Phases of Living

This past weekend, we woke up early enough to witness the wedding of Prince Harry and Meghan Markle – a truly joyous ceremony of unity and love which transcended differences and emphasized the power of respecting diversity across cultures. We also attended a 500 person celebration of life for a 56 year old cousin who lost his cancer battle.  Two hours later we attended a retirement party for a seasoned veteran in the IT industry and after that?  A birthday party for a 92 year old southern bell who had a distinguished 35 year career in criminal justice.  This next Monday, May 28this Memorial Day, our nation’s commemoration of the sacrifices made by those whose lives were lost for the freedoms we hold sacred.  Whether our veterans survived their military service, or were killed on the field of battle, our country owes each of them, and their families, a debt of gratitude.  All of these events speak to the phases of living with this reverberating theme:  Get outside our vision and see each other a little more, by taking time to care and show interest in those inside and outside our world.  I am grateful for all of you who follow our work and give us a reason to press on.  Thank you for reading this edition and I always welcome your response to my messages. Your reply goes directly to me and I personally read each and every one of them.

Average Cost of Workers’ Comp Claims Rising in Florida
Still in line with other states, for now

A new study out by the Workers’ Compensation Research Institute (WCRI) shows the average cost of workers’ compensation claims in Florida grew moderately between 2011 and 2016, up 3.7%.  That’s in the middle compared to the other 17 states in the study, which collectively saw an average 2.8% claims cost increase.  Although much of the Florida data is prior to two key state Supreme Court decisions expected to drive up workers’ comp costs, the study will serve as a starting point for a new study ordered by the state Department of Financial Services (DFS).

“Medical payments per claim, indemnity benefits per claim, and benefit delivery expenses per claim in Florida all grew moderately at 3 to 5 percent per year during this period,” said Ramona Tanabe, WCRI’s executive vice president and counsel.  The study, CompScope™ Benchmarks for Florida, 18th Edition, compared Florida’s with workers’ compensation system with those in 17 other U.S. states.

Two significant decisions (Castellanos and Westphal) by the Florida Supreme Court in 2016 struck down caps on attorney fees and prompted the legislature to extend the state’s previous 104-week limitation on temporary total disability benefits.  Those decisions are expected to affect costs and litigation expenses in Florida’s workers’ compensation system.  Data from this study only reflected 10-12 months of experience after those two decisions, prompting DFS to order an updated study, expected out in 2019.

As we’ve reported previously in the LMA Newsletter, the Office of the Judges of Compensation Claims last annual report showed injured workers received in total $186 million in overall approved legal fees in 2016-2017, a 36% increase over the prior year.  It’s the highest amount paid in almost a decade and surely a sign of things to come. That report showed another $254 million was spent by employers defending those claims.  Nevertheless, workers’ comp rates here have fallen 11.3% in the past year.

The WCRI report showed Florida had more frequent defense attorney involvement with higher payments per claim. These factors were offset by slightly lower frequency and payments per claim for medical cost containment expenses, resulting in typical benefit delivery expenses per claim.

WCRI also reported indemnity benefits per claim in Florida were lower than most other states included in the study.  Medical payments per claim in Florida were fairly typical of the 18 states. Prices paid were the lowest of the study states for medical professional services and the highest of the 18 states for hospital outpatient care.

Model Cybersecurity Law Passed in South Carolina
Other states, including Florida with $110 million in losses, urged to follow

Another cost driver in the workplace – and growing larger each year – is the expense of dealing with cybercrime, both before and after cyberattacks.  There have been two major breaches of health insurance information in recent years (Anthem and Premera Blue Cross) and now the state of South Carolina has stepped up under the leadership of its Insurance Director Ray Farmer, to become the first state in the country to pass cybersecurity regulation on the insurance industry.  The new law is based on the NAIC model actapproved last year.

The law establishes standards for data security and investigation and notification of a data breach and applies to licensees, which includes not just insurers, but agents, brokers and other parties.  It requires these organizations to create a comprehensive written information security program that details the administrative, technical and physical safeguards for protecting personal information. It requires them to investigate data breaches and notify state regulators of a cybersecurity event.

The new South Carolina law is the culmination of a nearly decade-long effort by Ray Farmer, who chaired the NAIC’s Cybersecurity (EX) Working Group and currently serves as NAIC Vice President.

“This sets South Carolina apart and shows we are dedicated to keeping insurance information safe,” Director Farmer said in a statement.  “In this day where cybersecurity breaches are a real and ongoing threat, it is best to take a proactive approach to protecting data before there is an issue, rather than trying to fix a breach once it has happened.”

Farmer is hoping other states will follow South Carolina’s lead.  Indeed, Florida came in third in overall financial losses from all cybercrime on the recent FBI’s annual Internet Crime Report, with $110.6 million of losses.  California topped the list at $214.2 million, followed by Texas with $115.7 million in losses.  Arizona, Washington, Illinois, New Jersey, Colorado and Massachusetts rounded out the top 10.

The South Carolina law requires companies to identify “reasonably foreseeable internal or external threats that could results in the unauthorized access to or transmission, disclosure, misuse, alternation, or destruction of nonpublic information.”  Insurers have to designate at least one employee, an affiliate or an outside vendor to act on their behalf as being responsible for securing personally identifiable information.

Of course, concerns about cybersecurity certainly extend beyond insurers.  Equifax, Target, and Home Depot are among a growing group of companies that have had personally identifiable information of their customers and other accounts compromised by cyber thieves.

Most commercial property and general liability policies do not cover cyber risks.  Specialized cyber insurance policies are driving a new market line estimated at $2.49 billion, according to the NAIC.  Cyber is big business!

Court Rules Multiple Assignment of Benefits Okay
Meanwhile, effort underway to keep OIR data call details private

During our ongoing discussions and advocacy on the critical need to reform Florida’s Assignment of Benefits (AOB) practices, we often focus on the abuse by certain law firms and third-party vendors, taking advantage of the state’s one-way attorney fees statute, to inflate claims. But we’re reminded by ongoing litigation that there’s also a need to reform the very language of AOB contracts between policyholders and contractors, to provide greater uniformity. A recent Hillsborough County case shows how vendors competing for AOB exclusivity can end up in court against insurance companies.

The 2ndDistrict Court of Appeal recently overturned a Hillsborough Circuit Court ruling that had been in favor of Homeowners Choice Property and Casualty Insurance.  The circumstances are familiar to our regular readers:  a pipe bursts and the homeowner hires two firms to provide water cleanup and restoration.  Each firm wants an AOB which the homeowner, Richard Prager, signs. Both firms end up in court suing the insurance company for not paying the claims in full.  The circuit judge had ruled for Homeowners Choice, finding the homeowner had assigned all of the insurance benefits to B&M Clean and that the other vendor, Nicon Construction, had no AOB claim.

But the 2ndDCA ruled that the circuit judge’s interpretation was too narrow.  Writing for the three-judge panel, Appellate Judge Patricia Kelly wrote “When the phrase ‘any and all insurance rights, benefits, and causes of action under my property insurance policy’ is read in the context of the entire assignment and the purpose for which it was entered into, it is evident that Mr. Prager was assigning all his rights under the policy to payment for the services performed by B&M Clean — not all his rights to payment for the entire covered claim.”

Meanwhile, information gleaned from this and other Florida AOB disputes, are now the subject of another legal proceeding. Universal Property & Casualty Insurance, Florida’s largest homeowners insurer with more than 600,000 policies, is suing to keep granular information from the Office of Insurance Regulation’s (OIR) recent AOB data call private.  Universal recently filed suit in Leon County to block a public records request to OIR by an Orlando lawyer, arguing such detailed information is a trade secret and thus exempt from public disclosure.

OIR’s data call included information about individual claims filed against companies, including claims numbers, locations, policy limits and exclusions, and AOB case details, such as identities of contractors and attorneys involved.  Universal says such detailed information provides claims level insight that reveals internal processes and expenses that would provide a competitor an unfair advantage if disclosed.

Florida’s $616 million Spending Plan for post-Irma Recovery
Report notes that $65 million in flooded housing assistance was unmet

Governor Scott announced last week how Florida is planning to spend the $616 million received from the federal Community Development Block Grant – Disaster Recovery (CDBG-DR) program as part of its long-term recovery efforts from Hurricane Irma.  In a roundabout way, the Governor’s plan will be a housing and infrastructure boon to Florida and these new structures will need insurance coverage – so get ready insurance industry!

The 165-page state Action Plan, which has been submitted to the U.S. Department of Housing and Urban Development (HUD), will be used to replace and repair damaged homes, build new affordable housing and provide grants to severely impacted businesses.  This is the fed’s “money of last resort”, to be used after all other funding, public and private, including insurance claims, have been paid out. The $616 million is in addition to the $791 million HUD released to Florida in April for remaining unmet needs from direct Hurricane Irma damages and to support mitigation activities.  The state previously received $118 million for Hurricanes Hermine and Matthew from 2016.

The Governor noted in a statement that “since the storm, we have worked tirelessly along-side community and business leaders to build stronger communities that are better prepared for future disasters.” The plan includes critical economic and infrastructure needs in urban centers and rural communities, specifically those of the Florida Keys which experienced Irma’s first landfall and was especially devastated.  The plan also helps support the needs of new Floridians who moved here from Puerto Rico following Hurricane Maria.

The action plan includes a section addressing residential properties in flood zones, noting that in Florida there are 3,135,904 residential structures in the 100-year flood zone, yet only 1,763,729 policies in force (both inside and outside of the flood zone).   For those of you selling flood insurance, or thinking about it, the chart on pages 60-62 of the state Action Plantell the story of the perils of going without flood coverage.  Of the nearly 580,000 Floridians in a Flood Zone who applied to FEMA’s Housing Assistance Program post-Irma, almost 43,000 had losses, with estimated home damage of $139 million.  Yet, while FEMA provided $74 million in housing assistance, the balance – $65 million – was unmet.  With the average flood policy costing around $500 annually, it’s clear that more Floridians need flood insurance than currently have it.

The action plan notes that while many counties and cities across the state participate in the National Flood Insurance Program’s Community Rating System, there are still 16 counties and many more municipalities that do not participate and are not required to enforce the full suite of mitigation and flood reduction measures available.

Per HUD rules, at least 80% of the $616 million must be used to address needs in the hardest-hit counties and ZIP codes as determined by HUD. These areas include Brevard, Broward, Collier, Duval, Lee, Miami-Dade, Monroe, Orange, Polk and Volusia counties, and specific communities within Flagler Beach, as well as the inland towns of Starke, Middleburg, and Arcadia.  HUD has 45 days to approve Florida’s Action Plan or provide feedback for changes.

Revising Florida’s State Constitution
Amendment 6 Creates Rights for Crime Victims

(Editor’s note: This is part of an ongoing serieson the 13 proposed state constitutional amendments that will appear on this November’s ballot for Florida voters to consider.)

Amendment 6is actually three proposals in one amendment.  It would revise and establish new rights for crime victims, based in part on the national push for Marsy’s Law; require an administrative law judge to interpret state statute or rule instead of letting an agency do so; and create a retirement age of 75 for judges.

At its core, the amendment proposes to put crime victims on an equal footing with those accused of committing the crime, “to ensure that crime victims’ rights and interests are respected and protected by law in a manner no less vigorous than protections afforded to criminal defendants and juvenile delinquents.”

To accomplish this, the amendment would entitle every victim, from the time of victimization, to the following rights:

  • The right to due process and to be treated with fairness and respect for the victim’s dignity
  • The right to be free from intimidation, harassment, and abuse
  • The right to be reasonably protected from the accused and any person acting on behalf of the accused
  • The right to have the safety and welfare of the victim and the victim’s family considered when setting bail and pretrial release conditions
  • The right to prevent the disclosure of information or records that could be used to locate or harass the victim or the victim’s family, or which could disclose confidential or privileged information of the victim
  • The right to prompt return of the victim’s property when no longer needed as evidence in the case
  • The right to full and timely restitution in every case and from each convicted offender for all losses suffered, both directly and indirectly, by the victim as a result of the criminal conduct
  • The right to proceedings free from unreasonable delay and to a prompt and final conclusion of the case

The amendment would also allow victims other rights upon request.  These include the right to receive notice of and be present at all public proceedings involving the accused; the right to be notified of any release or escape of the accused; the right to be heard in any public proceeding regarding release; the right to confer with the prosecuting attorney on any plea agreements or other disposition of the case; the right to make a victim impact statement; and the right to be informed of and participate in all post-conviction processes and procedures.

Interestingly, the amendment also has monitoring and accountability provisions for its proper execution.  All state-level appeals on any judgment must be complete within two years from the date of appeal in non-capital cases and within five years from the date of appeal in capital cases, unless a court enters an order with specific findings as to why the court was unable to comply with the requirements.  Each year, the chief judge of any district court of appeal or the chief justice of the Florida Supreme Court must report on a case-by-case basis to the Speaker of the House of Representatives and the President of the Senate all cases where the court entered an order regarding its inability to comply.

Amendment 6 was placed on the November ballot by the Constitutional Revision Commission, a group that meets every 20 years to consider changes to the state constitution.   Read more here on how this proposed amendment was created. All proposed amendments to Florida’s constitution require a 60% majority vote to be approved.  As many of our readers are Floridians, it’s important to know how each of these measures can affect us and our families, businesses, and employees. Knowledge is power!

Bondi v. Opioid Drug Companies
Unfair, deceptive trade practices and racketeering alleged

Florida Attorney General Pam Bondi did last week what she’d been threatening to do for the past six months: sue big pharma for the thousands of deaths each year in Florida she has proclaimed are part of a state and national opioid crisis.  Bondi filed a civil lawsuit against five of the nation’s largest opioid makers and four distributors in Pasco County court, the county that has experienced the highest drug overdose mortality rate in Florida.  In all, the state’s lawsuit says opioids caused 5,725 deaths in Florida in 2016, an average of more than 15 deaths a day from opioids.

Calling it a “pill mill epidemic” the lawsuit targets manufacturers Purdue, Endo Pharmaceuticals, Janssen Pharmaceuticals, Cephalon, Inc., and Allergan PLC.  Also included in the suit are related companies and four distributors: AmerisourceBergen Drug Corp., McKesson Corporation, Cardinal Health, Inc., and Mallinckrodt LLC.  The suit alleges the companies violated the state’s unfair and deceptive trade practices laws and Florida’s criminal racketeering laws.

The 54-page complaintsays the manufacturers “promoted misrepresentations about the use of opioids to physicians, other prescribers, and consumers that were designed to increase opioid prescriptions and opioid use.”   Specifically, they are accused of using front organizations to promote opioids, using paid “key opinion leaders” as alleged medical experts to write articles promoting opioid use but omitting information on the risks.  They are also accused of not making clear the dangers of mixing opioids with benzodiazepine, a drug that veterans are often prescribed for post-traumatic stress disorder.

Meanwhile, down I-75 in Sarasota, a company called ROBRADY has designed a smart pill dispenser to control opioid dosages and prevent abuse and overdose.  Called PILL, the battery-operated prescription device releases opioid pills at prescribed times, so that users don’t run out of pills before the end of the prescription.  The product resembles a Z-Pak of antibiotics and has been in development for six years. More from 83 Degrees magazine.

Attorney General Bondi also took aim this past week at the state Department of Corrections, criticizing budget cuts that are prompting DOC officials to cut reentry programs for inmates returning to society.  The agency said it didn’t receive adequate funding from the legislature for this upcoming fiscal year to cover growing costs of operating prisons and felony probation.  Cuts are being considered in mental health, substance abuse, and re-entry programs for felons finishing out their prison terms.  “We have to have treatment in our facilities, it’s ridiculous not to,” Bondi was quoted as saying in published reports.

Working Together Into Hurricane Season

Over the past couple of weeks, I read stories about how the Florida regulators were sending a team of its own to Puerto Rico to assist with all things post-disaster and that former insurance commissioner Kevin McCarty provided some lessons learned in his years during post-disasters as a regulator, including his timely reminder that we need to always focus on disaster mitigation.  As we head into the official 2018 storm season at month’s end, we will want to work together to plan, drill, and if one (or two or three) hit, do what we do, which is “see a need, react, and get it done.”  I will be curious to hear of your disaster recovery plans and ways we can help you get ready.  Have a great week and we’re always here for you!