Episode 31 – Property Insurance Reform

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The Florida Legislature has passed a property insurance reform bill designed to stem double-digit rate increases, costly claims practices, and excessive litigation.  The Governor has signed the bill into law effective July 1, but there are questions about just how effective it will really be.

Host Lisa Miller, a former Florida Deputy Insurance Commissioner, talks with a leading state Senator and a veteran insurance defense attorney and legal strategist on what the measure does and doesn’t do – and its expected impact on Florida consumers.

State Senator Jeff Brandes (R-Pinellas County)

John Henley, Vice President and Head of Claims Shared Services, UPC Insurance

Show Notes

Over the past 18 months, Florida’s residential and commercial property insurance market has seen a growing number of policy cancellations and non-renewals, greater coverage restrictions, and regulatory approval of necessary double-digit rate increases, some as high as 50%.

Senate bill SB 76 changes the calculation of attorney fees and restricts solicitation of roof damage claims, requires claims be filed within two years and requires that insurance companies receive a ten-day presuit notice in first-party litigation.  It also directs state regulators to collect insurance claims and litigation data annually.  (For a complete summary of the bill, click Lisa’s 2021 Bill Watch.)

State Senator Jeff Brandes (R-Pinellas County) voted in favor of the bill, which was watered-down in the last week of session, but warned colleagues on the Senate floor that it was just a 40% solution for what is needed to restore a competitive property insurance market and lower costs.  “We have a rash of roof claims across Florida.  The two things that we really needed to deal with were attorney fees and roof issues… most of that is missing (from the bill),” he shared on the podcast.

The bill changes the decades-old one-way attorney fee statute formula.  If the claimant recovers at least 50% of the disputed amount, full attorney fees would be awarded; less than 20%, then there would be no attorney fees.  Judgments between 20% and 50% would merit the same proportional attorney fee to the percentage of the disputed amount obtained. 

“The attorney fee provision is a step in the right direction,” said John Henley, Vice President and Head of Claims Shared Services at UPC Insurance, one of the largest writers of homeowners insurance in Florida.  “It’s so much better than the current paradigm, where if a claimant gets a judgement of a penny more than the insurance company offered, they get all their attorney fees paid, and even more.”  And the bill’s required ten-day notice before being sued, “is better than nothing, which is what we have now, where we settle the claim and think everything is fine and then they sue us and don’t tell us what they’re demanding,” Henley added.

Senator Brandes, a champion for insurance reform in the Florida Legislature, said he hopes the provisions will bring all parties to the table and to act reasonably.  “Prior to this law, people had no incentive to be reasonable.  In fact, they had an incentive not to be reasonable.”

Midway through the legislative session, Florida Insurance Commissioner David Altmaier released a letter citing National Association of Insurance Commissioners data that showed in 2019, Florida had 8% of all homeowners’ claims in the U.S., yet 76% of all homeowners’ claims lawsuits.  The letter “completely changed the dynamics and the tone of our colleagues in the House, because it’s indefensible,” said Brandes.  “It’s also unsustainable.  That’s largely what’s driving both the cost of insurance but also the investors out of the market.”

Henley, a longtime claims attorney, said the one-way attorney fee law is the reason behind the startling statistic.   He said another provision in the bill requiring insurance companies annually report to regulators their litigation figures, loss cost, and adjusting cost, will lead to greater transparency of the problem.  “When the state starts to get that information and they (regulators) truly see behind the veil of how much money this industry, this litigation economy in Florida is taking from carriers and ultimately insureds, that will be the kick-start to get the other 60% that we want done, done,” Henley said.

“People are essentially paying a hidden tax on property insurance that they’re paying through their insurer to the trial bar and that’s what’s causing all of these problems,” Brandes added.

Both guests pointed out that while the bill’s changes in law take effect July 1, the effects will take 12-24 months to make their way through carriers’ books of business.  That leaves insurance companies to continue to face these challenges and consumers facing skyrocketing premiums, along with other market factors such as record-high lumber prices and the next two hurricane seasons.  “In the meantime, Citizens Property Insurance (the state’s insurer of last resort) will likely grow to more than one million policies in the next two years,” said Brandes, putting taxpayers at risk of having to cover any potential reserve shortages that could occur in a future super storm or series of storms.  

Henley also predicts “a deluge of litigation” between now and when the law takes effect July 1 that he says the industry is already starting to see.  He likewise sees limited impacts of the new law itself.  “You’re dealing with a very creative plaintiff bar here in Florida.  So we need to see this bill play itself out in a court system that has been historically lenient toward plaintiffs.  I suspect we’ll see a flattening of litigation only.”

Even with SB-76, other challenges to Florida’s property insurance market remain.  The aging roof problem, where solicitors go door to door encouraging claims for roofs that instead have normal wear and tear, was unaddressed in the final bill.  “We’re already starting to see insurance companies pull away from writing coastal policies simply because they can’t get the reinsurance or raise additional capital,” said Brandes. 

Host Miller noted that there are three main factors causing rising rates: excessive litigation, contractor fraud, and claims creep from past hurricanes, along with resulting reinsurance price increases.  “Consumers are really rising up and they are upset,” Miller said.  She and her guests talked about the need for the insurance industry to do a better job communicating to policyholders about the negative effects of door-to-door repair solicitations and lawsuits. 

“I live in South St. Petersburg and I love it,” said Henley.  “But I pay three times more for a house that is three times smaller than one of my best friends who lives in Atlanta, Georgia.  Why is that?  It’s because of the claims litigation activity that is driven by these bad actors.”   He said the reporting requirement on carriers in the bill will prove “it’s not a made-up crisis.”

“This isn’t a made-up issue, as some claim,” agreed Brandes.  “There’s a real problem in Florida.  The insurance market is the Achilles heel of the state….and unless we get our hands around this problem, we’re going to have real challenges going forward.  This effects everyone, whether you are renting, owning, or in a condo…We have begun to address the problem, but there’s a lot more work to be done.”  

“It’s clear from our conversation here and from others we’ve had recently, that the legislative reform passed may have modest impacts on two of the foundations of insurance that are increasingly out of balance in Florida, availability and affordability,” concluded Miller.

Links and Resources Mentioned in this Episode

Florida Senate bill SB 76

Florida Legislature 2021 Bill Watch summary (Lisa Miller & Associates)

Florida one-way attorney fee statute

Florida Insurance Commissioner David Altmaier’s litigation statistics letter

National Association of Insurance Commissioners: The Cold, Hard Truth about Florida Litigation (LMA Newsletter of April 12, 2021)

Senator Jeff Brandes Senate floor debate video (beginning at timecode 1:35:25, The Florida Channel)

Senator Jim Boyd (sponsor of SB 76) Senate floor debate video (beginning at timecode 3:07:10, The Florida Channel)

Insurance Costs Threaten Florida Real-Estate Boom (The Wall Street Journal, April 25, 2021)

Reforming Florida’s broken insurance market (Inside P&C, April 12, 2021)

Florida Domestic Property Insurers Summary of 2020 Year-End Financial Results

Florida’s Property Insurance Dilemma (The Florida Insurance Roundup podcast, March 26, 2021)

UPC Insurance

Senator Jeff Brandes Legislative Webpage

Demotech Financial Stability Ratings for the Florida Domestic Market (March 12, 2021)

Regulators Reject Citizens Rate Cap Request (LMA Newsletter of April 26, 2021)

Several Factors Hinder Homeowner and Auto Glass Insurance Fraud Processing (Florida Office of Program Policy Analysis and Government Accountability, March 2021)

Florida’s P&C Market: Spiraling Toward Collapse (Guy Fraker, Cre8tfutures Advisory, January 2020)

Florida’s Property Insurance Market Is ‘Spiraling Towards Collapse’ Due to Litigation: Report (Insurance Journal, January 20, 2021)

Consumer Impact and Trends in Property and Automobile Insurance (Florida Insurance Consumer Advocate presentation to the Florida House Insurance & Banking Subcommittee, February 3, 2021, pages 37-45)

Citizens Exposure Reduction and Depopulation Opportunities Analysis (Florida State University’s Florida Catastrophic Storm Risk Management Center, November 2020)

How a $41,000 Plumbing Leak Turned Into a $1.2 Million Attorney Fee (Lisa’s Blog, March 12, 2020)

Assignment of Benefits & Insurance Litigation Webpage (Lisa Miller & Associates)

Floridians for Lawsuit Reform

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