Finding Talent and Keeping It
On a weekly basis, LMA receives inquiries asking about available talent for professional positions and the proverbial, “do you know someone looking for a position who can do xxx”?  All of us know that unemployment is the lowest it’s been in seven years, at 5 percent, and for those with a bachelor’s degree or higher the rate is actually half that. For those doing the hiring, employee retention will be key.  In fact, LinkedIn’s 2016 Global Recruiting Trends report found that nearly 60 percent of companies are investing more in their brand in an effort to keep current employees happy and recruit new, well-qualified talent. Recent studies have found that among the top ten fastest growing occupations are nurses, software developers and network and computer system administrators, marketing managers, sales managers, industrial engineers, construction professionals and financial managers.  Also in demand, is expertise with data analytics -now one of the most in-demand skills in the U.S. and there is a great need for marketing managers with the growth of digital consumer advertising. The job increasingly requires the use of analytics to navigate new marketing channels and ways of acquiring customers.And within ten years nearly half of Millennials are aiming to be senior managers; seven percent want to be executives and 15 percent want to be business owners.  The global consultancy EY (Ernst & Young) is a good example of this leadership transition underway-about 60 percent of its managers are Millennials, as well as 18 percent of its senior managers.

As you peruse this edition, be thinking about someone you know who needs a change or wants a new adventure and recruit them to the insurance industry!  Let us know who you know and how we can help!

Housing Forecast Solid But Unknown Variables Threaten 
According to Freddie Mac’s latest 2017 Outlook report updating its opinion of the housing market, there is some good news and bad news.  While there is a solid appetite for home purchases, uncertainty about fiscal policy and the unknowns about foreign investments in U.S. real estate will lead to a smaller mortgage market in 2017 than 2016. The prediction is that mortgage rates will rise throughout 2017, which likely will dampen mortgage market activity. Economists think that refinancing activity will plummet by more than 50 percent from 2016 levels, and reach about $425 billion in 2017.As an illustrative example, the average monthly cost of owning a $250,000 house financed by 4.25 percent 30 year fixed-rate mortgage increases by approximately $200/month for a borrower who no longer itemizes deductions.  Reducing marginal tax rates will also increase the cost of homeownership but by a smaller amount ($75/month or less, varying by tax bracket.  The extent to which tax policy changes will impact housing is hard to determine. Reducing taxes may boost income and general economic efficiency. But as we illustrated above, shifting tax policy may increase the cost of homeownership. The net impact on housing markets is uncertain.

There are key elections in France, Germany and the Netherlands this spring that could potentially shock markets like the Brexit vote last year and drive long-term interest rates here in the U.S.  Freddie Mac economists also note that appreciation of the U.S. dollar is making U.S. real estate pricier to many international buyers.

Necessity is the Mother of Invention
Never underestimate the power of an insurance agent who is in-tune with their clients.  So notes Robert Ritchie, the President & CEO of Tampa-based American Integrity Insurance.  An astute agent put the bug in Bob’s ear that several customers had been asking about stand-alone insurance for their golf carts and alas, only a couple of national carriers offered some sort of coverage.  With Florida having more golf courses than any other state (1,100+), what a natural insurance line for a Florida domestic, eh?!Last week the official press release went out making American Integrity the only Florida-based homeowners insurance company (out of more than 50) to offer this stand-alone coverage.   They got the idea from agents at The Villages Insurance, located in the retirement mecca town of the same name (population 157,000), where residents drive golf carts around town just as much as automobiles.   The COO of The Villages Insurance, Jody Hart, complimented AI for taking the time to listen to their request for this coverage and says customers are now purchasing this special protection every day.

The golf cart policy has similar coverage types to auto policies, including collision, comprehensive, property damage liability, and injury liability.   Customers can even select from several deductible options and the program features discounts, too.  Bob Ritchie says his company will continue to innovate and expects to launch several additional products later this year.

Our congratulations to Bob and Jon RItchie and the entire American Integrity team.  As they wish in golf, “May you hit it straight and far!”

Keep the Policyholder at the Table! 
This headline is my oft-refrain when talking with legislators, regulators, clients, and the news media about best approaches to Assignment of Benefits (AOB) reform.  After all, it’s their policy – they pay premiums toward it – and it’s their home – and they should remain in control of when and how it gets repaired and ultimately be made whole again.  Isn’t that the purpose of insurance after all?This past week, the Florida Office of Insurance Regulation in a refreshingly bold move, presented a plan to the Governor and Cabinet that is a step forward toward meaningful AOB reform.  Insurance Commissioner David Altmaier proposed to limit one-way attorney fees to the policyholder, and longer to third-parties.  The one-way attorney fee statute protects policyholders from legal bills when they sue their insurers.  Commissioner Altmaier said unscrupulous contractors who convince policyholders to sign AOBs are exploiting one-way attorney fees for their own benefit – they literally have nothing to lose by suing the insurance company.  His idea, now in a draft bill, would put an end to that.  It would also prevent contractors from filing liens against policyholders for billing balances above what insurers paid and would also require policyholders notify their insurer when signing an AOB.

The Commissioner told the Cabinet, sitting as the Financial Services Commission, that there’s been a significant increase in the use of AOBs since 2010, from 5.7% of claims to 15.9% among those insurers who track AOB and driven mostly by non-storm water claims.  Both the frequency of water claims (up 46% since 2010) and the severity (up 28% since 2010) have increased, resulting in rising loss and LAE ratios.  Commissioner Altmaier’s presentation also showed the percentage of water claims that are litigated has increased from 21% to 34% in the last three years.  He said those increased costs are being passed along to consumers:  OIR’s approval rate for residential rate increases went from 38% in 2014 to 72% in 2016. Click here to view HO3 filings through 2016 Q3.

Recent SCOFLA Rulings
The Florida Supreme Court has made a series of rulings over the past two weeks that will impact insurance interests, some for the better:

  • Allstate Insurance won and medical providers lost, when the court ruled that insurers have broad leeway in choosing fee schedules from which to reimburse providers for Personal Injury Protection (PIP) medical cases.  The 4-3 ruling overturned a 4th DCA decision that involved 32 consolidated PIP cases.  The Supreme Court found that Allstate’s policies provided legally sufficient notice that it would use the cheaper Medicare fee schedules to base reimbursements to hospitals and other providers.
  • The court also shut down a defense hospitals have been raising in medical malpractice cases, by claiming that federal HIPPA and other patient confidentiality provisions trump Florida law.  Specifically, the court ruled that federal law doesn’t preempt a 2004 state constitutional amendment requiring hospitals to release adverse medical reports.  The 5-2 ruling overturned a 1st DCA decision that quashed discovery orders for a Jacksonville hospital to release its adverse reports.  The Supreme Court decision noted that “health care providers should not be able to unilaterally decide which documents will be discoverable and which will not in medical malpractice cases.”
  • The court has once again, said limits on attorney fees are unconstitutional.  This time, it involves Claims Bills, which are a yearly ritual in the legislature, where injured parties ask the legislature to pay-out more than the $200,000 damage cap established in state law.  Sometimes plaintiff lawyers put in long hours on cases leading up to and including such an appeal.  The court ruled that attorney fees may not be limited by a claims bill if the limitation impairs the contract between the law firm and the client.
  • The court has also ruled that a party can raise new legal claims for which the statute of limitations has expired in an amended complaint if they are based on the same facts set out in the original complaint. The ruling clarified disagreement over the “relate back doctrine” that had resulted in two different interpretations running through Florida’s district courts of appeal.
Loss Costs on the Rise in Florida’s Workers’ Comp Market
For construction and roofing companies utilizing Assignment of Benefits (AOB) and flashy lawyers to try to force insurance companies to pay out big claims, sometimes things just don’t go as planned.  Sometimes they go very wrong indeed.Springhill Builders of Jacksonville is learning that lesson the hard way.  Lured by attorney advertising, Springhill a few years back hired Harvey Cohen and his Altamonte Springs law firm currently called Cohen Grossman P.A. to handle a mere 23 legal matters for insurance claims owed to Springhill.  (If Cohen rings a bell, he should: he’s known as one of the founding fathers of AOB litigation in Florida.)

According to the lawsuit Springhill later filed this past summer against the Cohen Firm, the hiring of Harvey Cohen seemed to have been the highlight of the relationship.  Things went downhill from there.   According to Springhill’s suit for legal malpractice and breach of fiduciary duty, Cohen and his underlings engaged in a pattern of litigious mistakes and failures to communicate with their client, which resulted in Springhill paying hundreds of thousands of dollars in attorney’s fees, judgments and other costs.

The suit references three specific AOB cases in which the Cohen firm at times failed to voluntarily dismiss the AOB case within the 21-day safe harbor period, kept right on litigating without Springhill’s knowledge and consent, requested bad faith discovery items, refused to coordinate hearings on motions with insurance company counsel, failed to timely respond to discovery and when it did, was deficient, repeatedly changed attorneys, and then tried to withdraw from cases, citing irreconcilable differences with their client Springhill.

In one instance, the law firm was in such a hurry to sue, that it failed to make sure the insured had submitted a proof of loss, according to Springhill’s lawsuit.  In another case, it transposed the first and last names of the insured, sued the wrong insurance company subsidiary, and attached wrong exhibits to its AOB complaint.

The court in one of those cases found the Cohen Firm was 100% responsible for filing a meritless lawsuit and awarded the insurance company $93,000 in attorney fees to be paid by the Cohen Firm.  In another case, Cohen had to pay $83,000 in attorney fees to the insurance company.  In yet another, the court itself pointed out the many errors in Cohen’s work, including mislabeling its client Springhill as an insured, rather than a third-party company.  Oops!

Folks, these are trying times.  People are trying everything and getting away with it.  It’s nice to see that Lady Justice cuts both ways and that Karma also uses balance scales.  We are happy to discuss this case with you.

“Covered Agreement” on Insurance & Reinsurance Now Before Congress
Loss costs are on the rise once again for the largest segments of Florida’s workers’ compensation market, reversing a multi-year trend and is the result, at least partially, of court rulings last year that declared unconstitutional the state’s workers’ comp program.   That’s one of the key findings in the recently released  2016 Workers Comp Annual Report, produced by the Florida Office of Insurance Regulation (OIR).OIR’s previous 2015 year report showed Florida in good shape on costs compared to the other 37 states that also use NCCI as the rating agency and rate filer of record.  Florida’s loss costs were below the NCCI average in 9 of the 10 largest class codes.  The 2016 report, however, shows there’s been significant deterioration and that Florida’s loss costs are now higher than average in 8 of the 10 class codes.

OIR’s report noted part of the cost increase was due to the approved 14.5% average rate increase it granted to NCCI last month, spurred largely by the anticipated impact of the state Supreme Court’s decisions last year in the Castellanos and Westphal cases.   (The court in Castellanos ruled the cap on attorney fees unconstitutional and in Westphal that payments to certain injured workers should be extended from two years to five years.)

The report notes that past reforms to the attorney’s fee statute spurred lower rates but that the recent court decisions “have the potential to significantly impact the workers’ compensation system in Florida.”  OIR also noted that medical cost drivers in the areas of drug costs, hospital inpatient reimbursement, and ambulatory surgical center reimbursement are noticeably higher in Florida than the nationwide average.  The legislature is considering what action to take this upcoming session in all of these areas.

Overall, OIR says Florida’s workers’ comp market is competitive and served by a large number of independent insurers. The residual market is stable and accounts for a small portion of the overall market despite increases in policy count and written premium in recent years.

Let The Squabbling Begin
This week, the political feud between Governor Rick Scott and House Speaker Richard Corcoran hit a fever pitch.  Governor Scott said the House of Representatives doesn’t “care about people’s jobs” and said Speaker Corcoran (without naming him) was only concerned with running for governor and not doing what’s best for Florida. The battle is over the life of Enterprise Florida and Visit Florida, two mostly taxpayer-funded economic development arms that the Speaker sees no need to continue.  The Governor wants $180 million to continue both agencies’ work. The legislative session starts officially March 7 so this type of premature bickering sets the stage for some rocky times.  I invite each of you to come shadow me as the work continues.  Look forward to seeing you on the trail.Lisa and the team