LMA Newsletter July 25, 2016


July 25,   2016

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Just One More Turtle Story

You will remember our story a few publications ago about the sea turtle that died as a result of some of our very bad weather.  The story left me sad that we weren’t able to rescue this amazing creature.  So I was very happy to read of the heroic rescue of an Asea turtle recently by a couple of teenagers from Georgia who was visiting a local beach during their summer break.  I just had to share the story with you.  The two boys noticed something “odd sticking out of the water” and took the time to check it out.  What they found was an Asea turtle that was ensnared in a crab trap, languishing as fishing wire slowly choked the creature to death.  The boys told reporters that they got a knife and cut the fishing line, which looked to be wrapped around the exhausted turtle 20-30 times.  Carefully maneuvering the turtle so that they didn’t impair its breathing in the process of removing the fishing line, they were able to free it and return it to the Gulf.   As they watched it struggle to swim away, the boys felt good about their rescue.  In fact, one of the young men told reporters that he plans to make his career in marine biology.  Staff at the Gulf Specimen Marine Lab in Panacea tells us that while standard procedure for rescuing trapped turtles involves calling either the laboratory or the Florida Fish & Wildlife Conservation Commission, this turtle may not have survived long enough to do so.  We applaud these young folks FOR DOING THE RGHT THING by demonstrating the qualities and good manners that we want for our children, and the respect for all God’s creatures.  We are providing you with contact info for any situation that involves our Florida fish and wildlife that we love and want to protect.  Contact the Florida Fish and Wildlife Conservation Commission Division of Law Enforcement at 1-888-404-3922 or *FWC or #FWC from your cellphone.  You can get more information about our beautiful sea turtles at www.conserveturtles.org .    The circle of life starts with us as the caretakers of this earth.  I hope everyone will do their part, like these young visitors from Georgia.

Lynx Services To Assist Citizens Corporation With Water Claims

Citizens Property Insurance Corporation Board of Governors approved a $1.8 million contract with Lynx Services, LLC last week, so that Citizens can examine escalating water damage claims from policyholders, determine whether the charges are excessive and contest or adjust invoices so it comports with industry standards.  Citizens is implementing a 6.8 percent statewide rate hike for its nearly 500,000 policyholders, citing rising water-damage claims as a key reason for the premium increase and 10 percent in southeast Florida.  The rate increase will be the subject of public hearing next month.

 “Perfect Storm” Helping Push Florida’s
Private Flood Insurance Market

Rising National Flood Insurance Program (NFIP) rates, coupled with modernized insurance regulation and new predictive modeling technology, is creating increased demand for affordable private flood insurance in the Sunshine State.
NFIP rates rose 15%-18% for Florida homeowners this past spring and 25% for businesses and second homes, together with increased program fees.  While NFIP is debuting new flood maps in parts of Florida this summer – the first new maps in 30 years in some areas – and removing some properties from what were previously flood zones, there is a growing awareness of the need to have flood insurance regardless of your zone.
Here’s the take from Nancy Watkins, principal and consulting actuary with Milliman, who was among the first folks Senator Jeff Brandes (R-Pinellas) reached out to in 2010 when he realized the extent of the NFIP problem in Florida and wanted to encourage a private market alternative:
“Flood risk in Florida remains high-which is why Florida homeowners have historically accounted for a majority of NFIP premium,” says Watkins, in a recent Milliman release. “But reinsurers see an opportunity to diversify and assume uncorrelated risk, so there’s a willing reinsurance backstop that can support a private market. The Florida legislature has further prepared for a viable private market by passing SB 542 , which authorizes certain insurers to sell flood policies. And new catastrophe models are allowing insurers to better understand and predict flood risk.  So there’s financing, there’s regulatory will, there’s a technology solution, and there’s consumer demand.”
Bravo Nancy.  This is indeed the perfect storm for consumers!
These new predictive modeling tools, together with actuarial expertise, help private insurance companies set rates that truly reflect the actual risk down to the individual property level (as opposed to the “one size fits all” standard zone level like the Feds do).  As these Milliman maps show, large geographic areas with four-digit NFIP premiums are reduced to double- and triple-digit premiums by private insurers utilizing this new technology:
The predictive modeling and analytics cover not only flooding from storm surge, but the more prevalent inland flooding.  While storm CAT models have been around for years, there were no models for inland floodwaters until recently due to lack of interest by private companies and the huge computing power required.  While there has always been inland risk, it’s been tough to figure out where and how much – and how to price it – until now.
This is a big development.  Flood had generally been considered an uninsurable risk.  Now, many companies want to start writing what is essentially a new line for them.  While there are a handful of firms currently offering private flood in Florida (the latest is Centauri Insurance this past week), there are lots on the horizon exploring the option and others gearing up for a late 2016/early 2017 launch.  If you want more information, give us a call here at LMA.

NFIP Not Helpful in Efforts at Privatizing the Flood Market

In yet another example of the left hand doing one thing and the right hand doing another, comes a new report out by Congress’ General Accounting Office: Flood Insurance: Potential Barriers Cited to Increased Use of Private Flood Insurance.   Among the findings is that FEMA recently stopped allowing policyholders to obtain a refund of their unused NFIP premium if they obtained a non-NFIP policy.
While acknowledging that private insurers routinely refund unearned premiums upon policy cancellation, the GAO report says nonetheless that NFIP changed its refund policy in November 2015.  FEMA, which runs NFIP, said it did so after a review of NFIP cancellation policies found refunds were not explicitly permitted in NFIP policy terms and conditions.  Due to this change, consumers who wish to obtain private flood coverage would forfeit any unused portion of their premium.
The 2012 Biggert-Waters Act took steps to encourage private-sector participation by requiring regulators to direct lenders (especially Fannie & Freddie) to accept private flood insurance to satisfy the mandatory purchase requirement-a federal requirement to purchase flood insurance on certain properties.  Lenders whom GAO talked to for this report said they send notices to potential home buyers encouraging them to comparison shop private policies to NFIP policies, generally accept private policies, and generally follow existing 2009 FEMA guidelines for mortgagors to evaluate those polices.  Yet the report found that FEMA rescinded its guidelines in 2013, citing a lack of authority to rule on the acceptability of private insurance policies.  That has created uncertainty among lenders on which private policies qualify, especially given the lenders lack of insurance expertise.
The GAO report also found that low private sector participation in flood insurance was also due to market challenges.  Some stakeholders cited the inability to compete with discounted subsidized NFIP rates as a primary barrier-a finding that GAO had previously reported.
So now what?  Congress is attempting to clarify the rules with the Flood Insurance Market Parity and Modernization Act, which passed the House and is awaiting a vote in the Senate.  The Act requires federal agencies to accept private flood insurance when required for a homeowner to qualify for a mortgage.  Meanwhile, the GAO has recommended that FEMA revoke its refund policy that discourages NFIP policyholders from switching to private flood insurance policies, noting it’s contrary to Congressional intent to offload some of NFIP risk onto the private sector. That’s in no small part due to NFIP being $23 billion in debt (yes, that’s billion).  GAO notes that FEMA agreed with its recommendation.  Stay tuned!

Rubio Measure Requires Study of Areas at Risk from Storms and Sea Level Rise

On July 14th U.S. Senator Marco Rubio (R-FL) introduced a bill in Congress that would require the Secretary of the Army to perform a research study of the coastal areas located within the geographic boundaries of the South Atlantic Division of the Corps of Engineers to identify the risks and vulnerabilities of those areas to increased hurricane and storm damages as a result of sea level rise. The South Atlantic Division of the Corps of Engineers includes the coastal states from North Carolina to Mississippi. Also referred to as the “Assessing Coastal Areas to Assist States Act,” Sen. Rubio said the measure is intended to proactively address coastal storm and flood risks of vulnerable coastal populations, property, ecosystems, economies and infrastructure. “When it comes to hurricanes and tropical storms, it is crucial we act proactively to address any risks or harm they may pose to our vulnerable coastal lands,” noted Rubio. “For centuries, Florida’s coastlines have been battered by storms. This legislation will allow us to comprehensively assess our coasts while identifying opportunities to lower risks to our people, ecosystems and economies”.
Earlier this year, Rubio met with other federal officials to draw attention to the need for enhanced tropical weather forecasting and tracking as well as storm surge prediction. In May he met with leaders at the National Hurricane Center to review the Center’s preparation for the 2016 Atlantic Hurricane Season. Rubio has also engaged the media and other sources to spotlight the need to pass the Hurricane Forecast Improvement Act of 2015, a measure he filed last year that would hopefully improve guidance for hurricane tracking, intensity, and storm surge forecasts. We will closely monitor the progress of both pieces of legislation in Washington and keep you up-to-date on their progress.

Mandatory Arbitration Promising Lower Rates in Texas


Texas is proving itself a big state with big ideas once again.  Like Florida, Texas is feeling the sting of frivolous lawsuits.  A series of hailstorms has created a litigation storm in the Lone Star state from roofing contractors, public adjusters, and trial lawyers going door to door offering to expedite repairs if the homeowner will sign an AOB.  Sound familiar?
Texas Farm Bureau Insurance, the largest state-based insurer, has approached the Department of Insurance with an innovative solution.  The Bureau wants to offer a policy discount to its highest risk accounts if they agree to mandatory arbitration that would prevent them from suing in case of disputes.  The idea is prompted by a 30-fold rise in lawsuits in South Texas and along the Gulf Coast compared to the rest of the state.  The Bureau says the discounts would amount to 10-25%.
Under the proposed arbitration endorsement, each party would hire and pay its own professional appraisers.  If the appraisers disagree, they would either agree on an umpire to settle the dispute or lacking that, the policyholder would choose between two specified umpires.
While arbitration is a settlement method used in other Texas contracts, homeowners policies aren’t included at this time.  Published reports list Texas as among 24 states that appear to have no statute or regulation either prohibiting or restricting arbitration in insurance contracts.  In fact, the Texas DOI has approved some mandatory arbitration provisions in commercial policies.
As we know, homeowners often don’t realize that by signing an AOB, they are giving up control of their claim and joining in a future lawsuit against their insurance company.  As well-documented, AOBs drive up consumer costs, delay claims settlements, and can even leave the homeowner on the hook for unfulfilled repairs.
The Texas insurance industry is promoting arbitration as pro-consumer choice – that arbitration can help claims get settled faster, reduce lawsuit abuse, and ultimately reduce insurance costs for all policyholders. Opponents argue arbitration doesn’t protect consumers and would threaten the ability of Texas homeowners to sue their insurer in situations of obvious low-balling and other prima facie abuse.
It’s an idea that has the ear of Texas Insurance Commissioner David Mattax, who has held hearings on the matter, but has not indicated when he’ll make a decision.
Offering a mandatory mediation-arbitration endorsement is a wonderful idea and one that LMA is discussing with Florida stakeholders.  Florida does not prohibit arbitration clauses in contracts, so maybe this strategy could work here.  As our Governor has expressed many times, if Texas can do it, we can do it better!  Please let me know if you would like to help.

Allstate Gains Ground in PIP Reimbursement Schedule Dispute with Providers

On Thursday, July 14th Allstate Insurance Company prevailed in a court battle before Florida’s 3rd District Court of Appeal (DCA) where the automobile insurer is challenging whether medical providers are charging proper fees in the treatment of accident victims covered by PIP insurance. The ruling by the 3rd DCA actually involved five consolidated cases brought by Allstate on similar grounds. The auto insurer’s win before the 3rd DCA conflicts with a ruling in 2015 before the 4th DCA wherein that Court ruled in favor of the medical providers on like issues. The major issue in the cases before the 3rd DCA is whether policies were clear that Allstate would reimburse hospitals and other health providers under a fee schedule from the Medicare program, which includes limits on payments for services. In the July 14th decision in cases from Dade County, a three-judge panel of the 3rd District Court of Appeal found against the medical providers’ argument that policy language was ambiguous. “The language used by Allstate is sufficient to place the insureds (policyholders) on notice of Allstate’s election of the limitations allowed in the statutes,” reported the nine-page ruling, written by Judge Thomas Logue and joined by judges Linda Ann Wells and Ivan Fernandez. The ultimate dispute between the auto insurer giant and medical providers will soon come to a head when on September 1 of this year the Florida Supreme Court will hear oral argument from both sides in Allstate’s appeal of the adverse decision it received in the earlier case before the 4th DCA. LMA will closely monitor this legal battle and update you when the Supreme Court renders its decision.

Important Property Insurance Measures Took Effect July 1st

A number of very important property insurance measures passed during the 2016 Regular Legislative Session became effective on July 1, 2016 and impact a wide range of insurance issues. A list of the measures is as follows:
  • Exemption from FHCF Assessment for Medical Malpractice: (HB 651) This bill passed the legislature with little fanfare and was signed by the Governor. The measure extends the current exemption from Florida Hurricane Catastrophe Fund assessments for medical malpractice insurance an additional three years. Based upon this statutory change, the exemption will not expire until May 31, 2019.
  • Building Code Amendment Regarding Opening Protections: (HB 535) Likely the most controversial provision in the bill waters down the building code for high dollar coastal homes because it establishes an exemption for these structures from the existing building code statute that requires them to include opening protections under defined circumstances.
  • Disqualification of Sinkhole Neutral Evaluators: (HB 651) Perhaps most important, this measure includes a provision establishing a new ground for disqualification by the Department of Financial Services of a sinkhole neutral evaluator.
  • Sinkhole Only Insurers and Policies: (SB 1274) This measure establishes a new type of insurer COA allowing the holder to transact only sinkhole policies under arguably relaxed regulatory requirements, including an exemption from current stringent policy form and rate review requirements. The policies are only available for personal residential property and insureds are allowed to elect coverage up to only the outstanding amount owed on a mortgage.

Are We Really the Weirdest State of All?

We recently picked up a great book entitled Oh, Florida!, written by a Tampa Bay Times reporter.  The book is hysterical, first of all, and is all about our beautiful state where, as he said,  “…. abnormality is the norm. Florida is more than a place, it’s a meme.”  Some of the stories he shares include the Kathy Willets case as the weirdest.  She was the wife of a Broward County sheriff’s deputy who, at her husband’s behest, became a stripper and prostitute.  He filmed some of her work from a closet, and his videos – made public by the Florida Supreme Court – included a Fort Lauderdale vice mayor who had built his career partly on fighting porn shops and strip joints. Her attorney claimed she was driven to nymphomania by an antidepressant drug but she and her husband wound up pleading guilty anyway.  The writer said that while this story may be the weirdest, if an alligator had been involved, it would have been the ultimate Florida story.  If you think about it, what other state has sinkholes, giant Burmese pythons, a presidential election decided by 537 votes amid 36 days of court arguments, a street theater that included everything from a one-man protest against circumcision to a performance by FSU’s student circus, a man who sued God and 22 religious institutions, and a mayor who signed a proclamation banning the devil from her town.   Of course everyone who knows the Rolling Stones, knows that Mick Jagger and Keith Richards wrote “Satisfaction” in a Clearwater hotel that is now world headquarters of Scientology.  Yep…it’s true.  And some of you may remember  (Tallahassee folks sure do) that the first streaker was at FSU.  But a not well known fact is that my friend Cheryl, who writes for my newsletter, dated the streaker back in the ’70s when he was “famous.”  Does that make her famous by default?  Maybe in Florida it would.  So not only are we the “Sunshine State” we may also be the “state of weirdness.”  Or at least, that’s what the book tells us. Being a loyal Floridian,  I would debate that California and Texas might beat us at weirdness.  “Oh, Florida!” is really just a fun read and we Floridians are all about fun aren’t we!  If you are interested you can order the book for yourself via https://www.amazon.com/Oh-Florida-Americas.
Keep smiling and have some fun today.
Lisa and the LMA Team

Upcoming Events

August 21-24
The 71st Annual Workers’ Compensation Educational Conference and 28th Annual Safety & Health Conference
Orlando World Center Marriott
Orlando, FL

September 21-22
THF 2016 Insurance Conference on Financial Reporting
Alfond Inn
Winter Park, FL

October 1-4
NEMA 2016 Annual Forum
Hyatt Regency
Chicago, IL