’s Senate Bill 408 which made significant changes to Florida’s sinkhole insurance statutes. However, Sen. Simpson and other proponents of the bill said SB 408 is not helping resolve hundreds of claims filed before SB 408 took effect. Gilway weighed in on this argument and noted that while Citizens’ sinkhole claims have dropped 60 percent in the wake of SB 408, its loss ratio on sinkhole coverage is still 380 percent. An area of the bill which caused significant concern for a number of insurers was a requirement that Citizens and private market insurers offer sinkhole coverage deductibles of one, two, five and ten percent. During the meeting Tuesday the Committee adopted a strike-all amendment removing this language and retaining current law on sinkhole deductibles. SB 416’s next stop will be in the Appropriations Subcommittee on General Government and there’s little doubt that the trial lawyers and the FJA will continue their assault in an effort to derail the bill. The bill’s companion, HB 129 by Rep. Jake Raburn (R, Hillsborough) is scheduled to be considered by the House Insurance & Banking Subcommittee during its meeting tomorrow (Tuesday 2/11/14). LMA staff will continue monitoring this bill closely and update you with developments.

First Cat Fund “Right-Sizing” Bill Sails Through Major Committee Stop

Tuesday 2/4/14- The first of several bills attempting to make significant changes to Florida’s Hurricane Catastrophe Fund was approved unanimously last Tuesday by the Senate Community Affairs Committee. The bill (SB 482) by Sen. Alan Hays (R, Lake/Marion/Orange/Sumter) reduces the Cat Fund by $3 billion down to $14 billion in the 2017-18 contract years, among other things. In addition to reducing the Cat Fund’s coverage limits, the measure also allows insurers to recoup through their property insurance premiums specified reinsurance premiums paid to the Cat Fund. According to Senate staff’s analysis, the bill is designed to reduce the overall financial obligations of the fund, reducing the likelihood and amount of bonding and emergency assessments needed to fund deficits in the event the fund experiences a shortfall after a major hurricane. The bill amends Subsection 215.555(4)(c)1, F.S., to phase in decreases of $1 billion per year to the $17 billion Cat Fund mandatory coverage limit beginning in the 2015 – 16 contract year until the 2017- 2018 contract year, when the limit will have been reduced to $14 billion. Thereafter, the bill provides a mechanism for the board to determine if the claims-paying capacity of the fund will exceed $14 billion. The bill also amends Section 627.062(5), F.S., to allow insurers to recoup reinsurance premiums paid to the Cat Fund and purchased solely to cover a potential gap between the maximum statutory obligation of the fund as specified in Section 215.555(4)(c), F.S., and the fund’s claims-paying capacity estimate. The bill further deletes a prohibition against insurers recouping reinsurance costs that duplicate coverage provided by the Cat Fund. The bill’s companion, HB 391 by Rep. Bill Hager (R, Palm Beach) currently resides in the House Insurance & Banking Subcommittee which meets tomorrow (2/11/14). We’ll continue monitoring all Cat Fund legislation and update you as developments occur.

Bill Protecting Gun Ownership Gaining Early Ground In Legislature

Monday 2/3/14- A bill sponsored by former Senate President Tom Lee (R, Hillsborough) which will make discrimination against insurance applicants and renewing insureds based upon gun ownership an Insurance Unfair Trade Practice violation won approval early last week from the all-important Senate Criminal Justice Committee. The measure (CS/SB 424) was approved by a 5-1 vote of the committee. The bill’s companion, CS/HB 255 sponsored by Rep. Matt Gaetz (R, Okaloosa) also made positive headway last week when it successfully passed the House Insurance & Banking Subcommittee on Tuesday (2/4/14). The bills were developed by the NRA to prohibit discrimination by insurers against lawful owners of firearms. They prohibit underwriting and surcharging based on legal possession of firearms and amends Florida’s Insurance Unfair Trade Practices Act. As filed, both bills also prohibited the sharing of information on legal firearm possession by insurers with affiliated entities, including claims adjusting companies and MGAs. These provisions have caused a number of insurers considerable concern and talks have been underway with bill sponsors and the NRA who strongly supports the legislation. The result: during the committee meetings referenced above both bills were amended to incorporate industry agreed upon language which will allow needed information sharing under specific statutory conditions. The information sharing language in both bills now reads as follows:

Insurers are not allowed to disclose the lawful ownership or possession of firearms of an insurance applicant, insured, or household member of the applicant or insured to a third party or an affiliated entity of the insurer unless the insurer discloses to the applicant or insured the specific need to disclose the information and the applicant or insured expressly consents to the disclosure, or the disclosure is necessary to quote or bind coverage, continue coverage, or adjust a claim. For purposes of underwriting and issuing insurance coverage, this sub-subparagraph does not prevent the sharing of information between an insurance company and its licensed insurance agent if a separate rider has been voluntarily requested by the policyholder or prospective policyholder to insure a firearm or a firearm collection whose value exceeds the standard policy coverage.

It would not be surprising if either the Senate or House version of this legislation quickly makes it to the floor when Regular Session begins in early March. LMA will closely monitor and update you as we learn more.

Flood Insurance Bill Travels: Bill Sponsor Exhibits Grace under Fire

Thursday 2/6/14 – The Senate Appropriations Subcommittee on General Government heavily debated CS/SB 542 sponsored by Senator Jeff Brandes (R-Hillsborough/Pinellas). This bill creates laws governing the sale of private flood insurance by insurers and the factors to be considered by the Office of Insurance Regulation (OIR) when reviewing the rate filings by those insurers.  Several options of how the flood rates would be handled included the requirements of s. 627.062, F.S., as well as for those rate filings made before 7/1/17, the options of not being subjected to the requirements of the above mentioned statute, as long as the rates are not excessive, inadequate or unfairly discriminatory (to be determined under an OIR market conduct examination);  the use of individual risk rating; and, the use of consent to rate presently allowed under Florida Statutes for other lines of insurance.  The latter two are not subject to OIR intervention when used presently by insurers.   Oddly enough, amendments to the bill to insert OIR into “consent to rate” and “individualized” rating transactions were approved under the heading of “consumer protection.”  Lisa Miller, LMA’s CEO, testified before committee that no other line of insurance where consent to rate or individualized rating are used gets “second guessed” by OIR yet this bill would now allow that.  In essence, by allowing OIR to review a consent to rate or individualized rating transaction after the fact makes the use of these free market/willing buyer and seller tools useless.  Another point of contention during the debate was that the bill eliminated traditional surplus lines agent requirements used in other lines of insurance. Specifically, a surplus lines agent would be allowed to export flood insurance coverage with limits of $1,000,000 or above to an eligible surplus lines insurer without the standard requirement of obtaining three “diligent efforts” to place the coverage with an admitted insurer.  The remark of, “consumers won’t be aware they are placing their insurance with a ‘high risk’ insurer” was heard again and again from some committee members. Senator Brandes worked hard to convince the committee of the qualities of the bill stating, “It would actually allow flexibility to choose the coverage and the bill has the characteristics to allow our seniors and young families to stay in their homes”. He also stated that the bill would allow for the flexibility for a market based rate.  After lengthy discussion, the bill was finally passed with the qualifier that the bill would go back to the Senate Banking and Insurance Committee for further work.  In addition to the flood bill, the committee also heard SB 444 sponsored by Senator Bill Galvano (R- parts of Desoto, Glades, Hardee counties and parts of Charlotte, Highlands, Hillsborough, Manatee counties) which addresses changes to the provisions of stop work orders (SWO) issued by the Department of Financial Services, Division of Workers’ Compensation under s. 440, F. S.  This bill, also from the Senate Banking and Insurance Committee, addresses the extension of the number of days an employer must provide records to the DWC, allows a conditional release from a Stop Work Order if the employer has secured appropriate workers’ compensation coverage and pays $1,000 as a down payment towards their total penalty. The bill passed quickly and unanimously with no debate.

Measure Will Extend Underwriting Period of Post-DUI Insureds

Tuesday 2/4/14- Companion bills designed to help automobile insurers better assess their risk in writing coverage required to reinstate driving privileges suspended or revoked for driving under the influence (DUI) are successfully moving through pre-session legislative committees. HB 401 by Rep. Tom Goodson (R, Brevard/Orange) and SB 490 by Sen. Rene Garcia (R, Dade) will extend the underwriting period from 30 to 60 days for non-cancellable coverage required to reinstate driving privileges revoked or suspended for committing a DUI offense. This will allow insurers additional time to properly complete underwriting, during which the insurer may cancel the policy. The longer underwriting period will also extend from 30 to 60 days the period of time that lapses before an insurer reports to the DHSMV that non-cancellable coverage is in full force and effect and cannot be cancelled. The bills also allow the insured to change the coverage amounts under such policies without requiring the policy to be cancelled, so long as at least the minimum required coverage amounts are maintained. This past Tuesday HB 401 was unanimously approved by the House Insurance & Banking Subcommittee and now moves to the Transportation Highway Safety Subcommittee. On Wednesday, 2/5/14, SB 490 was likewise unanimously approved by the Senate Transportation Committee and now moves on to Senate Appropriations. LMA will keep a close watch on these progressive bills, consumer bills and update you regarding developments.

In 2014 Citizens May Transfer Upwards Of $1.5 Billion in Risk While Hurricane Cat Fund Director Jack Nicholson Announces Similar Track

Wednesday 1/29/14- The Citizens Property Insurance Corporation’s Board of Governors met via conference call and the potential transfer of major risk during 2014 was the most important item of discussion. After considerable discussion on the issue, the board directed corporation staff and their insurance brokers to negotiate a 2014-15 successor plan to a more than $1.5 billion private market risk transfer program in effect the past two years and additional risk coverage in both traditional reinsurance and capital markets.  During discussion it was noted that a team of Citizens executives spent much of the week of January 20th in Bermuda and while there developed solid prospects for a reinsurance risk transfer plan for 2014 and 2015, and possibly in amounts greater than $1.5 billion. The Bermuda travel team included Corporate CEO Barry Gilway, CFO Jennifer Montero, Board Chairman Chris Gardner, Chief Risk Officer John Rollins and lawyer Dan Sumner. The team reported that Citizens received praise from Bermuda’s reinsurance community for the quality of data it brought and for the corporation’s contingency loss adjustment approach. “The progress we have made as an organization was very evident. We are going to have several options to consider. We are not sure what they are yet. We think this is a very favorable environment”, Chairman Gardner noted. Board member and former executive director of Louisiana’s Citizens Property Insurance Corporation John Wortman commented to Citizens’ leadership, “We purchased substantially less reinsurance to our exposure than a normal company. The move to purchase additional protection is absolutely proper and I would encourage you to do it.” In granting corporate staff the authority to move forward on the development of the 2014 risk transfer program for the Coastal Account the board asked staff to keep in mind the $750 million maturing Everglades Re Series 2012-1 risk transfer for the Coastal Account; the $854 million of expiring traditional reinsurance for the Coastal Account; and the need to evaluate opportunities in both the traditional reinsurance and capital markets to further lower assessment risk. CFO Jennifer Montero noted that Citizens has budgeted $200 million in the Coastal Account for 2014-15 risk transfer. If there is additional coverage, it will be ceded premium which would come from net income in the Coastal Account. Citizens is not currently pursuing risk transfer options for the Personal Lines Account or the Commercial Lines Account.

Friday 2/7/14 – About a week later, during the Florida Hurricane Catastrophe Fund Advisory Council call today, Cat Fund Director Jack Nicholson discussed his plans to pursue a risk transfer plan of approximately $1.5 billion or more.  The proposal will be unveiled at the March 6 Cabinet meeting where Dr. Nicholson will seek authorization from Governor Scott, CFO Atwater and Attorney General Bondi (SBA Board of Trustees) to initiate negotiations in Bermuda and other reinsurance centers.  The plan is to formulate a large risk transfer product that could include catastrophe bonds, collateralized reinsurance, and/or traditional reinsurance.   Dr. Nicholson said in essence he wants a plan that is NOT like “Swiss cheese” with holes or pockets in it that could cause gaps in coverage.  Should Citizens’ and the Cat Fund’s plans materialize, Florida’s two most vital property insurance programs would be placing at least $3 billion and maybe considerably more with the private reinsurance market.   There are differing opinions as to whether these two large placements will have an effect on private insurance company reinsurance pricing.  Many believe the world is “awash with cash” and this glut will counterbalance the $3 billion Citizens/Cat Fund reinsurance buy/use of capacity.  Still others are not convinced saying that reinsurers are seeking yield and are considering the $3 billion purchase a “demand surge” causing pricing to up.  Discussion during the Advisory Council meeting was indicative of this debate with council members differing on whether the Cat Fund should or should not proceed with the risk transfer noted above but the Council ultimately approved Dr. Nicholson’s proposal to make a presentation at the March 6 Cabinet meeting.

Workers’ Comp Division Issues Report Touting Accomplishments

The Department of Financial Services’ Division of Workers’ Compensation has released a “2013 Results and Accomplishments” Report to help educate the public and division stakeholders regarding its value. In releasing the report the Division’s Director noted that as the Division of Workers’ Compensation continues to meet its regulatory responsibilities in the most cost effective and efficient means possible, we also strive to improve Florida’s Workers’ Compensation System for the benefit of all of stakeholders. In an effort to provide relevant and quality workers’ compensation data, the Division’s report was developed for the second year. This report replaces the former statutorily mandated Annual Report that was repealed during the 2012 Legislative Session. All of our business processes are driven by our mission to ensure the self-execution of the workers’ compensation system through educating and informing all stakeholders in the system of their rights and responsibilities, leveraging data to deliver exceptional value to our customers and stakeholders, and holding parties accountable for meeting their obligations. We invite you to review our report as we continue in our commitment to ongoing improvement of Florida’s Workers’ Compensation System.

Rule on Stop Work Orders Officially Adopted By Workers’ Comp Division

Thursday 1/30/14- The Division of Workers’ Compensation at the Department of Financial Services has formally adopted Rule Chapter 69L-6.031, F.A.C., Stop-Work Orders in Effect against Successor Corporations or Business Entities. The rule was officially effective on January 30, 2014. This revised rule implements applicable sections of HB 553 passed by the 2013 Legislature.  HB 553 amended s. 440.107(7)(b), F.S., revising the law to include a limited liability company as a successor entity for purposes of effectuating a stop-work order.  The rule is updated to include limited liability companies as successor entities for purposes of effectuating a stop-work order. To review the newly revised rule in it’s entirely please click HERE. If you have questions about any aspect of this rule please contact us here at LMA and we’ll be happy to assist you.

PIP Fraudsters Arrested For Submitting False Claims

Friday 1/31/14- Leonardo F. Marquez Garcia and Daylen Marie Vallejo-Ruiz, of Miami and Orlando respectively were arrested by the Department of Financial Services’ Division of Insurance Fraud (DIF) on charges related to PIP claims.  An investigation by DIF detectives revealed that Garcia would do supposed ‘initial examinations’ on crash victims and refer them to the Injury Rehabilitation Center for physical therapy treatments. Vallejo-Ruiz, the owner of the clinic and a licensed massage therapist, had patients sign blank treatment forms that were sent to the insurance company requesting payment for services never provided.

Allstate insurance company received bills for the alleged medical treatments purportedly provided between February 3 and March 16, 2012, on two crash victims. Leonardo F. Marquez Garcia submitted requests for payment for his initial examinations claiming his services were provided on behalf of Global Rehabilitation Center, Inc., 15271 NW 60th Avenue, Suite 106, Miami Lakes, Florida, which is not an Area of Critical Need facility and where Leonardo F. Marquez Garcia, an Area of Critical Needs Doctor, was not licensed to practice medicine. Therefore, Garcia was additionally charged with the unlicensed practice of medicine for operating outside the scope of his license. The state’s investigation is ongoing and additional arrests are expected. These arrests are another positive sign in the on-going battle against the fraud which has been plaguing Florida’s PIP system. LMA commends DIF Director Simon Blank and his team of detectives for their tireless efforts in helping Florida policyholders and our industry curb fraud, the number one cost driver in auto insurance.

12 Arrested In Insurance Fraud Scam Dubbed ‘Operation Leaky Pipes

Friday 1/31/14- The Florida Division of Insurance Fraud (DIF) working closely with the National Insurance Crime Bureau (NICB) busted twelve Miami residents, including a public adjuster and plumber, for their roles in submitting fraudulent claims to Citizens Property Insurance Corporation and Liberty Mutual Insurance Company.  The state investigation uncovered a scheme between the licensed public adjuster and a plumber to coach homeowners on how to file fraudulent insurance claims for pre-existing or non-existent water damage. The homeowners filed fraudulent claims in an attempt to obtain money for home remodeling. A tip and subsequent investigation by Department of Financial Services’ Division of Insurance Fraud (DIF) detectives is what unraveled the scheme that Jose Nino, public adjuster, and Boris Diaz, plumber, were operating. Both were arrested after being caught during an undercover operation and providing sworn statements detailing all of the fraudulent claims filed with their assistance. “The National Insurance Crime Bureau works with its 1,100 member companies and law enforcement to identify, investigate, and deter insurance fraud that impacts the American public,” said NICB Director Dennis Russo. “The NICB values our partnership and working relationship with the Florida Division of Insurance Fraud.” DIF detectives obtained sworn confessions from all twelve named homeowners who were then arrested and transported to the Miami-Dade County Jail. The twelve homeowners arrested were named by authorities although the homeowners will be charged individually by Miami-Dade County State Attorney Katherine Rundle, the scheme resulted in a loss totaling more than $137,000 to Citizens and more than $38,000 to Liberty Mutual.

Seems Like Only Yesterday….

…we were writing these same words….only 21 days until session begins and there’s still so much to do.  But, we always seem to get there just in time or at least very close.  There won’t be any vacations or time off or being away from the biz for those of us at LMA dedicated to bringing you the most current news.  We have all our circus balls in the air and so far, haven’t dropped them yet.  We are staying healthy and strong, as we continue our focus on doing our part to make Florida the BEST state in the country.

Stay tuned and thanks for all you do!  Lisa