LMA NEWSLETTER MARCH 27, 2017

Congressmen toiled for the past few days up until late this past Thursday night to hammer out negotiations revolving around U.S. House Speaker Paul Ryan’s Affordable Healthcare Act (AHCA).  Some of the changes in Ryan’s bill that headed to the House floor (but were later pulled from further consideration and vote) would have eliminated the individual mandate tax penalty for people not having health insurance, reduced subsidies for the purchase of private insurance, required some Medicaid recipients to work, blocked states (such as Florida) that haven’t expanded Medicaid from ever doing so, eliminated Planned Parenthood funding for a year and repealed the employer mandate requiring larger companies provide insurance to employees or face financial penalties.

One of the most contentious discussions was the elimination of the 10 “essential health benefits” (EHB) provision currently in law for such services as maternity care, lab testing and mental health visits.  The compromise hammered out for this provision was to allow states to decide the mandated benefits.  Look for this provision to be included in future discussions about national healthcare.   One can only imagine the harried phone calls, pleas, and discussions about how to secure the votes for passage of the proposal, a signature campaign promise of President Trump’s.  Ultimately, the bill was not heard with Speaker Ryan admitting there were not enough votes to pass it.  Speaker Ryan lamented, “We’re going to be living with Obamacare for the foreseeable future.”

Florida has 29 members in its delegation (2 U.S. Senators and 27 U.S. Representatives).  Apparently, 9 of Florida’s congressional Republicans planned on voting in favor of the measure with the rest of Florida’s delegation planning to vote “No.”

So with that federal drama past us for the time being, let’s focus on our task to navigate a busy backdrop of Florida’s insurance bills this year that include fixing a workers’ comp system ruled unconstitutional by the state supreme court, providing remedy to a dysfunctional AOB system, repealing the state’s no-fault auto insurance requirement, cracking down on fraud, expanding the private flood market, eliminating a nearly $300 million tax credit for insurers, and expanding medical marijuana rules required by a recently passed constitutional amendment.  Onward!

The Senate Banking and Insurance Committee is scheduled to meet today but is not taking up any major bills. The House Insurance and Banking Subcommittee today will tackle insurance fraud. There is also talk that at least one of the two houses may take the entire week of Easter off – effectively shortening the usual nine-week session to eight. Stay tuned!

Here’s our weekly update of Bill Watch on the major legislation we’re following so far:

Assignment of Benefits (AOB) – HB 1421 (Grant/Plasencia) has received a hearing but sits unscheduled in the Commerce Committee. There has been no corresponding Senate action on an assignment of benefits bill and the Senate Banking and Insurance Committee chair chose not to hold a committee meeting this past week, which is the first time in many years that the committee hasn’t met during a week of regular session.  In most cases, the 8-week session has at least five committee meetings of the Senate Banking and Insurance Committee.

HB 1421 attempts to move Florida’s one way attorney fees for assignees to a “loser pay” system or some would call it a two-way attorney fee provision.  Of course, the best solution is the passage of the much simpler Senate bill,SB 1038 by Senator Hukill.

Note: Click here for a letter we received from a consumer who is outraged at the harassment of a Florida roofing company. We are working with law enforcement and others to stop this company from its bullying and harassing tactics (the consumer – a 9th grade Pinellas County math teacher with two teenage sons just trying to make her way – said company representatives beat on her door until “the hinges almost came off.”) If you or others have consumers who have experienced what it’s like to stand up to those who torment consumers for doing the right thing, please let us know.

Diligent Effort – HB 191  (Beshears) and related SB 208 (Passidomo/Mayfield) eliminates an insurance agent’s legally required diligent effort to find and place a commercial residential (condo) policy with an admitted carrier before going to the Surplus Lines market.  This bill would eliminate consumer protections as Surplus Lines in Florida are not regulated by rate, form, or coverage. Proponents argument of “greater choice” would lead to “predatory pricing” instead, say opponents.   Neither bill is scheduled for a hearing this week. 

Flood Insurance – SB 420  (Brandes) extends rate deregulation from 2019 to 2025 and relaxes eligibility requirements to write flood lines. It allows commercial lines coverage (residential & nonresidential), excess flood coverage, and more surplus lines participation by removing the capital/surplus requirement in favor of a stronger financial strength rating. Note that this and Diligent Effort represent a strong push this year by the unregulated lines to gain a stronger foothold in Florida’s currently stable P&C market. HB 813 (Lee) contains elements of both the Flood and Diligent Effort bills.  Both bills await hearings in their next committee of reference.

Healthcare – SB 262 (Stuebe)/HB 675 (Byrd) expands vicarious liability of HMOs and commercial health plans, while specifying they are not liable for other medical negligence except under certain circumstances. It also creates a bad faith cause of action for HMOs and specifies persons authorized to bring civil actions against HMOs for certain violations. The bills are supported by the trial bar and doctors. The Senate version has passed the Banking and Insurance Committee but was postponed from a vote this past week for the third time by the Judiciary Committee.  It is scheduled again this week – the House version hasn’t been heard since it was filed.

Insurance Fraud – SB 1012 &  SB 1014 (Brandes) and HB 1007 & HB 1009 (Raschein) are being pushed by outgoing CFO Atwater as providing needed tools to help DFS stay ahead of criminals who seek to defraud Floridians. The measures would create a dedicated Insurance Fraud Prosecutor, require insurers to adopt an anti-fraud plan and designate primary anti-fraud employees, and require that those plans and statistics be submitted to DFS annually.  The House bills are scheduled today before the Insurance and Banking Subcommittee.

Insurance Litigation/Prejudgment Interest – HB 469 (Harrison)/SB 334 (Steube) establish a requirement for an insurer’s interest payment and the timeline those monies are due.  The Senate bill, sponsored by Senator Greg Steube, is a priority of the Senate President’s according to sources familiar with the bill.  The House version is much stricter in its provisions than the senate version.  The only supporter of this bill was the Florida Justice Association/trial bar.  All other groups to speak oppose it. Neither is progressing.

Insurance Premium Tax – SB 378 (Flores) repeals the insurance premium tax credit of up to 15% on the salaries that insurers pay to their Florida-based full-time employees. This is a long-standing priority of the Senate President who has stated the credit was a good jobs incentive when enacted 30 years ago but is unnecessary now. The $297 million in resulting savings to the state will go to pay for a 2% reduction in the Communications Services Tax paid by almost all Floridians on cellular phone, cable, and satellite television services.  The bill passed the Senate Appropriations Subcommittee on Finance and Tax this past week and now goes to the full Senate Appropriations Committee, which is scheduled to meet on April 5 & 6. The bill was also scheduled to be discussed this past Friday (March 24) by the state’s Revenue Estimating Conference, an arm of the legislature.

Medical Marijuana – The Senate Health Policy Committee held a workshop this past week and afterward its Chairwoman Dana Young said a proposed bill might be ready as soon as the first week of April and would be a hybrid of the various proposals we outline below.   The committee discussed expanding the number of growers/dispensaries beyond the current seven, allowing snowbirds and other non-Floridians access, and greater flexibility in the formal relationship between doctor and patient.

The Legislature is attempting to implement last fall’s state constitutional Amendment 2 that approved marijuana for anyone deemed to have a “debilitating medical condition.”  SB 406 (Bradley) would allow the number of growers/dispensaries to grow to 27 once the patient registry has 500,000 names and those facilities could also operate as “medical marijuana treatment centers” as defined in Amendment 2.  He admitted to the committee this week that his bill isn’t inclusive enough.  The 90-day treatment requirement under previous Department of Health rules would go away, but written parental consent for minors would be required and the bill would ban edible marijuana products “in a format designed to be attractive to children.”  Meanwhile, the Department of Health is in the process of promulgating its own rules to meet a fall deadline, as the Amendment is self-executing.   Among the rest:

SB 614 (Brandes) is the most free market approach allowing organizations who meet high financial, medical quality, and organizational standards entrance into the market with little to no oversight except in the medical quality arena.

SB 1388 (Artiles) allows both an edible and smokeable version of marijuana be prescribed and provide quality control.

SB 1472 (Galvano) establishes a Coalition for Medicinal Cannabis Research and Education within the H. Lee Moffitt Cancer Center and Research Institute in Tampa to serve in a future advising role for state policymakers.

HB 1397 (Rodrigues), the latest bill released, includes a sales tax exemption for medical marijuana.

The House’s single bill is different than any other in the Senate and each of the Senate bills represent a different regulatory scheme so the negotiation between the chambers on this issue will be key. Our readers will remember that the constitutional amendment passed in November 2016 with 71% of Floridian’s vote, the highest margin of any constitutional amendment ballot initiative in the state. The amendment is “self -executing” meaning if the legislature doesn’t agree on a bill when it adjourns, all details of how medical marijuana will be grown, cultivated and distributed in this state must be launched on October 1, 2017.

Personal Injury Protection (PIP) – HB 461 (Hager) repeals the Florida Motor Vehicle No-Fault Law & eliminates the requirements for PIP coverage, along with a series of self-insurance provisions. In lieu of PIP, SB 156 (Brandes) requires auto policies to provide certain property damage liability and bodily injury liability coverage, to replace PIP coverage. Florida has been a no-fault state since 1972, yet despite significant reforms in 2001, 2003, and most recently under 2012’s HB 119 intended to reduce fraud, rates keep rising – up 13% in 2015.  Neither bill is moving through the legislature.

Workers’ Compensation – By far one of the most contentious – and by court rulings, most immediate – issues facing the legislature after the state Supreme Court last year ruled our workers’ comp system unconstitutional. SB 1582 (Bradley), based on a proposal from Associated Industries of Florida, addresses the Court’s attorney fee cap issue by keeping the current fee schedule but allowing a judge to decrease or increase attorney fees to a maximum hourly rate of $250. The bill also increases temporary total disability benefits and temporary partial disability benefits from two years to five years, the Court’s other point of contention. It also converts Florida to a loss cost state to encourage greater competition among carriers, following a recent 14.5% average rate increase. While the House Insurance and Banking Committee passed a bill (PCB IBS 17-01) earlier this month that has provisions to control some of the worker’s comp litigation abuse, both the House and Senate have a long way to go to get worker’s compensation insurance to a better place in our state.  Also of note, SB 1684 (Farmer) disallows attorney fees and costs from being figured into workers’ comp rate requests.

General Insurance Bills – SB 454 (Brandes)/HB 359 (Santiago) are insurance “catchall” bills, also called “omnibus” bills. They provide insurers a $15 insufficient funds fee when a customer’s electronic payments bounce with some exceptions and add electronic checks and drafts to the list of allowable e-premium payments; allow medical malpractice insurers flexibility on their annual rate filings and a permanent exemption from having to pay assessments into the Florida Hurricane Cat Fund; and specifies procedures for insurance companies to send documents electronically to policyholders. The House version of this bill is slightly different.  HB 359 passed unanimously out of the House Insurance & Banking Subcommittee this past Monday and now goes to the House Commerce Committee.

SB 1746 (Flores) There was no action this past week and none is expected this week. As of now, there is no House companion to the bill, although parts may appear in other bills. The Senate President Pro-Tem and Chair of the Banking and Insurance Committee sent shockwaves through the P&C industry the weekend leading into session with this proposed comprehensive reform of insurance regulation and practices in the Sunshine State:

Rates & Coverage

• Dis-incentivizes “underwriting after the claim” practices by essentially eliminating all exclusions (including misrepresentation) that would allow an insurer to deny a claim on policies that are already 120 days old
• Disallows attorney fees and costs from being figured into residential rate requests
• Requires all MGAs to be examined by OIR regardless of whether they represent a single insurer
• Requires replacement cost payments without reservation or depreciation holdback in counties declared in a state of emergency.

Hurricanes & Cat Fund

• Repeals the 25% Rapid Cash Buildup Factor in the CAT fund
• Extends from 3 years to 5 years the statute of limitation for filing a windstorm or hurricane claim

Citizens Insurance

• Allows a policyholder to stay in Citizens Property Insurance Corporation, even after receiving an offer of coverage from a private insurer that is equal to or less than the premium charged by Citizens
• Considers take-out offers as automatically declined if the consumer or agent fails to respond
• Requires a zero rate increase in a county without a reasonable degree of competition and where one model indicates a decrease in windstorm risk rate (this would create a rate freeze in Monroe County/Florida Keys)

Insurance Advocate

• Allows the state Insurance Advocate to directly initiate proceedings against insurers
• Allows the Insurance Advocate to intervene in actions involving insurers in cases before an administrative law judge (DOAH)
• Allows the Insurance Advocate to directly appeal final orders issued by OIR in rate increases

The bill also changes the venue of Surplus Lines civil suits to the county court where the property is located.

Senator Bradley warned that Florida medical marijuana growers need to be sure the plants are grown in places where they can’t be stolen and sold on the black market; and ensure that the transport of the drug from the cultivation warehouse to the dispensary is a safe process with no threat of hijack. Senator Bradley asked the committee’s senators to consider his Senate Bill 406 as a detailed roadmap of how Florida should proceed in the coming years for medical marijuana usage.

One of the most contentious questions in the Capitol surrounds how many grower licenses are the “right” number of licenses.   Currently, seven organizations have licenses to grow medical marijuana and Sen. Bradley’s bill allows for more in a graduated approach – the more patients registering for the drug, the more licenses issued. During the workshop, Sen. Bradley admitted his bill is “too restrictive” in the license expansion arena but no one has decided the right number of licensees.

Other points of debate include whether or not patients with chronic pain (back pain being the most commonly referred to) should be allowed access to the drug. Senator Bradley said he believes that only pain associated with the constitutional amendment’s 10 disease list should be allowed a prescription, indicating we don’t have enough research to substantiate using it more broadly. Other senators in the committee didn’t appear to agree with this position, with one senator saying, “that’s a judgment call” and in fact Senator Jeff Brandes’ bill (SB 614) allows doctors to decide who should and shouldn’t be prescribed medical marijuana.

Also debated: whether the drug should be smoked or eaten; whether nonresidents should be able to access it while visiting Florida (should the visitor have to be here a certain length of time before being allowed access to medical marijuana?); what is the length of dosage timeframe (45 or 60 days?); and what is the local government’s role on deciding where dispensaries should be located, along with other local decisions. Please see a side by side comparison of the  bills currently filed and under discussion. The last bill on the chart – a sixth – is the only one filed in the House by Representative Ray Rodrigues. We are awaiting discussions about that bill in the coming weeks.

The bill, approved this past week by the House Government Accountability Committee would create an interagency workgroup to share information on the current and potential impacts of natural hazards throughout Florida. The workgroup would also be charged with coordinating ongoing efforts at addressing these impacts, and collaborate on future statewide initiatives. All executive state agencies, water management districts, and the Public Service Commission would designate a liaison to the workgroup, which would be led by the head of the Division of Emergency Management or their designee. The bill now goes to the House floor. A companion bill (SB 464) by Sen. Jeff Clemens (D-Lake Worth), has one last committee stop.

And when the next big storm or other disaster hits, it’s nice to know that you might get a tax break from the part of your property that’s become unusable as a result. That’s the idea behind HB 49 by Rep. Dane Eagle (R-Cape Coral) and the House Ways & Means Committee, which would create a natural disaster property tax credit for residential property rendered uninhabitable by an event for which the Governor has declared a state of emergency. It also includes sinkholes. The credit would be based on the percentage of the year during which the property was uninhabitable.   The bill passed the Ways & Means Committee this past week.

The House bill passed the Energy & Utilities Subcommittee this past week.  The bill had additional language added that its sponsor has said are for consumer protection but that critics argue create barriers for solar power development.  It’s a touchy subject, given the defeat by voters last November of Amendment 1, which was pitched as a measure to allow consumers to own or lease solar equipment installed on their property to generate electricity for their own use, but came under successful criticism by opponents that it was a pro-electric utility measure instead.

From the municipality’s point of view, it is losing sales and other taxes sometimes worth up to 18% of the total lodging bill, along with increased complaints of noise and traffic from neighborhoods that are supposed to be quiet residential areas, not hotel and bed-and-breakfast zones. And it’s the existing zoning laws that prohibit such commercial activity that Miami Mayor Tomas Regalado and Miami Beach Mayor Philip Levine say they’re going to make sure get enforced. Both mayors are seeking higher fines against residents found to be in non-compliance. Those fines can amount to up to $20,000 for illegal short-term rentals.

From the resident’s point of view, their home is their own to use – and loan out – at their choosing, to make a little extra money, especially if they are going to be away for extended periods of time up north. Websites such as Airbnb (short for bed-and-breakfast) and VRBO (Vacation Rental By Owner) are very popular and allow homeowners a streamlined way to rent their places anywhere from one night to one year. Florida law requires state and local sales taxes to be collected for any rentals shorter than six months.

In last week’s LMA Newsletter, we reported efforts in the legislature to promote a more laissez-faire environment. SB 188 by Senator Steube (R-Sarasota) adopts a free-market approach by limiting local towns and counties from passing short-term rental restrictions. The practice of short-term vacation rentals has insurance implications, for those who rent their places utilizing traditional homeowners policies may come up short in providing proper liability limits for short-term guests. As we always say here at LMA, consult your professional insurance agent for guidance!

While midlife death rates continue to fall among all educations classes in most of the rich world, this report shows that in the U.S., the death rates have actually increased for middle-aged non-Hispanic whites with a high school diploma or less. The report attributes this to two factors: the number of “deaths of despair” from drugs, alcohol, and suicide; and to slower progress in the fight against cancer and heart disease, the two biggest killers in middle age, defined in this study as ages 45-54.

As a point of reference, the death rates of this particular group of whites, which were around 30% lower than the death rates of blacks in 1999, grew to be 30% higher than blacks in 2015.   The authors suggest that the increases in deaths of despair are accompanied by a measurable deterioration in economic and social wellbeing, which has become more pronounced with each successive birth period. The research also notes that marriage and labor force participation rates fall between successive periods, while reports of physical pain and poor health and mental health rise.

The authors found that deaths of despair are rising in parallel for both men and women without a high school degree, and the deaths of despair have increased in all parts of the country and at every level of urbanization. The states with the highest mortality rates from drugs, alcohol and suicide, among white non-Hispanics aged 45-54, are geographically scattered. In 2000, the epidemic was centered in the southwest. By the mid-2000s it had spread to Appalachia, Florida, and the west coast. Today, it’s country-wide.

No collision, no accident, right? Wrong, ruled the judge in Dittman v. Aviva, an Ontario, Canada case. Although the car was stationary when the coffee spilled on the plaintiff, the judge found that the risk involved in the course of handling the cup was similar to other risks that a driver might expect to encounter while on the road and ruled it an “accident”, ordering the insurance company to process the claim accordingly.

The driver’s automobile insurance policy defined the term “accident” as “…and incident in which the use or operation of an automobile directly causes an impairment…” The insurer denied the claim, saying the incident was not an “accident” but rather an “intervening event” that had nothing to do with driving a car. The judge, in applying the “purpose test” and “causation tests” found the driver met those tests and that the risk of the coffee spilling was a normal risk “not outside the ordinary course of things.”

Please folks, remember safety first: do not hold a hot cup of liquid by its lid, regardless of whether you have insurance or not!

The Ag Department gave Ocheesee Creamery’s owner Mary Lou Wesselhoeft three choices: add the Vitamin A or label it “Imitation Skim Milk” or stop selling the product. The dairy attempted numerous labelling compromises with the agency, at one point, offering to label the milk “Skim Milk Without Vitamin A Added”.   Ag rejected each one. The dairy’s whole philosophy is not to add ingredients to natural products so the dairy chose to stop selling the milk – and to pursue a legal challenge in federal court claiming violation of free speech.

Five years later, the 11th U.S. Circuit Court of Appeals last week overturned a previous federal court decision and ruled that “The Creamery’s use of the words ‘skim milk’ to describe its skim milk is not inherently misleading.” In its unanimous decision, the court noted there were “numerous less burdensome alternatives” available to the state than “banning the term ‘skim milk'” and used as an example “some Vitamin A removed by skimming.”

So folks, we have two stories of claims – one where coffee is all over the lap and the other where milk is all over the face of the offended parties. One prevailed in court, the other didn’t. The real loss though was the time and effort and money that went into bringing these silly and senseless cases to court.

“Occupational licenses, which are essentially permission slips from the government, routinely stand in the way of honest enterprise,” the nonprofit legal advocacy organization said in a release. “Instead, they are imposed simply to protect established businesses from economic competition.”

For a state where the mantra is “Let’s Get to Work”, now comes enabling legislation to accomplish the same, by cutting occupational licensing red-tape. HB 7047 by Rep. Halsey Beshears (R-Monticello) passed the House appropriations subcommittee this past Tuesday with bipartisan support, 12-2.  Companion bill SB 802 has passed its first committee and goes next to Senate Judiciary. The bills would rollback red-tape for nearly two-dozen professions.

Beshears’ bill would eliminate all Florida Department of Business and Professional Regulation (DBPR) restrictions against interior designers, hair braiders, hair and body wrappers, boxing announcers and boxing timekeepers, and would reduce mandatory training hours for barbers, nail specialists and facial specialists. DBPR would no longer regulate labor organizations, business agents, talent agencies and auctioneers, but established industry standards and civil and criminal actions would still apply. Architects, landscapers, geologists and asbestos abatement contractors would no longer be required to obtain certificates of authorization in addition to obtaining their licenses.

Rep James Grant said of the 366 occupational licensures in the state Florida, “I’ve yet to be compelled by any argument that any form of license or regulation is in any way as significant to make a consumer whole as an insurance policy.”  Insurance premiums are much less expensive than an entire bureaucratic scheme, he pointed out.

Backers of current regulation representing a variety of professions attended the hearing, urging the committee to keep certain licensing in place, claiming Florida is a model for other states in certain fields such as interior design and that in general, licensing is necessary to defend the public and protect the public welfare. Yet, inconsistencies were noted. Emergency Medical Technicians, or EMTs, need 34 days of training, while massage therapists are required to complete 117 days of training.

Governor Scott immediately moved to take Ayala off the case and assigned another prosecutor with Ayala responding by asking the court to weigh in, citing that the Governor lacks the power to strip her of her role as prosecutor. If a court interpreted state law to allow Scott’s action, Ayala wrote, “…the governor could supersede a prosecutor in any given case. Giving the governor the tremendous and unfettered discretion to interfere in that decision making, would be unprecedented and could undermine the entire justice system in Florida,” she wrote.

The Governor, clearly annoyed by the lawsuit, said, “So the first thing I did was I asked her to recuse herself. She said she wasn’t going to, so I moved the case to Brad King. Last week, she said she was fine with that. Today she’s changed her position. So the case has been assigned to Brad King, and that was the right decision,” the governor said. Reactions all over the media and the Capitol had political historians researching whether a governor has ever removed and replaced a prosecutor on a case.  Ayala also said she will not seek the death penalty in any other capital case while she is state attorney.

We wonder whether Attorney General Pam Bondi will instead declare this and other recent “police executions” of particular public safety interest and establish a special statewide prosecutor to handle such cases, current and future. We will report back on developments.

The Senate, more supportive of the Governor, is at odds with the House as well on most of the Senate’s priorities involving the environment, criminal justice and other major public policy initiatives.  In fact, we regularly hear for ourselves and from others who work the Capitol, that testimony in committees has a sarcasm and arrogance that we usually only see nationally in Congress and in presidential circles.  Perhaps, soon, we might return to the days of professional courtesy, committee decorum and just good old fashioned “manners.”  Talk to you next week – and be sure to check out our new website at www.LisaMillerAssociates.com

Lisa & the Team

The Florida Insurance Roundup podcast with link to podcasts.