Fate of Florida Insurance Reforms Uncertain as Lawmakers Weigh Industry-Backed Bills

March 26, 2021 by Amy O'Connor

Two bills designed to deal with Florida’s crumbling property insurance market have embarked on divergent paths in the state legislature as lawmakers approach the final weeks of the 2021 session.

Senate Bill 76 and House Bill 305, both originally supported by the Florida insurance industry and stakeholders, started off the session essentially as companion bills, but recent changes to the House proposal have stripped away reforms some in the industry say are desperately needed. While both bills advanced in their respective chambers this week, significant compromise will have to occur to give either a chance at becoming law.

Stakeholders have supported SB 76 and HB 305 since the start of session because they say the proposals will help tackle excessive insurance litigation, attorney fee costs, and abuse by predatory attorneys and contractors that is leading to severe losses for carriers and higher rates for consumers.

“Every year that we don’t address this problem, rates are going to continue to go up,” Florida Senator Jeff Brandes told the Senate Rules Committee on Thursday.

Brandes urged his colleagues to support SB76, sponsored by Senate Banking & Insurance Committee Chairman Jim Boyd, also an insurance broker. Among its provisions, the bill would change Florida law so that attorney’s fees in property insurance suits are awarded using a lodestar fee instead of the current contingency fee multiplier method, except in rare or exceptional circumstances. The bill also requires claimants give at least 60 days’ notice to their insurance carrier prior to initiating litigation against them. The notice must include the alleged acts or omissions of the insurer; the insured’s demand; and reasonable and necessary attorney’s fees incurred by claimants via calculation of the lodestar fee.

The bill would also allow insurers to offer homeowners insurance policies that adjust claims on roofs 10 years old or older on the basis of a roof surface reimbursement schedule.

HB 305 was equal to SB 76, except for the requirement that claimants provide notice of intent to initiate litigation. However, the original version was substituted last week by the bill’s sponsor, Representative Bob Rommel, for a different version that “has changed significantly” from when it was first introduced, Rommel told the House Insurance & Banking Subcommittee.

“It doesn’t seem any of the stakeholders are extremely happy with the bill,” Rommel said of the new version at the hearing on Monday.

The bill substitute no longer includes language authorizing insurers to offer limited roof coverage for homeowners policies through a roof surface reimbursement schedule, nor the attorney fee contingency risk multiplier provision that the industry has said is essential to fixing the problems in the market.

The proposed committee substitute instead:

Places salary limits on Citizens’ employees.
Includes presuit notice requirements for all residential and commercial property suits not brought by an assignee, including written notice of intent to initiate litigation that specifies the amount of attorney fees and costs incurred by the claimant. The costs would be calculated by multiplying the number of hours a claimant’s attorney actually worked on the claim as of the date of the notice by a reasonable hourly rate.
Clarifies that the Florida Office of Insurance Regulation has the same authority to examine MGAs that it has to examine insurers.
Establishes that insurers doing business in Florida must provide specific pieces of data regarding litigation of personal and residential property insurance claims to OIR on a quarterly basis.
Allows Citizens Property Insurance Corp. to raise rates a further 1% per year for the next five years, up to 15%, if OIR determines the financial need to raise rates.
Revises the eligibility for residential property owners to obtain coverage from Citizens so that they are not eligible for coverage from the residual market if a policy can be obtained from the private market that is less than 20% greater than the premium for comparable coverage from Citizens. The current amount is 15%.
Prohibits a court from awarding attorney fees to a claimant for services rendered if a suit is dismissed.

The amendment also adds several provisions targeting contractor schemes against homeowners and insurers.

Specifically, it would establish that contractors may not:

Solicit a residential homeowner to file an insurance claim;
Offer an incentive to a residential homeowner for allowing the inspection of the residential property owner’s roof or for making an insurance claim for roof damage;
Offer or accept any compensation or reward for referral of services for which property insurance proceeds are payable.
Interpret policy provisions, advise an insured about policy provisions, or adjust claims on behalf of an insured unless licensed as a public adjuster.
Provide an insured with an agreement authorizing repairs without providing a good faith estimate of the cost of the repairs.
Enter into a contract with a residential property owner to repair or replace a roof without including notice that the contractor is prohibited from engaging in certain acts.

The reduction of the claims filing deadline from three years to two did survive in the new HB 305 and is also included in SB 76.

Rommel said the Florida insurance market is in crisis and his bill would be an adequate fix “without giving the insurance company too much power.”

“We need to make sure we can attract carriers to the state of Florida that want to do business here,” he said. “Right now, it’s very difficult under the current legal environment.”

But industry stakeholders say HB 305 doesn’t go far enough.

“We believe the cost drivers won’t be adequately addressed if you can’t address the litigation environment,” said Michael Carlson, president and CEO of the Personal Insurance Federation of Florida.

Carlson praised SB 76, which passed the Florida Senate Rules Committee on Thursday and now heads to the full Senate.

“We are facing a litigation crisis in Florida,” Carlson said. “It’s the consumers who get hit with higher insurance rates at the end of the day when insurance companies have to compensate for litigation factories who drum up lawsuits to win big attorney fee payouts. We’re thankful to Senator Boyd and the Senate Rules Committee for getting this bill close to the finish line, and we hope the House companion will include important consumer protections in the end.”

Before its passage, Senator Brandes told his fellow lawmakers they must remain committed to the proposals in SB 76.

“We have to act, and this is a good bill,” Brandes said. “As this bill moves forward, I hope this Senate will have the courage of its convictions to stand its ground because our colleagues on the other side have very different ideas about what’s to happen. If we don’t act, we are failing our constituents. We have to stand our ground here.”

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