LMA Newsletter March 7, 2016

Monday, March 7 , 2016

Important Legislative Calendars

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The Gardens of Our Lives

Gosh we are so very blessed to live in Florida for so many reasons, and I truly love living in our capital city.  While my travels take me away from home quite a bit, I am always excited to get back to where my heart lives.  This last week I was asked a simple question by a dear friend, which made me stop and think for a moment.  “Where do you find your peace?” she asked.  Simple question but profound.  With only a few moments of pause what came to mind was…my garden.  With our springtime weather upon us, I find myself yearning to get my hands dirty, pulling weeds and planting flowers.  And while it is pure joy for me, I often find myself thinking of what an education we derive from our gardening efforts.  If you stop and think about it for a moment, many sciences could be taught through gardening.  Tackling the death of a plant because of overwatering, drought, pest invasions, soil acidity and salinity, lack of nutrients or sun, or freezing temperatures can provide us with an understanding of the principles of science.  What an exciting way to learn about life –  and I’ll go even further to say, these principles could be applied to all areas of our lives.  I think of how relationships that are or aren’t tended properly will thrive or die just as quickly as the plants in our gardens.  And our businesses that mean so very much to us have the same life or death principle. We have to cultivate and nurture our relationships, keep the environment positive for sustaining and multiplying them, always being mindful of what is best to keep them healthy and strong.  Just something to think about as we move closer to our sunny days of growing our gardens…the gardens of our lives.

Insurance Commissioner Applicant Watch

The count now reaches 42 for applicants for the Florida OIR Commission-
er position, as of March 4.  But most don’t meet the minimum qualifications
for the position. There are still a few days left to apply before the closing date of March 11.

 National Flood Insurance Legislation Heard Last Week  

Last week, the House Committee on Financial Service unanimously passed HR 2901,  “The Flood Insurance Market Parity and Modernization Act” by Representatives Ross (R-FL) and Murphy (D-FL).

This is a bi-partisan bill that is aimed at offering additional choices to consumers with a mortgage and living in a high-risk flood zone.  Bi-partisan support of this bill is no small feat, especially as a bill that has the potential to reduce the size of a government program (the National Flood Insurance Program). The sponsors, Rep. Ross and Rep. Murphy, and their staff members have done an amazing job crafting a bill with broad support AND securing the support of Rep. Waters, who initially opposed the bill.  Kudos to former Florida House of Representatives Insurance Committee Chairman Don Brown who testified at a hearing before the U.S. House Insurance and Housing Subcommittee, the National Realtors Association, members of the insurance and reinsurance industry, all who worked tirelessly to reach this point in our country’s efforts to move away from government flood insurance.


This focus of this bill is to provide choices to consumers and private, primary flood insurance as an alternative to NFIP for homes that are  1) covered by a mortgage and 2) in a high-risk flood zone. The bill does this by clarifying how a private carrier can issue a policy that satisfies the Federal mortgage requirement for flood insurance on a home that is mortgaged and located in a high-risk flood zone. It also clarifies what we’ve been referring to as “grandfathering” by permitting people that leave the NFIP for a private carrier to come back to the NFIP under the same rating plan they would have had if they had kept the NFIP policy.


Read the bill as it was introduced and approved by the House Financial Services Committee here. We expect that this will be the final version voted on by the House.

 Transparency in Healthcare Costs

Ever receive a hospital or doctor bill and wonder how on earth the price of the service was calculated?  HB 1175 passed the House last week and its companion, SB 1496, is on the Special Order calendar for today.  This legislation will require the Agency for Health Care Administration to, by zip code level, provide medical procedure costs so consumers can compare charges for hospitals, ambulatory surgery centers, etc. and make this information available on a public, government website.  In addition to having cost data provided on a website, the consumer can take the data to their insurance company who must provide to the policyholder the costs they have in their database.  A significant portion of this bill deals with out of network doctors, so that the consumer understands that they will have an out of network provider before their procedure.  If an entity does not provide the requested information, a provider could be fined $1000 a day up to $10,000 if the information isn’t provided in 7 days.  This bill is a somewhat of a companion to the “balance billing” legislation (HB 221/SB 1442) that is designed to stop surprise charges to patients who receive treatments out of network and don’t know it.


The official description of HB 1175/SB 1496 says: Bill title–Transparency in Health Care: Requires hospitals & insurers to make available information which can be used by consumers to make health care decisions based on cost & quality; requires AHCA to contract with vendor to provide public access Internet-based health information platform; requires AHCA to design patient safety culture survey for licensed hospitals & ambulatory surgical centers; requires health insurers & HMOs to make available on their websites information to estimate certain health care services costs & charges; requires certain health insurers, HMOs, managed care plans, DMS, & vendor for state group health insurance plan to contribute claims data to contracted vendor selected by AHCA; provides appropriation.  Effective Date: July 1, 2016.

Legislature Supports Maintaining A Strong Admitted Market

In a previous newsletter we reported about efforts by some to eliminate a process that kept the admitted market in the drivers seat in placing commercial residential risks insurance coverage (here is the previous article).  The process, known as “diligent effort” is outlined in Section 626.918, Florida Statutes, and requires a producing agent to ensure there are no admitted market insurance coverage options prior to the consumer and agent having the risk insured with a surplus lines carrier.  The long standing diligent effort process originated in Florida’s insurance code almost 75 years ago to ensure consumers are protected by Florida rate, form, and solvency regulations.  It was puzzling to those of us who hold, as a fundamental premise, that the admitted market should always be the first option with surplus lines, which are a terrific partner in this marketplace, being a steady alternative when the need was presented because the admitted market didn’t want the risk.

This past week, the effort to eliminate the age-old diligent effort process failed.  During a meeting a month ago of many stakeholders who had concerns about this proposed legislation, several of us committed to work during the summer on finding ways to improve the process and make suggested changes to the law so that agents and consumers would benefit from the collective wisdom of those at the table.   We will report more during the spring and summer on our firm and others convening a summit on diligent effort reforms and encourage all agents who are approached by those to compromise the diligent effort process to contact me so we can discuss your concerns. Once we have a consensus document to present to legislators and regulators, we will ensure a transparent process so that all concerned can have input.  We appreciate all you do every day and look forward to continued conversations.

No Raises for State Employees or Legislators

Efforts in the Florida Legislature this session to provide pay raises to legislators – and to state workers – have failed.


Senate Democratic Leader Arthenia Joyner (D-Hillsborough) proposed an almost 69% pay increase for lawmakers, which would have raised Senate and House members’ salaries from $29,600 to $50,000 per year.  Presiding officers would have seen a 39% increase, from $41,100 to $57,000, under her bill (SB 712).Senator Joyner said the increase was necessary to help attract more “everyday people” to run for office – not just the attorneys, business executives, realtors, and developers who make up the top occupations.  She said the legislature could use more diversity, such as teachers, bus drivers, and bartenders – people who can’t afford to leave their current jobs for an elected position paying less.

Also apparently dead is Senator Joyner’s proposal (SB 478) for an across-the-board 3% pay increase for state employees working 20+ hours per week.    State workers haven’t received a pay increase in nearly a decade, except for select merit bonuses authorized in some years, but were required five years ago to start contributing 3% of their salary toward their state pension.


A recent report by the Department of Management Services said state employees on average earn 13.5% less than their private-sector counterparts.  And their numbers are dwindling as well.  The report said the number of state positions is down more than 7,000 in the past five years.  Florida’s per capita cost of state employees, as well as their ratio to the general population, is the lowest of the 50 states.   As of last June 30, there were 160,704 people on the state payroll.

Measure Requiring Life Insurers to Search for Unfiled Claims
Gains Steam

A measure pending before the Florida Legislature that would require life insurance companies to periodically wash their active policy database against the Social Security Administration’s master death index file is steadily moving towards possible passage. The legislative initiative comes on the heels of a large-scale effort by Insurance Commissioner Kevin McCarty and the OIR, in concert with four other states, to examine the practices of a number of life insurers and how they have used the master death index file previously. A number of examinations have revealed that life insurers have used the index file to verify the death of annuitants and stop routine annuity payments while not utilizing the index file to identify deceased insureds covered by life insurance so that beneficiaries unaware of policies can submit death claims. As a result of OIR’s campaign, settlements have been reached with about 20 life insurers and beneficiaries have received approximately $310 million in death claim benefits they would have otherwise not received. The actions have also required insurers to remit about $172 million to the state’s unclaimed property office, and state officials have located and paid nearly $51 million to life policy beneficiaries.


The Senate bill sponsored by Sen. Lizbeth Benacquisto (R-Lee) successfully navigated all committees this session and the full Senate passed the measure by a 40-0 vote. The companion HB 1041 sponsored by Rep. Bill Hager (R-Palm Beach) has also won favor in committees and is currently on Second Reading by the full House. Perhaps the greatest concern about the legislation expressed by life insurance industry representatives is the measure’s retroactive applicability. Florida’s insurance code prohibits the retroactive applicability of amendments to the code, unless the Florida Legislature specifically authorizes a “look back”. In this case, the legislation does just that, requiring life insurance companies to search their records back to 1992 in order to find deceased persons covered by company life insurance policies as well as make efforts to locate corresponding beneficiaries. LMA will continue closely monitoring the bills and bring you updates as they reach final passage.

Economic Development Organizations Get a Budget Goose Egg

Among the big surprises last week in the Legislature were the fate of Governor Scott’s economic incentives plan and his proposed list of tax cuts.  The governor wanted $250 million to create the Florida Enterprise Fund, his biggest budget priority.  It would have replaced the Quick Action Closing Fund and provided enhanced incentives to bring new companies to Florida. Legislative leadership declined, providing zero funding. Americans for Prosperity-Florida had called it ‘corporate welfare’.


Likewise, the governor wanted $1 billion in tax cuts, including $700 million cut in the corporate income tax for retailers and manufacturers, nearly $300 million to reduce the commercial rent tax, and about $69 million to make permanent the current sales tax exemption on purchases of manufacturing machinery and equipment.  Legislative budget leaders settled instead for $400 million in tax cuts, which will likely include the manufacturing sales tax exemption and about $50 million for  a scaled back 30day “back to school” sales tax holiday the governor was also pushing.  The remaining roughly $290 million will be in local property tax cuts, something previously rejected by the governor. Leadership touts it as a broad-based tax cut because it could positively impact every property owner in the state, not just businesses.  Technically, only a small portion of the $290 million represents a true “tax cut” – most of it is avoiding a planned tax increase.


The Governor’s proposed $507 million increase in education funding (a $458 million increase passed), relied on $428 million coming from local property owners through increased tax revenues created by rising property values.  Both parties criticized the plan as a tax increase, which it was, under the definition of the state’s  Truth in Millage Act. Budget leaders explained their allocations and tax cuts were not personally directed at the governor, but rather reflect the realization that the money simply didn’t exist to execute the governor’s entire plan.  This was made even clearer by a $395 million revenue shortfall projection made in January by the state’s revenue estimating conference, due to weaker corporate profits and adverse developments in the international economy.
In reaction, the governor referenced the fact that legislators create the budget and the governor reviews it, leading some to believe he will use his veto power to the extent he can to influence legislators – or even veto the entire budget, which would force lawmakers to come back into session to either make changes or override such a veto with a 2/3rd vote of both chambers.

Laminate Flooring Cancer Risk May Be Higher Than First Thought

The U.S. Center for Disease Control and Prevention (CDC) in Atlanta is reporting that it was notified last month of an error in its report released February 10, 2016, about the possible health effects from exposure to formaldehyde emitted from select laminate flooring samples. Further, insurance industry media sources are reporting that Lumber Liquidators Holdings Inc. flooring, tested by the CDC for formaldehyde, was found to have a three times higher risk of causing cancer than previously stated. This revised data is what prompted CDC officials to reverse their own findings from earlier this month. Accordingly, health risks of people who have the laminate flooring are being revised to reflect greater exposure to formaldehyde, which could cause eye, nose, and throat irritation for anyone. Additionally, the estimated risk of cancer associated with exposure to the flooring increased. According to the CDC, its indoor air model used an incorrect value for ceiling height.  As a result, the health risks were calculated using airborne concentration estimates about 3 times lower than they should have been. Lumber Liquidators’ stock has fallen more than 70 percent since the March 2015 airing of a “60 Minutes” segment that alleged the company’s flooring had potentially dangerous levels of formaldehyde. Formaldehyde is a chemical used to make building materials such as carpet and laminate flooring, and some household products. It’s also widely used in the funeral industry as the key component in embalming fluid. Formaldehyde is highly toxic to animals, including humans and people with breathing disorders including asthma and bronchitis are highly sensitive to formaldehyde exposure.

CPSC Finds Hoverboards Pose Significant Fire Hazard,
Potential Injury Risk 

Between December 1, 2015 and February 17, 2016, reports indicate that 52 hoverboard fires have occurred in 24 states resulting in $2 million in property damage as well as the destruction of two homes and an automobile. Most of the fires happened indoors and would have likely caused serious injuries to occupants had they not been put out by the residents. The fires and insured losses have triggered a full investigation by the U.S. Consumer Product Safety Commission (CPSC) and pressure is being applied to hoverboard manufacturers to comply with U.S. safety standards or risk the threat of product seizures. CPSC Chairman Elliot F. Kaye recently stated that the Commission is actively investigating a number of companies that make or sell hoverboards and that his agency is searching to find the root cause of hoverboard fires.  According to insurance industry reports, the CPSC has sent correspondence to hoverboard manufacturers seeking compliance with newly released voluntary safety standards as established by Underwriters Laboratory. Kaye went on to say that his staff is focusing on the components of the lithium-ion battery packs as well as their interaction with the circuit boards inside the units. CPSC is working with test laboratories, lithium-ion battery representatives and other experts to verify safe design practices for use of lithium-ion batteries in hoverboards. The Commission is also aware of the increasing number of serious injuries and ER visits relating to the use of hoverboards and its investigation has been expanded to include injuries associated with hoverboards. CPSC is focusing on the product’s design to evaluate any hidden dangers that may cause fall injuries to occur. Mr. Kaye has expressed concern that the current designs of hoverboard products might not take fully into account the different weights of different users, possibly causing the units to speed up or lurch forward, occurrences that would be difficult to predict, particularly for first time users. We’ll continue monitoring this story and let you know when all the findings are in.

Last Week of Session

Well, this is it, as far as we know.  Did it seem to you that the 2016 Legislative Session went by very quickly?  Maybe because this session didn’t contain the drama of the 2015 Session.  Maybe because lots of our attention as a country has been focused on the presidential election, which has been packed with drama.  Whatever the reason, we will see if the hanky drops in sine die on Friday.  Feels a little odd that we will have springtime without a city bursting with legislators and the folks that join them in the legislative process. For our loyal readers, we will be providing a recap of the 2016 Legislative Session on March 21, and then we will be back to our bi-weekly newsletters. So watch for our wrap up edition, and news of what LMA is doing next.


Keeping you informed,

LMA and the Team

Upcoming Events

Inaugural FloodPCA Conference
April 5, 2016
Tampa Airport Marriott

30th Annual Governor’s Hurricane Conference
May 8-13, 2016
Rosen Shingle Creek
Orlando, Florida

National Flood Conference
May 17-20, 2015
Washington, DC

May 18 & 19, 2016
Disney’s Coronado Springs Resort
Lake Buena Vista, Florida