LMA Newsletter October 3, 2016


 2016-17 Legislative Session

Interim Committee Meeting Schedule


Tallahassee’s New Meeting Place!

We now have The Conference Room available for rental for all kinds of events.  Co-located with the offices of Lisa Miller & Associates, The Conference Room is an affordable and convenient venue for business, political or social events.

For more information, contact Roberta Courtney-Bailey at 850-222-1041, email at [email protected], or see http://lisamillerassociates.com/the-conference-room.  for photos and details.  And feel free to come by and take a look!


All Eyes on Matthew

As you open this newsletter, many of you are preparing for Matthew…the latest in this season’s weather events. You have watched the weather channel to the point you are humming its musical jingle. I have called all my “eyes and ears” throughout the state and reminded them of the “get ready” basics with most telling me “we are fine…quit worrying.” Me? Worry?

Next comes the analytics. Our good friends at AIR Worldwide and Guy Carpenter were in front of their computers all weekend sending you updates and you yourselves are analyzing how much fuel is needed to maintain the generator and people fuel (food and staples) to get ready for the electricity-less days.

Catastrophe plans, including radio spots, adjuster resources, call center readiness, mobile unit functionality, have got to be ready to go.  So what sets our industry apart from other industries like the utility companies or the banks affected by a storm?  It’s our people…it’s the faces of our insurance adjusters and field inspectors who embrace storm victims and tell them it’s gonna be OK. It’s the hand we lend to shelter our policyholders who don’t have a roof or running water. And it’s the spirit we bring that “we are ready!” Once the storm passes, I will be in my car to drive to the area to help those who need a special hand and a comforting smile.  Most of you have my cell number which is the same one I had when a regulator during the 2004-5 storm season.  I hope to come see you not because of Matthew…. so give me a call and I’ll be there!  Be safe!


Election Factoids

Until Election Day, each LMA newsletter will contain a 2016 Election factoid or two. Here is this edition’s election trivia:

A total of 2,293,922 Vote-by-Mail ballots have been provided for the November 8th general election by 66 counties as of last Thursday  morning– 43.51% to registered Republicans and 37.38% to Democrats.  So far, 1,257 ballots have been returned.


Worker’s Comp Rate Increases

Most all of us involved in the insurance industry, in addition to others in Florida’s business sector have been waiting, not so calmly at times, for the Office of Insurance Regulation (OIR) to make a decision and issue an Order responding to the National Council on Compensation Insurance’s recent rate filing request for a 19.6% increase in workers’ compensation premiums effective December 1, 2016. That decision came this past Tuesday (9-27-2016) when the OIR released its decision approving a 14.5% rate increase, not the 19.6% requested earlier by the NCCI. The National Council’s earlier request was based largely on its projected costs upon the business industry resulting from an April Supreme Court decision that ruled a statutorily imposed cap on attorneys’ fees in workers’ comp cases was unconstitutional. In reality, for approximately three years and perhaps longer, the workers’ compensation body of law (mainly portions of Chapter 440, F.S.) has been under challenge in Florida’s court system based upon a small number of very weighty cases. Chief arguments in those cases have involved assertions that since the last major reform of the workers’ compensation law, the Florida Legislature has slowly reduced overall benefits to injured workers. Injured workers groups and the plaintiffs bar have hailed their court victories as proper and just. In response, business groups and other stakeholders involved in the workers’ comp industry correctly point out that a proper balance must be reached for the good of all involved, including Florida’s vital economy. A number of business leaders described the OIR approved 14.5% rate increase as a potential job killer both for existing insurance companies and those considering a move to Florida’s comp insurance marketplace. Associated Industries of Florida (AIF) President and CEO Tom Feeney noted, “Since the decision by the Florida Supreme Court on the Castellanos case to return to hourly rate attorneys fees, we knew it was only a matter of time before a significant workers’ compensation rate increase was approved, ultimately hurting Florida employers and injured workers.  And, today’s announcement by Insurance Commissioner David Altmaier to move forward with a 14.5 percent rate hike for new and renewal policies, as a result of the workers’ compensation law being unconstitutional, will do just that.”

In addition, Bill Herrle, executive director for Florida of the National Federation of Independent Business noted that, “While the commissioner has done what was necessary in response to the Supreme Court undoing legislation that capped attorney’s fees and maintained reasonable rates, our small business owners will be paying the price.”  Most of the other organizations representing Florida’s business interests have expressed similar concerns about the OIR move approving a 14 plus percent rate increase for comp insurance. LMA is all over this issue and will be right in the thick of things between now and the start of next session. We’ll watch for any potential special section activity to address this major issue and keep you posted on every development.


Industry Forced to Pay Even More Attorneys Fees 

As a general rule and consistent occurrence, Florida’s highest court refuses to take up cases where current appellate court decisions fail to conflict with other recent or previous appellate court rulings.  This was not the case, however, in a recent Marion County case where an earlier appellant court failed to find that the insurer ever acted in bad faith. Further, a dissenting Supreme Court Justice noted in his opinion that the Supreme Court even lacked jurisdiction to take up the case in the first place. This case involves a 6-1 decision issued last Thursday (9-29-2016) by the Supreme Court ruling on behalf of homeowner Kathy Johnson, who filed a HO insurance claim in 2010 with Omega Insurance Company. Johnson stated in her claim that her residence had suffered sinkhole damage, including cracks in walls and separations between walls and ceilings. In its decision, the Supreme Court said a property insurer must pay the attorneys’ fees of a homeowner who successfully challenged the company’s contention that her home was not damaged by a sinkhole, the decision Omega had arrived at after adjusting the claim. The high court noted in its ruling for Johnson that, “The need for fee and cost reimbursement in the realm of insurance litigation is deeply rooted in public policy. Namely, the Legislature recognized that it was essential to ‘level the playing field’ between the economically advantaged and sophisticated insurance companies and the individual citizen.”

Concerning, however, is the fact that a sinkhole consulting firm retained by Omega reported that the damage to Johnson’s home was not caused by a sinkhole. Lawyers that Johnson retained ultimately produced an engineering report showing a sinkhole was responsible. Omega eventually agreed to pay for repairs, which totaled $213,465 and Johnson then filed suit seeking attorney’s fees. What is disturbing in this case is that much earlier a circuit judge ruled that the insurer should pay the legal fees; however, the 5th District Court of Appeal disagreed. It said the insurer could only be forced to pay the fees if it initially denied the claim in “bad faith.” Omega never denied the claim in bad faith. Further, in his dissent, Justice Charles Canady said he did not think the court had justification to take up the case. He argued the earlier 5th District Court of Appeal decision did not conflict with rulings by other appellate courts and such conflicts often serve as bases for the Supreme Court to hear cases.

Legal experts are debating if the Supreme’s decision or better, Justice Canady’s reasoning for dissent, is the new law of the land. Court watchers point to the court’s long diatribe about how citizens should have the right to recover fees/costs against insurers, and some think that overpowers legal precedent that the high court shouldn’t have taken up the case in the first place due to no prior conflict between the state’s appellate courts.

 We are curious if you would like to weigh in on the debate. Let us know.


Citizens Meetings Continue to Reflect Concerns

Last week, Citizens Property Insurance Company held its 4th Quarter board meeting, and the news from the various committees revealed more policy and procedural changes from our insurer of last resort, following OIR approval the previous week of a 6.7% overall statewide average rate increase in Personal Lines from the 6.9% the company requested to offset “a disturbing increase in non-weather water loss claims and litigation.”

Citizens currently has about 491,000 polices statewide, down 675,000 from 2014 and 2015 depopulation efforts.  It expects to lose another 65,000 in 2016, but of course, is still writing new business.  It remains the largest insurer by far in hurricane-prone Miami-Dade County with 23% of all policies; likewise in Broward County, but barely–(14.1%) compared to Universal Property & Casualty (13.8%).  It’s now playing second fiddle in Palm Beach County (9.8%) to UPC’s almost 14% share.

Here’s a look at the concerns and changes approved by the Citizens Board:

  • Claims Litigation: Last year, Citizens was averaging about 650 lawsuits per month.  1100 suits were filed in August 2016 and another 826 in September.  Although it writes 15% of all homeowners policies in Florida, it is party to 45% of all lawsuits, which it blames on Assignment of Benefits (AOB).  On those AOB suits, Citizens is settling on 2.9% in a 30-day timeframe.  84% take 120 days or longer. It blames contractors associated with AOB claims who are nonresponsive and want to move the cases into litigation.  Citizens board member James Holton shared that he’s heard from lawyers in Miami-Dade that courts there are clogged up with AOB cases.  “There is division in their ranks and a lot of people in the legal community perceive this cottage industry of the AOB lawyers as being really outliers.  The stars are aligning to take them on in the next session,” he said.  Citizens has had to hire 30 additional adjusters and increase other staff to compensate.  President Barry Gilway said new Citizens contract language designed to address these issues became effective July 1 for renewal policies and their effectiveness won’t be fully known until next summer.    To view a September 28, 2016 press release from Citizens on litigation and AOB costs, click here.
  • Actuarial & Underwriting: Citizens is taking a different tact in trying to mitigate the growing AOB and water loss issues, abandoning efforts to offer a premium discount in order to sign-up policyholders to use a Citizens-approved-only contractor for certain services.  Instead, the Board approved two new programs for HO 3 and DP 3 policies: one that offers no-cost, no-deductible water extraction and drying services for plumbing mishaps, and the other a managed repair program that provides an approved contractor to complete repairs, with payment less deductible made right to the contractor.  Neither program offers premium credit or deductible reduction.
  • Depopulation: The Board approved a new depopulation process for Personal Lines that will take effect this January, prompted by passage this year of HB 931.  Policyholders who’d complained of being bombarded with various takeout offers will now receive a single letter directly from Citizens with a list of private companies that want their policy, the estimated premiums, and that will allow them to choose – rather than have a Citizens’ algorithm choose – their new insurer.  Agents likewise are being given a greater role with the ability to register the policyholder’s choice.  For private insurers, the takeout schedule in 2017 is alternating every other month with Commercial Lines and assumption agreements will be calendar year, instead of the current 18 months – all part of a new comprehensive documented process.
  • Hurricane Hermine:  Although the light hurricane affected potentially 13,000 Citizens policyholders, only 827 claims have been received so far, with total indemnity of $284,000 and expenses of $98,000. Liability was light, with many claim payments less than the hurricane deductible from mostly coastal and tributary flood surge, leaking roofs with no direct physical damage, but little wind damage.


Florida Accelerating Its Leadership Role in Automated Vehicle Development 


The Florida Department of Transportation is partnering with Florida Polytechnic University to build a new state-of-the-art transportation technology testing facility named “SunTrax” in Auburndale, near the University’s Lakeland campus.  Their goal is to create a high-tech hub for research, development, and testing of all emerging technologies, including tolling, intelligent transportation systems (ITS) and automated vehicle (AV) and connected vehicles.

SunTrax will include a 2.25-mile oval track on a 400-acre site and actively involve students and faculty in applied research together with industry partnerships.  It will also serve FDOT as a nearby testing facility for its tolling technology used on Florida’s Turnpike Enterprise system throughout Florida.  The Turnpike has more than 5.5 million SunPass customers who use their toll facilities daily.  The system processes more than 1.3 billion toll transactions annually statewide for FDOT and for regional and local toll agencies.

The initial phase of the project will be construction of an innovative toll testing facility expected to offer local and potentially national and international certification for tolling technologies. The construction of the oval track will be designed to support high speed testing of toll technologies, with multiple lanes and parallel tolled express lanes similar to those being constructed on many current highway-widening projects throughout the state.

The approximately 200-acre infield of the track will be developed next, and is expected to become a hub for automated and connected vehicle testing, providing a safe environment for testing these emerging technologies before they are deployed in live traffic.  A simulated city center, suburban and rural roadways, interconnected signalized intersections, interchange ramps, roundabouts, and various types of pavement are some of the features planned.  The facility would also be equipped to perform research, development and testing for data and security, vehicle safety and equipment certification.

The University also notes the economic development potential of the new facility to the region, saying SunTrax will be the first step in building the surrounding area into a destination for the development of this quickly emerging and advancing automotive technology. Hundreds of acres are available immediately adjacent to the facility for future development that will support the growth of this emerging industry.


The Middle Class Shrinking in Florida?

Say it isn’t so!  Actually it is so, but it’s mostly a good thing, according to a recent study by Florida International University, which found that the share of middle class households in Florida shrunk by 3.5% between 2009 and 2014.

Most of this shrinkage is caused by folks moving upward into the upper class (whose household share was up 8.1% during this period), while a smaller number have slipped into the working class (whose household share by contrast grew 1.1%).  Just like the theme song to the 1970’s television series The Jeffersons (“yeah we’re moving on up, to the East Side, to a deluxe apartment in the sky…”) those middle class in Florida who are moving are moving on up as well (perhaps to a deluxe apartment on Brickell or Las Olas Avenues?).  But like the television series, real life in Florida is showing some significant blemishes, too, according to the 13th edition of The State of Working Florida 2016 study by FIU.  The report found “Florida is increasingly becoming more economically polarized.”  “Some in the middle class have achieved considerable economic mobility, as observed in the growth of the upper class, but the inability of many middle- and working-class households to climb the economic ladder has led to a greater concentration of households at opposite ends of the economic spectrum while the middle class has shrunk,” according to the report.

As of 2012, the average upper-class household earned three times that of the average middle-class household.  It also earned nearly 10 times what the average working-class household earned.  Other findings included: women earn 78 cents for every $1 made by men; and racial and ethnic minorities earn 92 cents for every $1 made by whites.

The research finds that the economic polarization of classes in Florida is largely a reflection of an occupational structure offering fewer middle-income jobs that facilitate upward mobility. Many working Floridians continue to be perpetually stuck in low-wage occupations while occupations that have historically facilitated upward economic mobility have eroded. At the same time, recent growth in occupations with high education and/or skill requirements has provided some with the opportunity to achieve high incomes. Furthermore, the persistence of traditional forms of economic marginalization, based on race and sex, further complicates the ability of some Floridians to achieve economic mobility.

Healthcare practitioner and technical jobs as well as computer and math occupations experienced the largest gains in shares of all jobs between 20009 and 2014.  These occupations facilitate upward economic mobility.  Sales and related occupations and office and administrative support jobs, the two largest occupational groups in Florida, declined in their share of all jobs between 2009 and 2014, by 12.1% and 13% respectively.  These occupations facilitate upward mobility for working class and middle class workers.

Tougher Flood Rules Coming for

Federally-Funded Projects

If you’re involved in repairing or building anything that is funded in part by the federal government, then you’ll need to reach higher ground.  FEMA became the first federal agency last month to publish proposed new regulations that would, for instance, require homeowners and companies using federal funds on construction projects in flood-prone areas to build up to two feet higher in many cases.

FEMA’s proposed rules provide three options for construction or repairs using federal monies in those flood-prone areas:

— Build two feet above the 100-year floodplain level for standard projects or three feet above the 100-year flood plain for “critical projects” such as hospitals or  nursing homes;

— Build to the 500-year floodplain; or

— Use the best available scientific models, which combine flood records with other  factors such as sea level rise data.

FEMA’s proposed rules are based on a Presidential Executive Order signed last year that broadened existing policy to improve the resilience of communities and Federal assets against the impacts of flooding to any structures built or repaired using federal money.  According to the White House, the Order creates a new “Flood Risk Management Standard” for federally funded projects and was coordinated by National Security Council staff, consistent with the President’s Climate Action Plan.

The Order described the new Standard as a flexible framework to increase resilience against flooding and help preserve the natural values of floodplains. “Incorporating this Standard will ensure that agencies expand management from the current base flood level to a higher vertical elevation and corresponding horizontal floodplain to address current and future flood risk and ensure that projects funded with taxpayer dollars last as long as intended, ” stated the Order.

FEMA’s proposed rules are in an open comment until October 21.  It’s expected that other federal agencies will issue their own rules to implement the Executive Order.  While privately funded projects would be unaffected, these new rules would raise levels for buildings, roads and any other projects that receive federal funds including FEMA funds following natural disasters such as the recent floods in Louisiana.

An Old Joy Rediscovered
One of our dedicated readers sent us a wonderful piece following last newsletter’s opener:

Your “Watching Our Step” story below prompts me to write. Yes, my iPhone has two apps that prod me along to get exercise and get healthy. I use an app named Strava to track the walks I take and more, which I’ll get back to. And I have been using the UA MyFitnessPal app for 215 days in a row now (since my better half Trudi got me going) using it to count calories. I lost ten pounds in the first month and have NOT gained them back.  That said, nice as the electronic apps are, they are not as good a device as another “tool” I rediscovered in early summer.  After our vacation to Mackinac Island, Michigan which allows NO automobiles and the best way to get around was a bicycle, my wife and I bought each other bicycles for our July birthdays. Riding a bicycle has been my best form of exercise since then. It is better than the two apps I use because I’ve rediscovered many joys of riding a bike. First, on hot days here in Florida you create your own cooling breeze as you ride around. Second, because of that I often find myself riding further than I planned. As result I’m not only getting more exercise than the phone apps prod me into, I’m also seeing more of my St. Petersburg neighborhood than I planned. I’m a bit healthier and experiencing more places and more people thanks to my new bike. As I tour around, even though I often track my journeys with two apps, Strava’s mileage tracking records and the calorie counting tool I use are not as important as this other tool I’ve rediscovered. My bicycle is a better tool than both of those. Why? Good as the joys of accomplishment that the two phone apps I use gives me are, they don’t match the extra joys, the delights of meeting new people and visiting new places, that riding my new two-wheel device delivers.”  Hats off to this adventurous reader, and we hope you are also finding your way either on foot or on a bike!


Lisa and The Team

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

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