Special Session on Property Insurance, Hurricane Ian Relief
The Florida Legislature this morning begins its scheduled week-long special session focused on addressing the dire escalating issues in our property insurance market and providing economic relief for Hurricane Ian victims. The bills to be considered were released just this past Friday evening, following a Tuesday proclamation that added the establishment of a statewide toll road credit program for frequent commuters to the session call. Senate President Kathleen Passidomo (R-Naples) in her memo to Senators that accompanied the release of the property insurance bill said it “builds on the consumer-friendly property insurance reforms forms we passed in May, working to curb skyrocketing property insurance rates and bring stability to the property insurance market for the benefit of policyholders.”
The Senate and House bills are identical and I believe would accomplish many of the long-sought reforms needed to help re-right Florida’s decimated property insurance market ̶ plagued by high insurance and reinsurance rates, carrier insolvencies, inflated claims, excessive litigation, and a residual market that needs to be restored to the market of last resort.
The major highlights of the identical bills, if passed, would:
- End one-way attorney fees in residential and commercial property insurance policy lawsuits;
- Prohibit Assignment of Benefits (AOB) contracts of residential and commercial property insurance policies issued on or after January 1, 2023;
- Prohibit the filing of a bad faith lawsuit until a final judgement was issued against the insurance company in the original claim dispute;
- Make many essential improvements to current laws governing the state-backed Citizens Property Insurance Corporation, including:
- Changing the eligibility to remain a Citizens policyholder, by requiring that private insurance company coverage has to be 20% more expensive (up from 15%, to match current rules on new policies) and likewise for commercial residential policies;
- Ending capped rates (the so-called “glide-path”) and requiring its rates be actuarially-sound and be “non-competitive” with admitted companies’ market rates;
- Defining and allowing higher rates for second (non-homesteaded) homes; and
- Requiring personal lines policyholders purchase flood insurance to become or remain a Citizens policyholder.
- Establish a second optional hurricane reinsurance fund for carriers offering rates of 50% to 65% of the cost of on-line rates;
- Allow carriers to include mandatory binding arbitration in their policies; and
- Reduce from 90 days to 60 days the time insurance companies have to pay or deny a claim, unless extended by regulators; and reduce from 14 days to 7 days the time a carrier has to review and acknowledge a claim communication and begin an investigation, along with other time requirement changes.
The 105-page identical bills also contain new regulatory requirements for the Office of Insurance Regulation and on the insurance companies it regulates, including the use of appraisal in disputes. Further details are provided below.
Noticeably absent: any consideration for allowing carriers to pay actual cash value (ACV) instead of replacement cost on claims requiring new roofs. The bills instead seem to rely on elimination of AOBs as the solution to unscrupulous contractors, aided by attorneys, pursuing “free roofs” for homeowners. Nevertheless, these proposed measures significantly build on the May 2022 special session reforms and include many urged by the President & CEO of Citizens Property Insurance and its Board of Governors for several years. The inclusion of mandatory flood insurance is a significant and positive step to protect more Floridians from the hidden dangers of flood waters, most recently witnessed in Hurricanes Ian and Nicole, where many residents didn’t know that homeowners policies don’t cover flooding or who otherwise chose not to purchase it.
Many of these needed solutions were the very subject of our recent Florida Insurance Roundup podcast “Special Session Preview” that we released last week, featuring Deb Franklin, Co-CEO of PEAK6 InsurTech and former state representative Andrew Learned (D-Brandon). You can listen and/or read more here. For more background on past reforms, you can visit our Assignment of Benefits and Insurance Litigation webpage.
Here’s more detail on the identical property insurance bills, followed by the likewise identical bills on Hurricane Ian relief and the bills providing a toll-road credit for commuters. There were also three additional bills filed over the weekend that would provide a new alternative dispute resolution program for insurance claim disputes, create a property insurance commission, and urge Congress to establish a federal catastrophe pool. The House of Representatives and the Senate have floor sessions this morning, followed by afternoon committee meetings to hear these bills and ready them for an anticipated floor vote in the Senate tomorrow (Tuesday) and possibly in the House on Wednesday. We’ll be following the legislature’s actions all this week and will have a special Bill Watch when session ends to report what happened.
Property Insurance – HB 1-A and SB 2-A by Reps. Tom Leek (R-Ormond Beach) and Bob Rommel (R-Naples), and Senator Jim Boyd (R-Bradenton) are identical, which is expected to make them easier to pass. Senator Boyd is the returning Chairman of the Senate Banking and Insurance Committee, which will take up the bill this afternoon beginning at noon. It is expected to go to the Senate Fiscal Policy Committee afterward at 3pm. The Florida Channel will have live coverage. Rep. Leek is Chair of the House Appropriations Committee and Rep. Rommel is Chair of the Commerce Committee. Rep. Rommel’s committee meets at 9am tomorrow (Tuesday) to take up the House bill, followed by Rep Leek’s committee, scheduled to meet at 3pm. Following are the measure’s components that except as otherwise provided, are effective upon becoming law.
Florida Optional Reinsurance Assistance Program
- Establishes the Florida Optional Reinsurance Assistance (FORA) Program for the 2023 hurricane season, which:
- Creates an optional hurricane reinsurance program that insurers can purchase at “reasonable” rates. Rates vary by tier level purchased and will range from 50% to 65% rate on-line.
- Provides purchase tiers that begin at the Florida Hurricane Catastrophe Fund (FHCF) attachment point and cumulatively are limited to no more than $5 billion below the FHCF attachment point.
- Allows insurers that purchase FORA coverage or receive free Reinsurance to Assist Policyholders (RAP) coverage at each tier to have the option to purchase the next tier down.
- Maintains the Reinsurance to Assist Policyholders (RAP) program created in last May’s special session, thus allowing those insurers and their policyholders that could not participate during 2022-2023, to receive and benefit from RAP reinsurance in 2023-2024.
- Funds FORA coverage with $1 billion in general revenue funds and the premiums insurers pay for FORA coverage.
- Returns remaining revenue to general revenue after the FORA program ends.
Claim Filing Deadline
- Reduces the deadline for policyholders to report a claim under the policy from 2 years to 1 year for a new or reopened claim, and from 3 years to 18 months for a supplemental claim.
Regulation of Insurance in Florida
- Authorizes the Office of Insurance Regulation (OIR) to subject any authorized insurer to a market conduct examination after a hurricane under certain conditions relating to property insurance claims.
- Ensures that insurers do not abuse the appraisal process under property insurance policies by:
- Specifying the OIR has discretionary authority to suspend or revoke an insurer’s certificate of authority or issue administrative fines and restitution upon if the insurer engages in a general business practice of, without just cause, compelling insureds to participate in appraisal in order for the insured to secure the full payment or settlement of a property insurance claims.
- Adding additional elements to the mandated insurer’s quarterly reports filed with the OIR related to claims.
- Authorizing the OIR, based on finding that the insurer had exhibited a pattern or practice of one or more willful unfair insurance trade practice violations with regard to its use of appraisal, to withdraw OIR approval of the property insurer’s forms and, in addition to any other authorized regulatory action, issue an order that prohibits the insurer from invoking appraisal for up to two years.
- Adding an element to the Property Insurer Stability Unit’s required semiannual report on the status of the homeowners’ and condominium homeowners’ insurance market to include the name of any insurer found to have exhibited a pattern or practice of one or more willful unfair insurance trade practice violations with regard to its use of appraisal. The bill also requires the OIR to publish this same information on its internet webpage.
Prompt Pay Laws for Property Insurance
- Amends the prompt pay laws to encourage the prompt payments of claims, as follows:
- Reduces the time for insurers to pay or deny the claim from 90 to 60 days. Allows the Florida Office of Insurance Regulation (OIR) to extend the 60 day period up to 30 additional days if a state of emergency, cyberattack, or computer systems failure prevents the insurer from meeting the time frames of the prompt-pay law.
- Reduces the time for insurers to review and acknowledge a claim communication from 14 days to 7 days.
- Reduces the time for insurer to begin an investigation from 14 days to 7 days.
- Reduces the time for insurer to conduct a physical inspection from 45 days to 30 days, and applies this requirement to hurricane claims.
- Specifies insurers may use electronic methods to investigate the loss and allows policyholders to participate in the use of such methods.
- Requires insurers to send any adjuster’s report estimating the loss to the policyholder within 7 days after it is created.
- Requires that the insurer’s claim records include various parts of the claim investigation and their dates.
- Provides that the requirements of the section are tolled: during the pendency of any mediation or alternative dispute resolution procedure provided in the insurance contract and upon failure of a policyholder or representative to provide material claim information within 10 days, if the request for such information was made within the first 45 days after notice of the claim.
- Amends the Homeowner Claim Bill of Rights to conform to the bill’s changes to the prompt pay laws.
- Amends the Unfair Insurance Trade Practices Act to conform to changes made to the prompt pay laws by reducing the requirement to pay undisputed amounts of benefits from 90 days to 60 days and revising the factors that excuse failure to perform.
Awards of Attorney Fees in Litigation under Property Insurance Contracts
- Provides that the one-way attorney fee provisions of s. 627.428, s. 626.9373, and s. 627.70152 are not applicable in a suit arising under a residential or commercial property insurance policy.
- Reinstates application of the civil offer of judgment statute to civil actions arising under a residential or commercial property insurance policy.
- Allows joint offers of settlement in property insurance litigation contingent on acceptance of all joint offerees.
- Removes provisions regarding attorney fees relating to the alternative procedure for resolution of disputed sinkhole insurance claims.
Assignments of Benefits
- Prohibits the assignment, in whole or in part, of any post-loss insurance benefit under any residential property insurance policy or under any commercial property insurance policy issued on or after January 1, 2023.
Bad Faith Failure to Settle Actions against Property Insurers
- Provides that bad faith litigation for failure to settle a property insurance claim may not be filed until after the insured has established through adverse adjudication by a court that the insurer breached the insurance contract and a final judgment or decree has been rendered against the insurer.
Citizens Property Insurance Corporation
- Increases the eligibility threshold for Citizens renewal personal lines policyholders. Under the bill, such policyholders are ineligible for Citizens coverage at renewal upon receiving an offer of comparable coverage from an authorized insurer for a premium that is not more than 20 percent greater than the Citizens renewal premium.
- Increases the eligibility threshold for Citizens new policies for commercial residential coverage from 15 percent to 20 percent, which is consistent with the current threshold for new policies of personal residential coverage.
- Amends provisions on take-out offers and the Citizens clearinghouse to conform to the increased eligibility thresholds contained in the bill.
- Requires that Citizens’ rate be non-competitive with the approved rates charged in the admitted market, in addition to being actuarially sound.
- Increases the potential rates charged for coverage on risks that are not primary residences.
- Defines the term “primary residences.”
- Repeals language allowing policyholders to return to Citizens as a renewal if the take-out carrier increases their rates above the Citizens’ glidepath.
- Combines Citizens three accounts into a single account upon Citizens eliminating all outstanding financing obligations. A single account structure will allow Citizens to access its entire surplus to pay claims. Currently, surplus in a particular account may only be used to pay claims in that account. The bill also revises the Citizens policyholder surcharge imposed in the event of a deficit from 15 percent per account (maximum 45 percent) to 15 percent for the single account.
- Provides that Citizens personal lines residential policyholders must secure and maintain flood insurance that meets certain requirements as a condition of eligibility for Citizens coverage.
- Provides a timetable for which flood insurance coverage must be implemented for personal lines residential Citizens policyholders.
- For risks located in areas designated by the Federal Emergency Management Agency as special flood hazard areas, flood insurance must be secured for new Citizens policies with an effective date on or after April 1, 2023, and at renewal for Citizens policies that renew on or after July 1, 2023.
- For all other risks, the requirement to obtain flood insurance at policy issuance or renewal is effective:
- March 1, 2024, for policies insuring property to a limit of $600,000 or more.
- March 1, 2025, for policies insuring property to a limit of $500,000 or more.
- March 1, 2026, for policies insuring property to a limit of $400,000 or more.
- March 1, 2027, for all other policies.
- Amends the mandatory flood insurance notice by requiring it to be part of the declarations page and makes revisions to the content of notice to encourage purchase of flood insurance.
- Provides conditions whereby a property insurer may include mandatory binding arbitration in its policies. The insurer may not require a policyholder to participate in mandatory binding arbitration unless specified conditions are met, including that the insurer also offer a policy that does not have a mandatory binding arbitration clause. Insurers must also provide an appropriate premium discount in exchange for the rights ceded by the policyholder.
Continuation of Coverage
- Authorizes the OIR to extend the 30-day coverage period for policies of insolvent insurers by an additional 15 days if the OIR reasonably believes that market conditions are such that the policies cannot be placed with an authorized insurer within the 30-day period.
- For 2022-2023 fiscal year, appropriates $1,757,982 in recurring funds from the Insurance Regulatory Trust Fund to the OIR with an associated salary rate of $844,464.
- Allocates the funds as follows: $1,356,615 for Salaries and Benefits, $400,000 for Other Personal Services Category, and $1,367 to DMS. Funds also will be used for recruitment and retention of personnel within the OIR.
- Authorizes cumulative transfers from general revenue not to exceed $1 billion from the General Revenue Fund to the Florida Optional Reinsurance Assistance (FORA) Program for the 2022-23 contract term beginning June 1, 2023.
- Authorizes up to $6 million in transfers from general revenue to the State Board of Administration to administer the FORA program. See Section V. Fiscal Impact Statement. The bill, except as otherwise provided, is effective upon becoming law.
Disaster Relief – HB 3-A and SB 4-A by Reps. Stan McClain (R-Ocala) and Tom Leek (R-Ormond Beach), and Senator Travis Hutson (R-Palm Coast) are identical and would provide a variety of economic relief for residents and local governments impacted by this fall’s Hurricanes Ian and Nicole. First and foremost is property tax relief to the hurricane victims. The measure grants a property tax deferment for homes and businesses destroyed or made uninhabitable for at least 30 days in either storm by retroactively applying this past spring’s Surfside building collapse law that created rebates when residential properties are rendered uninhabitable for 30 days or more by catastrophes. It also extends the due dates for property taxes levied in 2022 for those same property owners. .
The measure, which comes with a total proposed appropriation of $751.5 million, also:
- Appropriates $350 million from the General Revenue Fund to the Division of Emergency Management (DEM) to provide the full match requirement for FEMA Public Assistance grants to local governments affected by the two hurricanes.
- Appropriates $150 million from the General Revenue Fund to the Florida Housing Finance Corporation, of which $60 million shall be provided to local governments to assist persons with the repair or replacement of housing, relocation costs, housing reentry assistance, and insurance deductibles. $90 million shall be used to fund the Rental Recovery Loan Program to promote development and rehabilitation of affordable housing in affected areas.
- Appropriates $251.5 million from the General Revenue Fund to the Department of Environmental Protection (DEP) for:
- Beach erosion projects ($100 million)
- Hurricane Reimbursement Grant Program ($50 million)
- Hurricane Stormwater and Wastewater Assistance Grant Program ($100 million)
- DEP administrative costs ($1.5 million)
- Provides for the creation of a direct-support organization for the DEM to provide assistance, funding, and support to DEM in its disaster response, recovery, and relief efforts for natural emergencies.
Senator Hutson chairs the Fiscal Policy Committee, which meets today (Monday) at 3pm to take up the Senate bill, right after it’s heard at noon by the Community Affairs Committee. Rep. McClain chairs the House Ways & Means and Rep. Leek is Chair of the House Appropriations Committee. Rep. McClain’s committee meets at 12:30pm tomorrow (Tuesday) to take up the House bill, followed by Rep Leek’s committee, scheduled to meet at 3pm. The Florida Channel will have live coverage of all meetings throughout the week.
Beyond this special session, House Speaker Paul Renner has formed a Select Committee on Hurricane Resiliency and Recovery to look at issues resulting from the hurricanes and “accelerate rebuilding and gather lessons learned, so that we are even better prepared for future storms,” said Renner. He appointed Rep. Michael Grant (R-Port Charlotte) as Chair and Rep. Adam Botana (R-Bonita Springs) as Vice Chair. Expect a report similar to a previous select committee’s 2018 report on Hurricanes Maria & Irma.
Toll Relief – HB 5-A and SB 6-A by Rep. Demi Busatta-Cabrera (R-Coral Gables) and Senator Nick DiCeglie (R-St. Petersburg) are also identical bills that provide pricing breaks for motorists who regularly use Florida’s toll roads. The measure would provide 50% refunds for commuters who pay more than 35 tolls in a month and use a transponder to pay. Hearings on these measures are also scheduled for these bills today and tomorrow. The measure comes with a total appropriation of $500 million for the 2022-2023 fiscal year. You can read more about it in the Senate staff analysis.
Other Bills – There are several other bills filed in the House, by Democrats, that propose a variety of ideas but we don’t anticipate any of these receiving a hearing:
HB 7-A Hurricane Property Insurance Claim Mediation, by Rep. Jervonte Edmonds (D-Palm Beach) that would establish the Hurricane Property Insurance Claim Alternate Dispute Resolution Program within the Florida Office of Insurance Regulation (OIR).
HB 9-A Insurance, by Rep. Fentrice Driskell, the House Minority Leader, that covers a variety of topics, including having an elected state insurance commissioner, creating a Property Insurance Commission, and establishing capped premiums.
HM 11-A Establishment of Federal Catastrophe Pool, by Rep. Kelly Skidmore (D-Palm Beach). Filed as a House Memorial, urging Congress to establish a federal catastrophe pool.
We’ll be following the legislature’s actions all this week and will have a special Bill Watch at week’s end to report what happened.
LMA Bill Watch of 12-12-22