Monday August 12, 2013
Entering the Thick of Things This Hurricane Season
Like me, many of you have a bad knee, hip, elbow or other joint that serves as your personal barometer to let you know for certain when it’s going to rain! That familiar ache starts to ramp up and then, boom-the thunder hits and the rains come. Well, my knee has been bugging me lately which makes me think that we are days away from weather – real weather! Many of you who know me so very well are thinking my knee barometer is a result of the fast pace I keep; however, I think it’s more than that. As we enter the most active period of the hurricane season (August-October) one forecaster, Crown Weather Service, is predicting all of Florida having anywhere from a 50 to 95 percent greater chance of being impacted by a hurricane. Crown says the upper level pattern over the last couple of months has featured a fairly strong ridge of high pressure over the western Atlantic basin. Crown’s forecaster notes that based on everything he’s looked at, the areas of greatest concern this hurricane season in the Gulf of Mexico targets much of the northern Gulf coast, the Florida Panhandle, western, southwestern and south Florida. Looking back, it’s hard to believe that the 29th of this month will be the eighth anniversary of Hurricane Katrina’s landfall. Katrina was the deadliest and most destructive storm of the 2005 Atlantic hurricane season. It was the costliest natural disaster, as well as one of the five deadliest hurricanes in the history of the United States. Maybe it was partly due to concerns over a federal debt hovering at around $8 trillion, fatigue from responding to earlier 2005 Hurricanes Cindy and Major Hurricane Dennis or lack of preparedness; regardless, FEMA got off to a real rocky start responding to Katrina. Eventually though, FEMA and other federal agencies gained traction and were there for the people of Louisiana, Mississippi and other Katrina impacted states. Today’s federal debt has breached the ozone level, about $16.7 trillion and so many other things have changed since 2005. So, when the real weather comes what will be the implications for Florida? It’s not unreasonable to ask, will the feds be there for Florida if we’re hit by one or more severe storms this season? Public sentiment seems to have changed since the automobile industry bailout and Americans appear much less willing to write big bailout checks. For example, on July 28th Treasury Secretary Jack Lew made it clear to several media outlets that there will be no federal bailout of Detroit. So, perhaps it’s time for Florida’s policymakers to initiate brave, bold steps to significantly reduce the liability and exposure posed by Citizens Property Insurance Corporation to Florida’s consumers and businesses. One concept that was discussed in the 2013 session was to use the resources of the Cat Fund to reduce Citizens’ probable maximum loss through a strong wind mitigation program. Another involves packaging the risks in Citizens, modeling the risks, calculating the reinsurance costs and putting together public and private resources to cover those costs. Whatever the answer, look for some dynamic and “outside the box” thinking as we roll toward legislative committees that start in late-September. If you want to know more about the various ideas, please send me a note and I’d like to talk more about them!
With Initial Interviews Completed, Selection Of Citizens Inspector General Progressing
As many of you will recall, this past session’s SB 1770 to reform various aspects of Citizens contained a provision establishing an Inspector General (IG) for the corporation. The Citizens IG will be appointed by the Financial Services Commission (comprised of the Governor and Cabinet), however, report directly to the Chair of Citizens’ Board of Governors. This past week a three-member selection committee conducted interviews of twelve candidates who were selected from an initial group of 88 applicants. The selection committee is chaired by Gov. Scott’s Chief Inspector General, Melinda Miguel. Also serving is Tom Kirwin, Inspector General for the Department of Financial Services and Bonnie Deering, Inspector General for the Office of Insurance Regulation. All candidates interviewed were asked the same set of predetermined questions, including those in the following subject matter areas: Independent nature of the IG role, past experience in being proactive instead of reactive, preferred management style, experience in managing internal and ethics violation investigations, experience in handling negative public press and its impact, if any, on IG investigations as well as background in responding to public records requests. Based upon last week’s interviews it is the intention of the selection committee to develop, by no later than Wednesday of this week, a “short list” (up to six) of finalists who will be discussed during the committee’s next meeting on August 15th. At some point in the near future the committee hopes to submit the names of finalists to the Financial Services Commission for its consideration and potential interview. The following candidates were interviewed by the three-member committee this past week:
Neftali Carrasquillo Jr.:
Associate Commissioner, Texas DOI
Robert Cerasoli:
Enhanced Protection Specialist-MSA Security, New York; Former IG, City of New Orleans
Charles Faircloth:
Exec. Dir & Chief of Staff, Medicaid and Public Assistance Fraud Strike Force, DFS
Lester Fernandez:
Dep. Asst. IG, U.S. Department of Education
John Grayson:
CPA, Grayson Accounting and Consulting, Tallahassee
Christopher Hirst:
IG, Florida Dept. of Children & Families
R. David Holmgren:
Deputy IG, U.S Treasury Dept., Inspector General for Tax Administration
Robert McNichols
: Chief Audit Executive, Santa Fe Healthcare, Gainesville
Bruce Meeks:
Attorney, Law Offices of Roberts & Meeks, Tallahassee
Thomas Raftery:
Inspector general, Delaware River Port Authority, Camden, New Jersey.
Peter Williams:
Former IG, Florida Dept. of Education, former State-Wide Prosecutor & Deputy Attorney General
Richard Woodford:
Dir., Office of National Talent Pool and Training, U.S. Department of Labor
We’ll be sure to keep you posted on the next steps in the selection process.
Maryland Trying Different Approach With Some Fraud Cases
Late this past month the Maryland Insurance Administration began implementing new legislative authority to resolve certain insurance fraud cases using civil penalties as opposed to criminal prosecution. Maryland insurance regulators’ new powers became effective last October following passage of a bill by the 2012 Maryland General Assembly. Prior to October 1, 2012, Maryland’s insurance fraud division only conducted criminal fraud cases, which are prosecuted by either State’s Attorney’s offices or the Office of the Attorney General. Now, all referrals made to the Maryland Insurance Fraud Division are also reviewed for possible resolution using civil remedies. On July 23 civil orders were issued in two separate fraud cases. The first concerned a woman who allegedly submitted falsified documents to two insurers, claiming she had missed eight days of work resulting from a February 2012 auto accident. The investigation found that the woman had used her employer’s signature stamp without his knowledge to back her claim of lost wages. Investigators discovered that the woman had not missed any days of work after the accident occurred. In the resulting civil order the woman was required to pay a $2,000 fine and reimburse State Farm $644 it paid to her resulting from the fraudulent claim. The other insurer became aware of the false documentation in time to stop payment on her claim. The second case involved a Maryland man who allegedly recorded a false date for his return to work on a disability insurance claim. Because of the false date, the insurer compensated the man for some period while he also received a salary from his employer. In the civil order just recently entered, the man was required to make restitution to American United Life Insurance Company in the amount of $1,120.70 and pay an administrative penalty of $2,000. We are certainly interested in receiving our readers’ comments regarding Maryland’s additional authority and whether you believe our state’s insurance fraud division should be granted similar authority by the Florida Legislature.
DBPR: It’s OK For Windstorm Mitigation Inspectors To Pay Referral Fees to insurance agents or others
In an intriguing Declaratory Statement issued on July 19, the Department of Business and Professional Regulation (DBPR) concluded that licensed home inspectors and contractors can offer a fee to insurers and insurance agents for the referral of wind mitigation inspection clients. Although s. 627.711 of the Insurance Code establishes the types of construction-related professionals who have the authority to sign a uniform mitigation verification form, it is DBPR which licenses and regulates home inspectors, contractors, architects, engineers and others who may function as “authorized mitigation inspectors” pursuant to the Insurance Code. The Petition for Declaratory Statement was filed with DBPR on June 10 by Don Meyler Inspections, Inc., and focused, in part, on s. 468.8319(1)(h), Florida Statutes, which states, “a person may not offer or deliver any compensation, inducement or reward to any broker or agent therefor for the referral of the owner of the inspected property to the inspector or the inspection company.” In its Declaratory Statement, DBPR found several issues with the wording and/or interpretation of the above statute that caused the Department to conclude that the payment of referral fees do not violate the referenced statute. One of those issues is the fact that the statute fails to define the words “broker” or “agent.” The Department also noted that the prohibitions found in s. 468.8319(1)(h), regarding paying brokers or agents referral fees only apply to the regulation of “Home Inspection Services” which mean to render an opinion as to the overall or general condition of the home. According to the Declaratory Statement, licensed home inspectors and contractors who inspect wind mitigation fixtures and construction techniques, and later sign the mitigation inspection form are not performing home inspection services. DBPR also seemed to find no conflict of interest in licensed home inspectors and contractors paying referral fees because insurers’ sales are not contingent on the positive results of wind mitigation inspections. To the contrary, positive inspections result in discounts by the insurers. The insurers’ interests are in guarding against catastrophic loss and therefore they seek to have accurate inspections of wind mitigation features. DBPR goes on to say that a prohibition of referrals in this case would undermine the public purpose of the wind mitigation program, which is to promote to the greatest extent possible the proper installation of features that will guard against catastrophic loss from hurricanes. Regardless of whether you agree or disagree with home inspectors and contractors paying referral fees, based upon DBPR’s Statement it appears the Legislature will need to amend the home inspector statute if it desires to prohibit the practice. Please click on Statement in order to read the entire Declaratory Statement as well as the inspection firm’s formal written Petition.
Atwater Cites Reduced Reinsurance Costs In Letter Questioning Property Rates
In a letter dated August 7, 2013, CFO Jeff Atwater asked Insurance Commissioner Kevin McCarty to explain why property insurance rates have not lowered in light of reduced reinsurance costs. Citing reports by reinsurance professionals and analytics firms, Atwater says that data shows reinsurance rates are down on average 15-20 percent. The CFO goes on to point out that if increased reinsurance costs justified past rate increases, the current pricing structure should quickly translate into rate reductions for Floridians. Please click on letter to read the CFO’s correspondence; also included, a response from Commissioner McCarty to Rep. Ray Rodriguez who asked a similar question earlier this year.
Cabinet Approves PPACA Consumer Notice; OIR Communicates With Companies
During the Florida Cabinet meeting last Wednesday the Office of Insurance Regulation received final approval of its proposed Consumer Cost Notice which it was required to develop in implementing this past session’s SB 1842. Under the Consumer Notice Requirements of the legislation, health insurers intending to write Patient Protection and Affordability Act (PPACA) compliant individual and small group major medical health plans must file with the Office by September 1st up to eight consumer informational notices, one each for the PPACA plan types referred to as the platinum, gold, silver and bronze plans. Shortly after the Office received Cabinet approval, it sent the following communication to all insurers intending to write PPACA compliant plans:
From: Zutell, Tom [mailto:[email protected]]
Sent: Wednesday, August 07, 2013 02:26 PM
Subject: September 1 — Consumer Notice Requirement Filing Deadline
To all Companies writing PPACA-Compliant Individual and Small Group Major Medical Filings,
The Office is moving forward to implement the Consumer Notice Requirements of SB 1842 passed by the Florida Legislature to help inform the public about the impact of the Patient Protection and Affordable Care Act (PPACA). Under this legislation, companies are required to file up to eight Consumer Notice Requirements with the Office by September 1, 2013. [One notices each for platinum, gold, silver and bronze plans for both individual and small group.] Companies must make one filing that includes the appropriate number of attached EXCEL workbooks. Each workbook has three tabs: 1) instructions 2) data input, and 3) consumer notice. Companies will fill out the data input tab that will pre-populate the consumer notice tab which will satisfy the statutory filing requirement. To make a filing, carriers must log in using an existing I-Portal account to begin a session or, for first- time users, click the “Create Account” link under the “Common Tasks” heading. The filing will be made through the Data Collection and Analysis Modules part of the I-Portal on the Office’s website: https://apps8.fldfs.com/DCAM/Logon.aspx The EXCEL workbooks must be uploaded and submitted to the Office as an official rate filing. Instructions for completing the spreadsheet are included with the form. Again, the due date for submission to the Office is September 1, 2013. If you have technical questions or questions about the filing process – you may contact the Market Research Unit at (850) 413-3147; if you have insurance-related questions about the template – you may contact Eric Johnson at (850) 413-5059.
*Please click on Workbook if you wish to see the Excel spreadsheet containing the three tabs: 1) instructions 2) data input and 3) consumer notice.
Homeowners’ Policy & Claims Working Group Meets Today; Face-To-Face On August 19th
The Homeowners’ Insurance Policy and Claims Bill of Rights Working Group will meet this morning (Monday, August 12, 2013) from 10:00 a.m. to 11:30 a.m. via conference call and again in Clearwater on August 19 for an in-person dialog to likely confirm final recommendations. The Clearwater meeting will take place from 1:00 p.m. to 6:30 p.m. at the Pinellas Realtors Organization, 4590 Ulmerton Road, Clearwater, Florida 33762. We will be there to hear and participate in that dialog. During the most recent working group conference call on August 2 the majority of the discussion focused on the Assignment of Benefits issue. In earlier meetings there was discussion about allowing policy forms to prohibit their use altogether; however, that position has been altered somewhat with the final report likely to contain recommendations for restriction on the use of AOBs. The working group’s final report may include some of the following recommendations:
•Limiting the use of assignment of benefits to actual covered losses under coverage A and a requirement that insurers be notified in writing within 72 hours of the execution of an assignment.
•A requirement that water extraction firms and other vendors provide the claimant and insurer with a clear scope of work and estimate in connection with the AOB and additional written notice should the scope be exceeded.
•A mandate that a DFS mediation conference be held with the claimant in attendance prior to a contractor effectuating a lien on repairs not covered by the insurance contract.
•Adequate disclosures in AOBs that if claimants approve repairs not covered by the policy he or she must pay for those repairs out of pocket.
•For repairs other than emergency remediation, a requirement that public adjusting, water remediation and other vendor contracts contain a three-day cancellation (“cooling off”) provision allowing claimants to terminate the contract.
The topic of insurers’ use of Examinations under Oath (EUO) was again discussed during the most recent conference call with the Insurance Consumer Advocate (ICA) maintaining her position that structure around their use should be placed in statute. The ICA stated that written notice of an EUO must contain reasonable timeframes for appearance, in addition to a list of documents claimants must bring and a separate list of documents the claimant has yet to produce. Industry legal experts have, however, cautioned that Florida case law is very clear regarding EUO notice requirements and the acceptable scope of inquiry during an EUO. Further, it has been noted that if any doubt or lack of understanding about EUO standards is placed into the law, it could create a whole new round of litigation surrounding bad faith. There will most likely be further discussion regarding the appraisal clause and process, in addition to more dialog concerning neutral evaluation and mediation. Earlier there had been a suggestion of combining the mediation, neutral evaluation and appraisal processes into one; however, the discussion has now turned to possibly strengthening the mediation process and perhaps tweaking the appraisal process instead of doing away with it altogether. Also likely to be discussed is the insurers’ right to repair clause as well as safeguards and warranties for policyholders when insurers exercise their right to repair option. Stay tuned and we will keep you updated on working group developments.
Compliance Reminder: Are Your Appointed Producers Rebating Commissions?
The question of whether property and casualty, life or health agents are allowed to rebate commissions to their customers under Florida’s Insurance Code is one often posed to DFS regulators. At first glance and upon careful review of the Unfair Insurance Trade Practices Act (s. 626.9541(1)(h), Unlawful rebates) it would appear the practice is strictly prohibited. However, an agent rebating a portion of his/her commissions is allowable but only under strict statutory guidelines. Those guidelines are established in s. 626.572, Florida Statutes, and must be complied with to the letter in order to avoid potentially serious regulatory action. The step-by-step guidelines/requirements are as follows:
• (1) No insurance agency agent shall rebate any portion of a commission except as follows:
• (a) the rebate shall be available to all insured’s in the same actuarial class.
• (b) The rebate shall be in accordance with a rebating schedule filed by the agent with the insurer issuing the policy to which the rebate applies.
•(c) The rebating schedule shall be uniformly applied in that all insured’s who purchase the same policy through the agent for the same amounts of insurance receive the same percentage rebate.
• (d) Rebates shall not be given to an insured with respect to a policy purchased from an insurer that prohibits its agents from rebating commissions.
• (e) The rebate schedule is prominently displayed in public view in the agent’s place of doing business and a copy is available to insured’s on request at no charge.
•(f)The age, sex, place of residence, race, nationality, ethnic origin, marital status, or occupation of the insured or location of the risk is not utilized in determining the percentage of the rebate or whether a rebate is available.
• (2) The insurance agency agent shall maintain a copy of all rebate schedules for the most recent 5 years and their effective dates.
• (3) No rebate shall be withheld or limited in amount based on factors which are unfairly discriminatory.
• (4) No rebate shall be given which is not reflected on the rebate schedule.
• (5) No rebate shall be refused or granted based upon the purchase or failure of the insured or applicant to purchase collateral business.
As noted in (1)(d) above, insurers actually exercise significant influence over whether commission rebating occurs on its policy sales and many prohibit the practice altogether by contract or other written directive to their agents. Likely the most important thing is for insurers to periodically remind their appointed agents that the practice of rebating is generally prohibited, except under extremely specific statutory requirements and what the insurer’s position is regarding its agents giving rebates. As always, we hope you have found this compliance reminder informative. Please email us if you have any questions about this or other provisions of the Insurance Code as we will be happy to provide assistance.
Yes, We Try to Be Everywhere, All the Time, Following Every Issue
Yes, We Try to Be Everywhere, All the Time, Following Every Issue
At this date of publication, we at LMA have been everywhere over the past few weeks, again, and are on the road again this Wednesday, to participate in a myriad of functions including the Florida Realtors Association Meeting in Orlando followed immediately by the 68th Annual Workers’ Compensation Educational Conference and 25th Annual Safety and Health Conference, also in Orlando. Within that same two week period, we will be visiting friends, clients and all those we can reach who love our great State and work hard like us to make it an even better place to live. So, how do I do all this??? Well, yes, I do work 24/7 (and love it), but I also have a great team of colleagues at LMA that help me do 20 things at once and be everywhere all the time. In addition, many of you share invaluable intel and happenings that make our firm’s work successful. You know who you are and although I try to always remember to say “thanks for all you do,” I wanted to take a special moment and say it “in writing” in our newsletter. I absolutely could not do this work alone. My best and much thanks to each of you!!!!
Working for us all – getting’ ‘er done! Lisa
