Tuesday November 12th

 The LMA Team is proud of our Leader

Those of us that make up the LMA Team are thrilled to let our newsletter readers know that our spirited leader and CEO, Lisa Miller, was appointed by Florida Governor Rick Scott this past Thursday to the Apalachee Regional Planning Council, Region Two. Lisa was appointed for a term beginning November 7, 2013, and ending October 1, 2016.  Regional Planning Councils are public organizations which bring together the state’s local governments to share responsibility for the future of Florida. Each regional planning council is like a bridge between state and local governments representing an area in which mutual resources, characteristics, and issues exist. Regional planning councils include members from the counties and municipalities located in each region’s planning district and gubernatorial appointees who represent the state. The Governor’s appointment of Lisa could not be more fitting.  Those of us who know Lisa and have the opportunity to witness her indomitable spirit, know that in addition to her unbelievable work as CEO of one of state’s most successful business development and consulting firms, she tirelessly spends hundreds of hours annually working to bridge economic, social educational and political gaps between state and local government entities and organizations. WE ARE SO PROUD and know you will join us in congratulating Lisa on this special honor to serve the citizens of Florida.

Session Just A Little Over Three Months Away

It truly seems like yesterday that we were sifting through tons of 11th hour emails, text alerts, trades reports and other sources of information dissecting what occurred in the waning hours of the 2013 Regular Session, to provide  you a comprehensive overview of the successes and less than successes of the last legislative session. It’s hard to believe but our annual process of deciding public policy and making law is a mere three months away. As we noted in our last newsletter, a number of important insurance bills have already been filed and chances are a good number of additional industry-related initiatives will be filed in the coming weeks. In the meantime, however, the following provides an overview of legislative happenings since our last newsletter, as well as other important industry issues garnering major attention:

Senate Committee Focuses On Out-Of-State Insureds, PIP Reform

Tuesday 11/5/13- During a two-hour meeting Senator David Simmons (R-Seminole, Volusia), Chairman of the Senate Banking & Insurance Committee had his members laser-focused on two primary issues likely to be the subject of highly debated legislation during the upcoming 2014 Regular Session. The first, Citizens policies belonging to insureds residing in other states or countries was again the topic of considerable discussion, as newly appointed Citizens Chief Risk Officer, John Rollins, concluded a presentation started by CEO Barry Gilway during the committee’s October 8th meeting. In his comments, Simmons again highlighted the premium inequities which he believes exist when over 90% of the 180,000 out of state/country policyholders own residences in Florida free and clear. Simmons has noted on several occasions that non-residents who can afford to pay cash for Florida vacation homes on the beach should not be receiving premium subsidies at the expense of hard working, every day Floridians. Wind-only policies, and exposure in Citizens’ commercial-residential book of business, were also topics of discussion during the meeting. All indications are that Chairman Simmons will again sponsor major legislation addressing the above issues during the upcoming session, partly because the result of what the Legislature ultimately passed last session pertaining to Citizens was a far cry from the bill Simmons originally filed. During his dialog with John Rollins, Simmons firmly stated that Citizens should determine exactly which of its policyholders live outside of Florida and the United States (and benefit from rates which are  less than actuarially sound). “It is incumbent upon us to drill down into this and find out how we can identify these people…and how we can then go ahead and cause them to be paying rate parity,” Simmons said. He also believes and has publically stated that Citizens should cease writing wind-only policies. This was his position at the beginning of last year’s session, however, it was not in the bill which ultimately passed the Senate and never gained approval in the House. The second issue, PIP reform, was also a major topic addressed during the committee meeting. In his opening remarks on the topic, Simmons noted that $3.4 billion in auto premium is paid by Floridians annually and that slightly over $1 billion of that goes to offset the impacts of fraud within the state’s current PIP system. “We’ve had 40 years of fixes trying to resolve the PIP problem and here we are again”, said Simmons. With that, the Chairman asked Sandra Starnes, Director of Property & Casualty Product Review with the Office of Insurance Regulation, to provide the committee with her presentation about the state’s current auto market and presumable impacts of going to a mandatory BI system.  According to Ms. Starnes, OIR data reveals that 92.1% of insured Florida drivers already carry Bodily Injury coverage at the 10/20 limits or higher. She also states that 25.4% of the same insureds also purchase medical payments coverage, while 21.7% carry full coverage on their vehicles. Chairman Simmons’ proposed legislation to do away with the state’s current PIP system and implement a mandatory BI system was then discussed. The major highlights of the bill are as follows:

•Repeals Florida’s No-Fault law

•Allows financial responsibility limits to be met by having a policy that provides coverage in an amount of $60k for combined property and bodily injury for any one crash

•Increases financial responsibility from $10k/$20k/$10k to $25k/$50k/$10

•Proof of financial security in lieu of a policy must be in the amount of $60k (up from $30k); private individuals who self-insure private passenger vehicles possess a net unencumbered financial worth of at least $60k (up from $40k)

•Requires the FSC to adopt a form informing insureds of the security required and benefits provided by BI coverage (a like form exists for No-Fault)

•Provides that effective Jan 1, 2015, persons must maintain coverage of 25/50/10. Grandfathers in plans that are in force on December 31, 2014 for the duration of the policy term (until renewed, nonrenewal, or cancelled on or after Jan 1, 2015). Allows insurers to change coverages effective Jan. 1, 2015 to comply with the new law; provides that any reduction in premium must be refunded; prohibits the insurer from charging an additional fee for changes, although an actuarially indicated increase in premium is allowable; Requires notice of these changes to be provided to policyholder by their insurers by October 1, 2014; Provides the framework for the notice, i.e., new coverage limits, explanation of BI, and instructions on moving to the new systems.

An amendment to the bill also requires $10,000 in Medical Payments:

•Requires medical emergency payments benefits, up to a limit of $10k per claim, to be provided as part of the required BI policies. The medical benefits are limited to ambulatory transport by licensed ambulance services, services in an emergency room or trauma center in a hospital licensed under Chapter 395, and “subsequent medically necessary services and care, provided the individual is admitted to a licensed hospital because of bodily injury out of the ownership, maintenance, or use of a motor vehicle.”

•Provides that medical payments coverage is primary, except that workers’ compensation benefits must be credited against medical payments benefits “as loss accrues upon receipt of reasonable proof of such loss and the amount of expenses and loss incurred which are covered by the policy issued under this section.” Requires Medical Payment insurers to reimburse Medicaid if Medicaid benefits are paid.

•Provides that benefits must be paid “within 30 days after the insurer is furnished written notice of the fact of a covered loss”.

•Requires insurers to provide a detailed description of each item rejected in the event only a partial payment is made. Still allows insurers to assert that the claim was unrelated, unreasonable, or not medically necessary.

•Insurance fraud “fraud in whole, fraud of part”, voids all coverage.

Allows insurers to exclude medical emergency payments coverage benefits:

•For injury sustained by named insured/relatives while occupying another motor vehicle owned by the named insured and not insured under the policy or for injury sustained operating a vehicle without consent;

•To injured persons who intentionally or feloniously caused the injury.

We will closely monitor these issues in the coming weeks and let you know as soon as Rep. Simmons’ anticipated bills are filed.

McCarty Raises Caution Flag about Pending Workers’ Comp Litigation

Tuesday 11/5/13- Insurance Commissioner Kevin McCarty, appearing before the House Banking & Insurance Subcommittee, issued a serious warning about the effects three workers’ compensation court cases could have on the overall workers compensation system in Florida and characterized the impact as, “potentially devastating.” In his testimony the Commissioner informed legislative committee members that the workers’ compensation system in Florida remains competitive despite four straight years of rate hikes. He further pointed out that rates are still 56 percent lower than they were prior to the statutory reforms of Senate Bill 50A in 2003. McCarty also noted that the low number of employers required to procure workers’ compensation policies through the Workers’ Compensation Joint Underwriters Association (WCJUA) was a signal of the workers ‘compensation market’s continuing health.  Florida’s chief insurance regulator did, however, recognize that the three pending appellate court cases could deal a serious blow to the overall system in our state. The lawsuits in question address three distinct issues including attorney fees, disability benefits, and whether particular language in a workers’ compensation policy protect an employer and carrier from paying a claim in a liability suit. Commissioner McCarty said there are indications that one of the lawsuits (Westphal v. City of St. Petersburg) was perhaps already having a negative impact on the comp system. The Westphal v. City of St. Petersburg case involves whether an injured fire fighter who has received the maximum amount of temporary disability benefits (104 weeks) could be eligible for permanent disability benefits if in fact the injured worker continues to improve medically. Another of the appellate suits which could send major ripple effects through the comp system is a court decision which upheld an attorney’s fee award for a specific amount of time in legal work. The First District Court of Appeal in Tallahassee has requested that the Florida Supreme Court opine on whether the fees awarded are adequate and consistent with the access to the courts requirement.  We will continue to closely monitor these court cases and let you know how they play out; in addition to what impacts they have on the overall system.

State Agency Rulemaking Will Again Be Under Lawmakers’ Microscope

Thursday 10/31/13-  The House Rulemaking Oversight and Repeal Subcommittee has filed a Proposed Committee Bill (PCB) which will mandate that state agencies report on their rulemaking activities more often and brief the Legislature on their efforts to promulgate new rules or amend existing rules to align with newly enacted laws. The Bill (RORS 14-01) requires agencies, to submit annually to the Legislature, their plan outlining rulemaking endeavors. Under current law a somewhat similar report is required but under RORS 14-01, agencies must start the process of creating new rules to comport with newly enacted laws passed by the Legislature, or explain why the law can be implemented without creating new rules. Rep. John Wood (R-Polk), Chairman of the Rulemaking Oversight and Repeal Subcommittee, noted that the bill is not a critique of any particular agency but an effort to streamline legislative oversight of the rulemaking process. He said the bill is designed to move forward from the 2011 legislation requiring agencies to submit reports on the economic impact of all administrative rules existing at that time. Those reports are due by December 1st and the new legislation would repeal the mandate to inspect the economic impact of all existing rules in future reports. Although Chairman Wood has stated that the bill is not designed to target any particular agency, a number of them have been chastised in recent years for failing to timely promulgate rules specifically authorized or mandated as part of new laws passed by the Legislature. On Tuesday, November 5th the bill was considered during a pre-session meeting of the House Rulemaking Oversight and Repeal Subcommittee and won approval with a 12-0 vote. This bill follows an effort last session by Rep. Janet Adkins (R-Nassau/Duval) to bring about a fundamental change in the manner in which regulated individuals and businesses go about challenging the validity of state agency rules. That effort (CS/HB 1225, 2013 Regular Session) attempted to shift in official rule challenge proceedings the burden of proof away from regulated persons and on to state agencies to establish that their rules are not arbitrary, capricious or an unlawful exercise of delegated statutory authority. We will closely monitor the further progress of PCB 14-01 and be watching for an effort by Rep. Adkins to file her bill again this upcoming session, and keep you updated on both fronts.

Congressional Deal on Flood Insurance to Keep Florida’s Economy Afloat

Monday 10/28/13-  A bipartisan agreement has been struck in Congress which will deliver a four year delay in the massive flood insurance premium hikes for many Floridians along with making other tweaks to the Biggert-Waters Flood Insurance Reform Act of 2012 (“BW12”).  Perhaps equally important, the legislation mandates that federal flood insurance regulators address affordability of coverage prior to imposing BW12 rate increases. The joint agreement occurred after several weeks of negotiations between Democrats and Republicans in the House and Senate. When she recently announced the agreement, U.S. Representative Maxine Waters (D-California), ranking member of the House Financial Services Committee, was highly confident that the legislative fix for the National Flood Insurance Program (NFIP) will ensure that future rate increases are “implemented affordably.”  “Over the past several months, I have felt the harm and heartache that many Americans have already experienced as a result of changes to the National Flood Insurance Program. From the start, I have made clear that I would lead the effort to fix the unintended consequences of the Biggert-Waters Flood Insurance Reform Act,” said Waters in a statement released by her office announcing the deal. As is with most successful endeavors, timing was everything in getting key House and Senate members and staff together to develop a workable solution. Rep. Waters said that on October 9th, in the midst of the recent federal government shutdown, she orchestrated a bipartisan meeting of almost 20 House members in addition to Senate staff, in order to build consensus around an agreement to delay rate hike implementation for four years and fix the program. In addition, the legislation requires FEMA to develop regulations that address the affordability issues within 18 months after the completion of the study and establishes a six month moratorium thereafter to allow time for Congressional review. The proposed delay applies to: primary, non-repetitive loss residences that are currently grandfathered; all properties sold after July 6, 2012; and all properties that purchased a new policy after July 6, 2012. FEMA believes it will take two years to complete the affordability study before regulations can be issued and reviewed by Congress, making it essentially certain that rate increases would be delayed for about four years in total, according to Waters.

In addition, Waters said the legislation:

•Allows FEMA to utilize national flood insurance funds to reimburse policyholders who successfully appeal a map determination.

•Eliminates the 50 percent cap on state and local contributions to levee construction and reconstruction

•Protects the so-called “basement exception,” which allows the lowest proofed opening in a home to be used for determining flood insurance rates.

•Establishes a Flood Insurance Rate Map Advocate within FEMA to answer current and prospective policyholder questions about the flood mapping process.

•Requires FEMA to certify that the agency has fully adopted a modernized risk-based approach to analyzing flood risk.

While this deal has been supposedly brokered, we won’t exhale until we see the legislation filed in Congress and begin to move.  Word is the bill most likely won’t get legs until early 2014.  We promise to keep you posted on this very important issue.

McCarty Appoints Matthews as Interim Chief of Staff

Friday 10/25/13- Insurance Commissioner Kevin McCarty has announced that current Deputy Chief of Staff, Rebecca Matthews, was appointed as Interim Chief of Staff for the Office of Insurance Regulation (OIR) until a permanent replacement is selected for former COS Audrey Brown. Ms. Matthews joined the Office in 2008 and during her tenure led the Office’s Government Affairs initiatives which have included both Legislative and Cabinet Affairs; Market Research and Technology; and served 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 the Florida Department of Management Services and the Florida Lottery, as well as, serving in lead communications positions, including Vice President of Communications for the Florida Bankers Association. Ms. Matthews received her Bachelor of Science degree in communications from Florida State University with a minor in Political Science. Ms. Matthews has been a pleasure to work with and we congratulate her for her willingness to assume this vital role with OIR.

Board of Administration Formalizes CAT Fund’s Claims Paying Capacity

Wednesday 10/30/13- The State Board of Administration published official notice of the estimated borrowing capacity, estimated claims-paying capacity, and projected balance of the Florida Hurricane Catastrophe Fund (the Fund) as of December 31, 2013, in compliance with the requirements of Section 215.555(4)(c)2., Florida Statutes.  These estimates relate to the 2013-2014 Reimbursement Contract Year.  The Fund’s projected post-event borrowing capacity estimate is $6.1 billion for October 2013.  Given the current state of the financial markets, the borrowing capacity estimate is dependent on many factors, such as: the size of an event or events, the limitations or constraints of the financial markets to absorb potential debt issuances, the time necessary to access such markets, and the existing level of interest rates at the time of issuance. The estimated borrowing capacity and projected available year-end cash balance (which includes the proceeds of the Series 2013A Pre-Event Bonds) provides the Fund with a total estimated claims-paying capacity of $17.864 billion over the next twelve months, although the statutory limit is only $17 billion.  Greater detail can be obtained in the “October 15, 2013 Claims-Paying Capacity Estimates” Report, which can be found on the Fund’s website at www.sbafla.com/fhcf/ under “Bonding Program.”  The obligation of the Board for the payment of reimbursable losses is limited in Section 215.555(4)(c)1., Florida Statutes, and shall not exceed the actual claims-paying capacity of the Fund, and is limited in the statute to no more than $17 billion for this Contract Year.  The projected year-end balance available for reimbursement of participating insurers on December 31, 2013, is estimated to be $9.764 billion, which represents the amount of assets available to pay claims, not including any bond proceeds, resulting from Covered Events which may occur during the June 1, 2013 through May 31, 2014 Contract Year. Given the projected year-end cash balance of $9.764 billion and the additional liquidity provided by the $2 billion of pre-event bonds that were issued in April 2013, the FHCF has a total of $11.764 billion in liquid resources, and would therefore need to issue only $5.236 billion in revenue bonds to fund its $17 billion statutory limit.  The Board recognizes that its good faith estimates are being made while volatile global financial market conditions exist; therefore, changing market conditions can dramatically impact the Fund’s actual claims-paying capacity either positively or negatively. Current conditions may or may not be the same if and when the Board determines that it is necessary to issue revenue bonds.  Participating insurers who rely on these estimates should recognize the potential impact the financial market can have on the Board’s claims-paying ability and plan accordingly.

Burgess Selected Again As Insurance Consumer Advocate

Tuesday 11/5/13- During opening comments of his Senate Banking and Insurance Committee meeting, Chairman David Simmons announced that Steve Burgess, Committee Staff Director, had been selected by CFO Jeff Atwater to again serve as the state’s Insurance Consumer Advocate.  Burgess assumes the role from Robin Westcott, who resigned effective November 1 to become AAIS’s Vice President for Governmental Affairs. Steve was Insurance Consumer Advocate for several years prior to joining the Senate staff following the retirement of long time Senate insurance staff director Brian Deffenbaugh. In making the announcement, Chairman Simmons noted, “This is an opportunity the State of Florida is very fortunate to have.”.  “Steve is a dedicated public servant, an individual who is incredibly bright, incredibly dedicated and incredibly loyal. I have been truly blessed and honored to have the opportunity of working with Steve.” “We know that he will continue doing that which is best for the State of Florida. We are truly; truly blessed to have him take on this new task, one he has been previously involved in.” We at LMA recognize the importance and great responsibility that goes with being the Consumer Advocate and congratulate Steve for his willingness to again accept this role advocating on behalf of Florida’s insurance consumers.

Speaking of Advocating….

Those of you who follow LMA and stay close to the work we do every day know that “advocating” is what we are about.  Whether it’s for a GOOD piece of legislation that will make Florida an even better place to live or for the needs of the folks in our local community, we LOVE “advocating”.  It is the heart of LMA.  Please always know that we appreciate your efforts in advocating for the work WE do each day.  We are surely there for each other.

Stay tuned as we continue our walks and visits through the Capitol.  Keeping our eyes and ears open each day so we may advocate for the best for us all.

Always there for you, Lisa