Monday December 23, 2013

 ‘Tis the Season!

While we worked on this edition of the newsletter, we reminded each other of the wonderful group we have at Lisa Miller & Associates and how fortunate we are to have a gift like you as readers and clients.  “Tis the season” means so much to us and we are grateful for the gifts of your time, interest and support of our work, our mission and our dreams.  Please read on to see the happenings these past couple weeks and enjoy your time with your friends and family!

Sen. Brandes and Rep. Ahern Announce Flood Insurance Legislation

Tuesday 12/17/13- Senator Jeff Brandes (R -Hillsborough, Pinellas) and Representative Larry Ahern (R -Pinellas) announced flood insurance legislation that will provide alternatives to the rising rates in the National Flood Insurance Program (NFIP). Pointing to the failed attempt by Congress to delay NFIP rate increases, Senator Brandes filed Senate Bill 542 and said it is time that Floridians have a free market Florida – based alternative. “I will not stand on the sidelines while homeowners in our community are being forced out of their homes by more ‘bait and switch’ tactics in Washington,” stated Senator Brandes. “Floridians deserve an alternative to the drastic rate increases of Biggert – Waters. This legislation builds a framework for a Florida – based solution that gives flexibility to homeowners. This will put Florida at the forefront of addressing this issue nationwide.” Representative Ahern said, “The flood insurance rate increases have a disproportionate impact on Florida and its housing market; it has a devastating effect on Pinellas County.  We cannot wait for Congress to accomplish anything amongst the gridlock of Washington, but we can focus on private insurance solutions to increase competition and lower premiums.” Rep. Ahern’s bill will be released in the next few days.  The Senate bill is scheduled on Wednesday, January 8 in the Senate Banking and Insurance Committee.  Please note that the immediate scheduling of this bill on a committee agenda, (less than a week to have the bill placed on the agenda after it was filed), is most likely a sign the bill is on a fast track.   SB 542 creates a wide range of flexible options for policyholders to choose so they can reach an affordable level of coverage for their property allowing policyholders the option of covering either the outstanding balance of their mortgage, the replacement cost of their property, or the actual cash value of their property.  The bill has a clear legislative finding which reads:

“The Biggert-Waters Flood Insurance Reform Act of 2012 encourages the use and acceptance of private market flood insurance. The Legislature finds, however, that there has been a long-term inadequacy of private market flood insurance available in this state. Such inadequacy suggests that the private market in this state is unlikely to expand unless the Legislature provides multiple options for the regulation of flood insurance. In addition, the consumers of this state will be protected from excessive premiums by the continued oversight of the Office of Insurance Regulation and the continued availability of flood insurance from the NFIP. The NFIP, as amended by the Biggert-Waters Flood Insurance Reform Act of 2012, will prevent many property owners from obtaining affordable flood insurance coverage in this state. The absence of affordable flood insurance threatens the public health, safety and welfare and the economic health of this state. Therefore, the state has a compelling public purpose and interest in providing alternatives to coverage from NFIP by promoting the availability of flood insurance from private market insurers at potentially lower premiums.”

In addition, SB 542 contains the following key provisions:

•Amends Chapter 627, Florida Statutes, to allow insurance companies to provide coverage “for the peril of flood, on any structure or the contents of personal property contained therein.”

•Adds projected flood losses to the factors that must be considered by the Office of Insurance Regulation (OIR) in reviewing a rate filing.

•Authorizes projection of flood losses through a model, method or average of models found to be acceptable or reliable by the Florida Commission on Hurricane Loss Projection Methodology.

•Increases the membership of the modeling commission to include an engineer who is an expert in floodplain management and a meteorologist who specializes in floods.

•Requires that the modeling commission “adopt actuarial methods, principles, standards, models or output ranges for flood losses by July 1, 2015.”

•Establishes a menu of rate filing requirements and procedures. Companies will be allowed to use the normal filing procedure under Section 627.062; make an informational filing; use the individually rated risks procedure (where the insurer sends in a quarterly report to OIR listing each policy and the rate charged); or use consent to rate procedures.

•Establishes flexibility in the coverage scope and amounts. A company may offer a flood policy:

•That has a deductible based on a stated dollar amount or a percentage of the coverage amount. At a minimum, an insurer must offer deductible amounts applicable to flood losses that equal the standard deductibles offered under the National Flood Insurance Program.

•That provides that any loss that is repaired or replaced will be adjusted on the basis of replacement costs up to the policy limits; or the actual cash value of the property.

•That restricts flood coverage to the principal building, as defined in the applicable policy.

•In any agreed upon amount, including coverage limited in the amount of all outstanding mortgages applicable to the covered property.

The policies must cover at least the defined peril of flood and may also cover other water intrusion. The contract language must also contain a provision that this statute supersedes all other insurance statutes where there is a conflict. The bill also references the normal  company admission procedures and minimum surplus requirements unless the company is an existing insurer with at least $35 million in surplus and offer the flood coverage via endorsement (i.e. endorsed to a Homeowners policy).


We will keep you apprised of developments concerning this critical legislation, particularly the outcome should the bill be heard in committee during the month of January.

News of ‘State-Based Fix’ Flood Legislation Welcomed By R Street

Tuesday 12/17/13- The R Street Institute welcomed today’s introduction of legislation creating a statutory framework for private flood insurance that may be written by Florida’s admitted market property insurers. As reported above, SB 542 authorizes insurers to write policies, contracts and endorsements for flood insurance coverage with minimums that match the requirements set by Fannie Mae and Freddie Mac for conforming mortgage loans. The legislation upholds the principles set out by R Street Institute according to Florida Director Christian Cámara who last month released a policy brief entitled, “A state approach to flood insurance reform in Florida.” Camara said, “Broadly speaking, Sen. Brandes and Rep. Ahern are looking to find private sector solutions to alleviate the impact of sharply higher rates that may affect some National Flood Insurance Program policyholders in Florida.”  This bill responds to clear market demand to create these products, offers consumers more choices and, most importantly, does not put taxpayers on the hook through yet another state-backed insurance mechanism.”

Proposal Designed To Help Settle Citizens Sinkhole Claims More Rapidly

Thursday 12/12/13- Citizens Property Insurance Corporation’s chairman is applauding efforts to settle pending sinkhole claims by providing incentives for homeowners to have recommended repair work completed quickly and completely. Saying quick, quality repairs are critical to policyholder safety and cost effectiveness, Citizens Board of Governors Chairman Chris Gardner lauded Sen. Wilton Simpson (R-Hernando/Pasco/ Sumter) for unveiling the new proposal, which attempts to encourage appropriate repair efforts and reduce the need for litigation. “Proper repairs protect policyholders from additional risk to themselves and their families,” Gardner said. “We believe this proposal will provide policyholders with the assurance that Citizens will stand by them until all appropriate repairs are made.” Citizens this week began sending letters to hundreds of Citizens policyholders who are disputing repair recommendations surrounding their sinkhole claims. Of the 2,100 disputed sinkhole claims, 1,329 deal with disagreements over repair methods. The proposal encourages policyholders to have necessary repair work completed on their claim in accordance with an original engineer’s recommendations and offers an alternative resolution process for cases in which engineering opinions differ.

As required by Florida law, Citizens now requires sinkhole repairs to be completed in accordance with a qualified engineer’s recommendation. Claim payments are made once a contractor has been employed and work has begun. Under the proposed settlement agreement, homeowners disputing the original engineer’s recommended repair method can bring their recommendation to a neutral evaluator, who will review the repair options and render a decision. Citizens will abide by the evaluator’s determination.


The proposal specifically spells out that Citizens will reimburse policyholders for additional remediation work that may be needed after sinkhole repairs begin. In addition, the proposal states that Citizens will cover any additional cosmetic repairs resulting from the remediation process. Gardner said the proposal is a good faith effort to bring finality to sinkhole claims by ensuring that all necessary repairs are completed in accordance with the recommendations of a qualified engineer. “We use the phrase ‘put grout in the ground’ to emphasize that we want the recommended repair work completed quickly and properly, and in accordance with professional recommendations,” Gardner said. “We believe this proposal will help policyholders make their property safe for themselves, their family and their neighbors.”

Sen. Simpson Also Sponsoring Mandatory Sinkhole Managed Repair Legislation

In addition to recently unveiling his proposal to more quickly settle existing Citizens sinkhole claims where repair methods are in dispute, Senator Wilton Simpson (R-Hernando/Pasco/Sumter) is also sponsoring legislation for the 2014 Regular Session which will require all Citizens sinkhole claims to be governed and resolved through a Citizens Sinkhole Stabilization Repair Program. The bill (SB 416) establishes the legislative finding that it is in the public interest that sinkhole loss claims be resolved by stabilizing the land and structure and making repairs to the foundation of the damaged structure. Therefore, the corporation shall establish the Citizens Sinkhole Stabilization Repair Program for the purpose of making stabilization repairs. Should the bill pass and become law, effective March 31, 2015, any claim against a corporation policy that covers residential sinkhole loss must be included in and governed by the repair program. The repair program shall be managed by Citizens or a third-party administrator and include, among others, the following major components:

•Stabilization repairs must be conducted by a stabilization repair contractor (contractor) selected from an approved stabilization repair contractor pool procured by the corporation pursuant to an open and transparent process. Each contractor within the pool must be qualified and approved by the corporation.

•Contractors must demonstrate experience in the stabilization of sinkhole activity pursuant to requirements set by the corporation.

•Contractors must be licensed (“certified”) by the Department of Business & Professional Regulation.

•Contractors shall be selected from the approved stabilization contractor pool to conduct stabilization repairs pursuant to a fixed-price contract between the contractor and the corporation.

•The corporation shall develop a standard stabilization repair contract for the purpose of conducting stabilization repairs on all properties within the program.

•Approved contractors must post a payment bond in favor of the corporation as oblige for each project assigned and also post a performance bond, secured by a third party surety, in favor of the corporation as oblige, in a principal amount equal to the total cost of all fixed-price contracts annually awarded to that contractor.

•Approved contractors must provide a warranty, secured by a third-party surety, to the policyholder which covers all repairs provided by the contractor for at least 5 years after completion of the stabilization repairs.

•All contractors within the pool will be provided an opportunity to submit an offer to perform the recommended repairs. After offers are received and reviewed by the corporation, the policyholder will receive a list of contractors making the offers to repair and will have 30 days to select a contractors from the list.

•If no approved pool contractor submits an offer to perform the stabilization repairs for a property within the program, or all offers are above the policyholder’s policy limit, the corporation may enter the property into the selection process again or may pay the policyholder an amount up to the policy limits on the structure.

•The corporation’s liability related to repair activity pursuant to the sinkhole stabilization program and all other repairs to the structure conducted in accordance with the terms of the policy is no greater than the policy limits on the structure.

The most recent legislative action occurring on SB 416 happened on December 11th when the bill was referred to the Senate Banking & Insurance Committee, Appropriations Subcommittee on General Government and the full Appropriations Committee. We will be closely monitoring this important legislation and keep you posted as the bill is presented and voted on during its committee stops.

Montero Announces Planned $1.6 Billion Risk Transfer during Board Meeting

Friday 12/13/13- While briefing the corporation’s Board of Governors Citizens’ Chief Financial Officer Jennifer Montero announced that the state-run insurer is planning a $1.6 billion risk transfer to Bermuda and additional private reinsurance markets for the 2014 Atlantic hurricane season. Montero’s announcement came during the Board’s final meeting of 2013 on December 13th in Jacksonville. During her presentation Ms. Montero noted that she and Citizens’ financial planning and reinsurance partners (Raymond James, Guy Carpenter and Willis Re) will be working with other stakeholders on proposals to bring back to the full board in late January or early February. She also pointed out that at present there are no plans for private market risk transfer products next year for the Personal Lines Account and Commercial Account but there is a $1.6 billion goal for the Coastal Account. The proposed transfer would consist of 50 percent in alternative capital products ($800 million) and 50 percent in traditional reinsurance (an additional $800 million).

Gilway Appears Before Cabinet, Highlights Reduced Policy Counts, Depop Efforts

Tuesday 12/10/13- Citizens Property Insurance Corporation CEO and President Barry Gilway appeared before the Florida Cabinet and touted the state-run insurer’s successful efforts to decrease policy counts, exposure and the resulting likelihood of consumers being hit with large assessments should the state be hit hard by a costly storm or series of storms. Gilway noted that the corporation’s policy count has been reduced from 1.5 million to 1.22 million in recent years, which has lowered its total exposure from $510 billion to $336 billion and its probable maximum loss from a 1-in-100 year storm has decreased by 26 percent to $16.15 billion as a result. The reduced policy counts achieved through strong depopulation efforts have come more recently in the wake of the soon to be launched Citizens Clearinghouse where the landscape for acquiring corporation policies will change drastically. When the Clearinghouse begins operation, insurers will have to compete for coverage and prices to obtain business that would otherwise be covered by the corporation. In the current depopulation process, insurers can take over Citizens policies directly avoiding such competition. Although last session’s SB 1770 dictated a January 1, 2014, start-up date for the Clearinghouse the Citizens CEO has delayed the “go-live” date to January 27th to reportedly allow for more insurers to participate. It is believed that instead of the four insurers originally given final approval to participate, there will be a total of seven ready to begin selling policies when the January 27th start date arrives. The delay is also supposedly needed to respond to questions about the privacy of policyholders’ information as their applications to Citizens are marketed to private market insurers.  Mr. Gilway did not mention this delay during the Cabinet meeting; however, he reported to the Senate Banking & Insurance Committee the reason for the delay was to have more time to work with participating insurers and make certain it (The Clearinghouse functionality) works properly. “When we introduce this we want to be absolutely sure that it is going to be successful. I think by moving this date by three weeks it gives us the opportunity to do far more user acceptance testing with much more degree of confidence,” Gilway said.

Meeks Appointed By Cabinet as Citizens’ First Inspector General

Tuesday 12/10/13- In its most recent meeting the Florida Cabinet approved the appointment of Bruce Meeks, Esq. as the new Inspector General (IG) for Citizens Property Insurance Corporation. Mr. Meeks of Tallahassee is currently a partner at the law firm of Robert and Meeks. He previously served as the inspector general for the State Board of Administration from 2002-2010. Meeks also served in the Florida Attorney General’s office as the Deputy Executive Attorney General from 1998-2002, and as personnel director for the Office of Attorney General from 1995-1998. The IG position was created as a result of language contained in last session’s SB 1770 which also created the Citizens Clearinghouse and made other significant changes regarding eligibility for coverage by the corporation.

Matthews Named OIR Chief Of Staff, Stevens Returns As Deputy

Wednesday 12/11/13- Insurance Commissioner Kevin McCarty announced that Rebecca Matthews has been appointed Chief of Staff for the Office of Insurance Regulation.  Ms. Matthews has been serving in the Interim Chief of Staff capacity since October 25, 2013.  Monte Stevens has also been named as Deputy Chief of Staff with a primary focus on government affairs. Ms. Matthews joined the Office in 2008.  During her tenure with the Office, Ms. Matthews’s primary areas of oversight included government affairs initiatives, covering both legislative and cabinet affairs; market research and technology; and serving in an advisory role to the Chief of Staff for agency administration and operations. Prior to joining the Office, Ms. Matthews served as Legislative Affairs Director for both the Florida Department of Management Services and the Florida Lottery. She also served in lead communications positions, including as Vice President of Communications at the Florida Bankers Association. Ms. Matthews received her Bachelor of Science degree in Communications from Florida State University with a minor in Political Science. Mr. Stevens previously led government affairs efforts for the Office from 2007 through 2012.  Most recently, Mr. Stevens served as the Director of Government Affairs and Public Policy at the Florida Medical Association.  Additionally, he served as a Senior Legislative Analyst in the Florida House of Representatives Majority Office and as Deputy Director of Legislative Affairs at the Florida Department of Financial Services and Florida Agency for Health Care Administration. Mr. Stevens has a Bachelor’s degree in Political Science from the University of Missouri-Kansas City and a Master’s degree in Communication Studies from Kansas State University.

McCarty Orders Service Office Fee Reduction

Tuesday 12/10/13- Insurance Commissioner Kevin McCarty has issued an ORDER requiring the Florida Surplus Lines Service Office to reduce the current fee it collects on each surplus lines transaction occurring in Florida from 0.2% to 0.175% effective April 1, 2014. The collection of a service office fee is statutorily mandated and the funds are used to annually operate the Surplus Lines Service Office. In response to the Commissioner’s Order, Service Office Executive Director Gary Pullen on December 11th issued an informational bulletin to Florida surplus lines agents, surplus lines insurers and to those independently procuring coverage in the surplus lines market. The bulletin provides detailed information on how to calculate the reduced fee during the upcoming Service Office budget year (2013-2014) transition. The full text of the informational bulletin can be read by clicking HERE.

DWC Issues Bulletin Setting Maximum Weekly Compensation Rate

Thursday 12/19/13- The Department of Financial Services’ Division of Workers Compensation has issued an Informational Bulletin to all workers’ compensation insurance carriers, self-insured employers, and third party administrators establishing the maximum weekly compensation rate effective January 1, 2014.

The Florida Department of Economic Opportunity has determined the statewide average weekly wage paid by employers subject to the Florida Reemployment Assistance Program Law to be $827.08 for the four calendar quarters ending June 30, 2013. Section 440.12(2), Florida Statutes, expressly provides that, for injuries occurring on or after August 1, 1979, the weekly compensation rate shall be equal to 100 percent of the statewide average weekly wage, adjusted to the nearest dollar, and that the average weekly wage determined by the Agency for Workforce Innovation1 for the four calendar quarters ending each June 30th shall be used in determining the maximum weekly compensation rate with respect to injuries occurring in the calendar year immediately following. Accordingly, the maximum weekly compensation rate for work-related injuries and illnesses

occurring on or after January 1, 2014 shall be $827.00. If you have any questions regarding the Informational Bulletin, please contact Mr. Ryan Gagne, Government Analyst II, Division of Workers’ Compensation, Bureau of Monitoring and Audit at 850- 413-1771. Please click HERE to view and print the issued Bulletin.

Supreme Court Agrees To Hear Critical Workers’ Compensation Case

Monday 12/9/13-The Florida Supreme Court has agreed to accept jurisdiction over Westphal, a highly important and closely watched workers’ compensation case that resulted from work related injuries occurring in 2009 to Bradley Westphal, a St. Petersburg firefighter. The litigation is of keen interest to the insurance industry in addition to the National Federation of Independent Businesses, Police Benevolent Association, Florida Justice Association and Florida Workers Advocates. The case involves a state statute which imposed a two-year limit on temporary disability benefits payable to Westphal. The statutory limit discontinued disability benefit payments in 2011 to the firefighter who was unable to work due to his injuries but also could not meet the standard for entitlement to permanent benefits. Earlier this year a three-judge panel of the First District Court of Appeal (DCA) struck down the limit based on constitutional grounds. In September the full appeals court stepped back from that constitutional ruling, however, it ruled in Westphal’s favor based upon other grounds. The Supreme Court noted in its recent Order that it would schedule oral arguments in the near future by separate order. We will continue to monitor this important case and keep you apprised of developments.

Happy Holidays!

We wish all of you a blessed holiday …be safe and we look forward to a bright 2014 working side by side with all of you!