Property Insurance Claims ̶ SB 1508 by Senator Tom Leek (R-Ormond Beach) and the similar HB 1087 by Rep. Randy Maggard (R-Dade City) remove the existing alternative procedure for resolving disputed residential property insurance claims (mediation) and replaces it with a mandatory one. These bills are dead having never received an initial hearing. Read More
The bills also specify that a homeowner’s insurance policy is the primary policy and any separate flood or wind policy is subject to subrogation – meaning that homeowners insurance companies would have to pay for the flood claims themselves and seek reimbursement later from the National Flood Insurance Program.
The House bill’s stated goal is “to ensure the efficient delivery of the coverage offered under the policy, helping to restore an owner’s property and livelihood to normalcy after a disaster or loss, while maintaining reasonable costs to the insurer.” It takes a page from the Citizens Property Insurance Corporation’s playbook by requiring disputes be presented and resolved by the state Division of Administrative Hearings (DOAH), rather than in the traditional court system. As such, it eliminates appraisal and arbitration clauses. Among its provisions:
- Either the policyholder or the insurance company can elect to use the procedure on unresolved claim disputes.
- Participation by lawyers is not required.
- The petitioner or their counsel must certify that a good faith effort was made to resolve the dispute.
- Upon receipt of a petition, the administrative law judge would review it and dismiss it if it “does not on its face specifically identify or itemize all of the following information:
- The policyholder’s name, address, telephone number, and social security number.
- The insurer’s name, address, and telephone number.
- A detailed description of the loss or damage, including the date it occurred.
- The alleged acts or omissions of the insurer giving rise to the dispute, including, if applicable, a denial of coverage.
- An estimate of damages, if known, and the amount that is disputed by the insurer.
- A specific explanation of any other disputed issue that the administrative law judge will be called to rule upon.
- The dismissal of any petition or portion of a petition is without prejudice and does not require a hearing.
- Within 14 days of receiving the petition, the insurance company must pay the requested claim or file a response to the petition with DOAH. The response must specify all claims requested but not paid and explain the company’s reason for nonpayment.
- The DOAH judge in ruling on the petition and the response will follow the process outlined in f.s. 25, except the judge must make a determination within 60 days after the filing of the petition.
- The procedure involves disputes over claims relating to a material issue of fact and excludes claims where:
- The insurance company has a reasonable basis to suspect fraud.
- The insurance company has determined there is no coverage under the policy.
- The insurance company has a reasonable basis to believe material misrepresentation.
- All motions to dismiss must be handled as specified in f.s. 192(5)
DFS, OIR and DOAH administer the mandatory procedure. There are requirements on the state and insurance companies to notify consumers of the mandatory claims resolution process. It does not apply to liability coverage disputes. There is insurance industry concern about losing the safeguards inherent in the appraisal and arbitrations clauses that these bills eliminate and fears of increased litigation as a result.
The bill also seeks to “better coordinate payment of claims.” It provides: “If a claim is submitted under a homeowner’s insurance policy and the insured also has a separate windstorm or flood insurance policy, the homeowner’s insurer is the primary insurer. Such insurer must pay the insured’s loss…and has the right to seek subrogation from the windstorm or flood insurer.” This part of the bill is the most problematic for the industry, with concerns it will create liquidity and cash flow risks for private insurers, forcing them to absorb flood-related losses before ever receiving federal reimbursement – sometimes a lengthy process. There’s a broader market concern that shifting a federal responsibility onto state-based private insurance companies will drive higher premiums and loss of capital as reinsurers and investors lose confidence in a more unpredictable system. (Return to Bill Watch)
