Here It Comes – 2017 Session Convenes Next Week 
We have counted almost 75 Senate and House bills that will either directly change how insurance companies do business or indirectly affect the industry through judicial impact, business practice, or regulatory oversight.  For the past 3 weeks in February, there have been about 15 legislative committee meetings where we watched legislators of those committees debate some of the basic fundamentals of insurance and contracts.  For example, in a recent Senate Banking and Insurance Committee meeting, the 9 committee members debated if a Health Maintenance Organization (HMO) should be vicariously liable for the acts of their network physicians.  In another meeting, we heard lots of discussion about why assignment of benefits (AOB) and the abuse of their use has a direct correlation to rate increases.  It is important for us to watch these committee meetings to get a feel for the philosophy of various legislators who sit on the committee.  Listening to a legislative committee member gives us signals on how we approach a particular member of the legislature on issues important to our clients.    If you would like to watch a quick hour long meeting, listen to the debate at the recent Senate Banking and Insurance Committee referenced in our story below on efforts to expand Florida’s private flood market below by clicking here.  We will be watching and listening and most importantly, advocating for our clients and good public policy for the next 60 days.
Palm Beach Judge Rules Against Construction Company Seeks
Assignment of Benefit (AOB) Status But No AOB
In The Construction Guys, Inc. a/a/o Micciulli v. United Property & Casualty Insurance Company, the plumbing contractor filed suit against the insurance company seeking benefits for repairs made on behalf of United’s insured. The Construction Guys, Inc. claimed to have standing as an assignee of the Insured but the document on which suit was based stated as follows:I, Insured herein authorize: The Construction Guys, Inc. to perform necessary repairs to bring my home at 32 Bedford B West Palm Beach FL 33417 to pre loss condition. For Plumbing Only…I herein direct my insurance carrier United Property & Casualty Ins. Co. to directly pay The Construction Guys, Inc. for this work performed on the above claim.

Law firmGroelle & Salmon argued that the agreement did not contain any language conveying any sort of assignment of benefits and therefore the Plaintiff lacked standing to bring suit against the insured’s carrier. In opposition to the Motion to Dismiss, opposing counsel argued that despite the lack of language granting an assignment, Construction Guys had an implied equitable assignment. Palm Beach County Court Judge Frank Castor dismissed the entire suit with prejudice, thereby foreclosing The Construction Guys’ ability to amend the Complaint. Judge Castor’s Order stated that although the agreement between the Plaintiff and the Insured conferred an authorization for payment to third party, it did not assign any rights or benefits to file suit or litigate a claim against the Insured’s carrier.

Chief Financial Officer Jeff Atwater Outlines 2017 Legislative Agenda 
Chief Financial Officer Jeff Atwater released his 2017 legislative agenda with bold initiatives such as fighting insurance fraud and reforming the use of assignments of benefits. Read more here.
AOB Reform Bill Filed
With the focus now on tightening the reins on one-way attorney fees as the solution to Florida’s Assignment of Benefits (AOB) problem, a new bill (SB1038) has emerged in the Florida Legislature that would also protect consumers from abusive contractors.The one-way attorney fees statute allows policyholders to recover legal costs if the insurer has been shown in court to have underpaid the claim in any amount.  The bill, crafted by the Office of Insurance Regulation (OIR) clarifies current law by adding that attorney fees would not be awarded “in favor of any person or entity seeking relief against the insurer pursuant to an assignment agreement.”  In other words, only the named policyholder would be entitled to file suit.  Simple, yes?

In practice, likely no, given the sway the trial bar has in Florida, including those members sitting in the Florida Legislature.   The Florida Justice Reform Institute, a Florida Chamber of Commerce partner group, predicts attorneys will circumvent the bill’s provisions by convincing policyholders to file suit in their own name.

The bill would also protect policyholders by allowing them to rescind an AOB within seven days.  It would also prevent a contractor from billing the policyholder for any balance remaining after the insurance company pays the claim.  Policyholders would have to notify their insurer within three days of signing an AOB.  The Florida Justice Association (trial bar) is of course, objecting strenuously to the bill.

The trick to what OIR proposed is to let the consumer keep all current protections (satisfying the legislature’s ongoing concerns over the past three sessions) but focus more specifically on the culprits: abusive lawyers and third-party contractors, some of whom aren’t even properly licensed, who inflate claims and fees.  The idea being that attorneys will think twice about taking on such cases in the future, knowing there’s no guarantee their fees will be paid.

Other potential solutions raised beyond this bill include requiring all mitigation contractors be licensed and making illegal aiding in solicitation of legal services for mitigation cases.

Last week, the head of Florida-based HCI Group said the company’s lawsuit rate is now 35%, but that the AOB problem is limited to just two of the state’s 67 counties and in only one of its five insurance lines.  He added that the claims rate is now declining because of compensating actions by the company.  We are following this issue very closely.

Predictive Modeling Not Just for the Big Boys Anymore 
Speaking of combating fraud, data analytics giant Verisk says predictive modeling is becoming a more affordable and widespread tool – and it’s not just for large insurance and financial companies anymore.  Here is an interesting read we’re sharing via our friends at the Insurance Journal.
Prove It! 
We know that sometimes proving fraud or other complicated court cases comes down to the use of “expert witnesses”.  Sometimes those experts have conflicting opinions among themselves.  For the past three years in Florida, we’ve been using the “Daubert” standard in state court to assess the reliability of expert testimony.   Earlier this month, the Florida Supreme Court, which has the final say in court rules and procedures, threw out the standard, pointing to “grave constitutional concerns.”The Daubert standard was passed into law by the Florida Legislature in 2013 as a way to eliminate the use of junk science in court cases.  It’s the standard that’s been in place for 23 years in the federal court system and is based on three tests to determine whether expert testimony may be admitted in court:

*  Is the testimony “based upon sufficient facts or data”?

*  Is the testimony the “product of reliable principles and   methods”?

*  Has a witness “applied the principles and methods reliably to the facts of the case?

The state Supreme Court ruled 4-2 that Daubert is more restrictive than the state’s previous Frye standard and sided with opponents’ arguments that using it would make cases more expensive and time consuming and therefore make it harder for people to pursue lawsuits.  The court majority in its ruling noted those concerns include undermining the right to a jury trial and denying access to the courts.

The Frye standard provides that expert opinion be based on “generally accepted reliable techniques in the relevant scientific community.”  The state Supreme Court years back previously rejected the Daubert standard, which led the Florida Legislature to pass the 2013 law, which is now again rejected by the court.  With this ruling, Florida rejoins California, Illinois, Maryland, Minnesota, New Jersey, New York, Pennsylvania, and Washington in using the Frye standard.

New Effort to Expand Florida’s Private Flood Market 
Building on the success of previous years’ legislation to encourage a private alternative to the National Flood Insurance Program in Florida, state Senator Jeff Brandes (R-St. Petersburg) has introduced SB 420 which extends rate deregulation and relaxes eligibility requirements to write flood lines.The senator is making the case that most homes in Florida that are flooded don’t have flood insurance because they’re not actually in a flood zone.  With rising prices in the federal NFIP program, property owners need a competitive alternative now more than ever. The bill extends the expiration of deregulated flood rates to 2025 from 2019, giving the private market more time to gain its footing.  It allows companies to submit once every four years instead of the current two years the revised actuarial methods, models, and standards for flood loss projections.  The bill removes current exemptions to allow commercial lines coverage, both residential and nonresidential and to allow excess flood coverage.  It also allows more surplus lines participation, removing the requirement that a surplus lines insurer maintain a minimum of $300 million in capital and surplus and instead would require the insurer maintain a superior, excellent, exceptional, or equivalent financial strength rating by a rating agency acceptable to the office.

The bill passed the Senate Banking and Insurance Committee last week.  One senator expressed concern about allowing a growing number of surplus lines carriers, who by definition are not regulated by form or rate, to sell flood insurance in Florida.

Fighting Regulatory Overreach  
When it comes to regulation, no one does it quite like the federal government.  With that in mind, President Trump and Congress are fighting what the President calls “regulatory overreach” as part of a package of Financial Services reform.Earlier this month, the President issued an Executive Order outlining what he termed “Core Principles” his administration will follow in its approach to financial services regulation:

(a) Empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(b) Prevent taxpayer-funded bailouts;

(c) Foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

(d) Enable American companies to be competitive with foreign firms in domestic and foreign markets;

(e) Advance American interests in international financial regulatory negotiations and meetings;

(f) Make regulation efficient, effective, and appropriately tailored; and

(g) Restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

The President also directed his Treasury Secretary to meet with the member agencies of the Financial Stability Oversight Council (which include the Federal Insurance Office) and report back within four months on the extent to which existing regulation, laws, treaties, guidance, reporting, and recordkeeping promote the Core Principles and what future action is necessary.

This action comes on the heels of another executive order the President signed, directly federal agencies to eliminate two existing regulations for each new one they create.  He announced that he expects to be “cutting a lot out of Dodd-Frank”, the series of stringent rules on bank capitalization requirements, created in the aftermath of the 2008 financial crisis, which also includes the FSOC and the Consumer Financial Protection Bureau, and the SIFI (too-big-to-fail) regulatory scheme.  His executive orders represent a first-step to review Dodd-Frank, before deciding what parts of it to change or eliminate.

Congress is also involved in the reform movement.  The House Financial Services Committee approved its proposed oversight plan with Chairman Hensarling reminding committee members to “remember this isn’t Washington’s money, it’s the taxpayers’ money.”  Included in the plan is a top to bottom review of the domestic and international functions of the Federal Insurance Office, a look at the impact of Dodd-Frank on the insurance sector, and review the National Flood Insurance Program with an eye toward encouraging a private flood insurance market.

Two Takes on Florida’s Real Estate Market
It’s a good time to buy a house in Florida – if you can afford it.  That’s the bottom line message culled from two different reports on Florida’s residential real estate market.  With home ownership nationwide at a record low, a small majority of Floridians say this is a good time to buy a house, according to a report by the University of Florida’s Bureau of Economic and Business Research (BEBR).The report, Home Ownership in Florida: Why it Matters and What Floridians Think, shows half of Floridians (50.1%) think it is a good time to buy a house, according to a fall survey.  Another 19.3% thought it was a bad time, while 30.6% were uncertain.

A recent U.S. Census Bureau report shows that as of 2016, the Florida homeownership rate has dropped 8 points to 64.4%, the lowest since the government started tracking in 1984.  Florida’s homeownership rate reached a peak of 72.4% in 2006, right before the Great Recession.  Our affordability rate is still higher than the U.S. rate of 63.4% in 2016.

Among survey respondents who favored buying now, 46.1% cited favorable interest rates, followed by low home prices, availability, and favorable economic conditions.  Of those who thought it was a bad time to buy a house, most cited unfavorable economic conditions (41.5%) followed by high home prices and difficulty qualifying for a mortgage.

Meanwhile, a new report by the National Association of Realtors shows Florida is no longer the home of inexpensive housing.  The Sunshine state now ranks as the nation’s sixth least-affordable market, behind only Hawaii, California, D.C., Montana, and Oregon.  Robust demand by first-time homebuyers has created big competition for cheaper entry-level priced homes while incomes in Florida continue to skew low.

The Realtor’s report is actually a new housing affordability model the association premiered this month,  Realtors Affordability Distribution Curve and Score.  It will be distributed monthly going forward and is designed to examine affordability conditions at different income levels for all active inventory on the market.  It uses mortgage data, state-level income, and listings on realtor.com.

The Realtors say while existing sales are forecast to grow 1.7% this year, homebuyers at different income levels could see a lack of listings on the market in their price range in coming months.  The research is in answer to a common complaint increasingly heard by agents from clients – that there’s a notable imbalance between what they can afford and what’s listed for sale.

Reflecting a growing shortage of accessible inventory for most income groups, the entire Affordability Distribution Curve in January was below the equality line and the gap was generally wider at lower incomes, which indicates even tighter supply conditions. A household in the 35th percentile could afford 28 percent of all listings, a median income household (50th percentile) could afford 46 percent of listings and a household in the 75th percentile was able to afford 74 percent of active listings.

Rude Surgeons an Indicator of Bad Medical Outcomes 
The study by Vanderbilt University Medical Center in collaboration with six other major health systems collected outcome data from more than 32,000 patients and correlated them with patient and family reports of disrespectful or outright rude behavior by surgeons for a period of two years prior to the surgeries.The study shows that those same high-risk physicians not only make patients and families unhappy, their disrespectful behaviors also impact the ability of other surgical team members to do their work. Patients receiving care from surgeons attracting the highest numbers of patient complaints experienced nearly 14 percent more surgical and medical complications in the 30 days following procedures than patients seeing surgeons perceived as respectful. Complications could include surgical site infections, pneumonia, renal conditions, stroke, cardiovascular conditions, thromboembolic conditions, sepsis and urinary tract infections.

The online study appears in the journal JAMA Surgery.  Researchers say by extrapolating the data to the 27 million surgical procedures performed in the U.S. each year, this could represent more than 350,000 surgical site infections and other maladies. This study is the latest based on more than 20 years of Vanderbilt’s research on the subject.  Its author, Dr. Gerald Hickson, had previously shown that doctors with a disproportionate share of unsolicited patient complaints are at a higher risk for medical malpractice claims.  More than 140 hospitals nationwide use what’s known as the Patient Advocacy Reporting System (PARS) to identify doctors who have a high risk for med-mal claims.

That rude and disrespectful surgeon may also suffer from higher surgical complications, such as infections, according to a new study that links the personality trait to operating room performance.

Always Glad To Hear From You 
We are working really hard for you…we have a great team who help us with this newsletter and invite guest authors anytime. If you would like to contribute, then please submit to us, or send us your ideas and thoughts.  Have a great week.The LMA Team