Property insurance overhaul measures move in both chambers
Bills would limit attorney fees in claims disputes
Citing a rapid rise in premiums and a pending crisis, the Senate has approved a property insurance measure that would, among other things, limit attorney fees in claims disputes.
The Senate voted 27-13 on April 7 to approve CS/CS/CS SB 76 by Sen. Jim Boyd, R-Bradenton.
A House companion, CS HB 305 by the Insurance and Banking Subcommittee, takes a significantly different approach. It faces one more committee stop before reaching the floor.
Sen. Jeff Brandes, R-St. Petersburg and the bill’s co-sponsor, said reforms are urgently needed to reverse a trend that has seen premiums rise 20% to 40% in some parts of the state. One constituent, Brandes said, saw his annual flood insurance premiums zoom from $1,000 to $12,000.
“If you’re a fan of Doctor Phil, then you know that number one of life’s lessons is that you either get it or you don’t,” he said. “If we continue on the current trajectory, rates are going to double in the next two years. Double.”
Florida represents 8.5% of the national insurance market, but 75% of insurance-related litigation, Brandes said.
The bill sets a 60-day pre-suit notice, requires that lodestar attorney fee multipliers be used only in “rare and exceptional circumstances” and ties plaintiff attorney fees to how much a policyholder wins in court, instead of the original amount claimed.
The measure would also ask the Supreme Court to adopt a Bar rule to have plaintiff and defense attorneys in insurance cases report their fees and costs to the Department of Financial Services so the state can compile data on how those costs effect premiums.
Critics warned that the measure would force consumers to make concessions without a guarantee that rates would fall.
Rep. Tina Polsky, D-Boca Raton and an attorney, called the proposal “draconian” for focusing so intently on legal fees. Insurance companies drive up litigation costs by routinely denying claims, she said.
“I mediate some of these cases for the Department of Financial Services. It’s always the same idea of denial, give us more documents, send someone else out, until [the homeowners] get a lawyer, that’s when they start to see some satisfaction,” she said. “What is the homeowner to do when they’ve been upholding their end of the bargain?”
Brandes said the measure would still allow fee multipliers, but only under rare and exceptional circumstances. The bill borrows reforms adopted by Louisiana and Texas, Brandes said.
“Draconian by what standard?” Brandes said. “Do you know how many other states offer a fee multiplier? Zero.”
One provision of the bill would allow insurers to prorate roof replacement costs for roofs that are 10 years old or older.
Poslky warned that the provision would tempt unsuspecting homeowners with lower premiums, and then leave them in the lurch after disaster strikes.
“I think that’s a really dangerous route to go down for the consumers,” Polsky said. “Do I pay for more coverage, or do I pay less? I think most people are going to take less.”
Democratic Leader Gary Farmer, a lawyer from Ft. Lauderdale, accused the insurance industry of manufacturing a crisis to justify higher rates.
“Every other commercial is an insurance commercial,” he said. “They are swimming in money. The reality is, they’re cooking the books.”
Farmer blasted Republican leaders for refusing to accept Democratic amendments that would require rate reductions.
“If we remedy these things will you reduce premiums?” Farmer said. “Put it in writing. The amendment fails, year after year, after year.”
But Sen. Jason Pizzo, D-Miami and an attorney, said he wasn’t convinced that the industry bears all the blame. Previous reforms didn’t prevent his premiums from rising so steeply that he and his wife considered moving, Pizzo said.
“Right now, I’m a yes vote on this bill…I apologize to the trial bar but nothing else seems to be working,” he said.
Another provision of the bill would require homeowners to file a claim within two years of an incident instead of the current three years.
Sen. Perry Thurston, D-Ft. Lauderdale and an attorney, noted that homeowners in Northwest Florida are still waiting to resolve claims related to Hurricane Michael, which struck in 2018.
“North Floridians still have a problem, and we’re talking about reducing the time?” Thurston said.
Sen. Gayle Harrell, R-Stuart, said she was confident that most consumers can discover damage within two years of a storm.
Lawmakers have to act now to head off a crisis, Harrell said.
“Otherwise we’re going to have a massive exodus of insurance companies from the state of Florida, and we’re going to be right back here in special session,” she said.
Boyd called Farmer’s comments a “mischaracterization” of insurance industry that “borders on slander.”
The insurance industry lost $1.7 billion last year in Florida alone, Boyd said, and by law, they are required to remain actuarially sound.
“This bill will reduce rates, this bill will give [consumers] the certainty that they’re not going to get crushed when they open their renewal notices next year…think hard, think about your friends and neighbors back home and vote for this bill.”
The House companion, CS HB 305, passed the Civil Justice and Property Rights Subcommittee 11-7 on April 6, with Rep. Anthony Rodriguez, R-Miami, joining six Democrats in opposition.
Even though it is much less far reaching than its Senate counterpart – especially on attorney fees – members from both parties said they were concerned that it wasn’t sufficiently consumer friendly.
“All are concerned about [premium] rate increases. We’re hearing from our constituents about rate increases,” said Rep. Erin Grall, R-Vero Beach. “As we have reform in the property insurance market I think we should also be talking about mandatory rate rollbacks.”
Grall said she was worried that reducing the claim-filing window to two years would spark a rush of litigation to meet the deadline.
“The good actors want to resolve a matter with the insurance company on their own without having to engage an attorney,” Grall said. “I think that’s what we should always be striving for.”
Rep. Anna Eskamani, D-Orlando, blamed rate hikes on an increase in natural disasters in Florida and around the world. She noted that it would allow Citizens Insurance, the state created insurer of last resort, to raise rates, but not reduce them.
“There is a collective goal within the Legislature to help bring down the cost of property insurance. It is ridiculously high,” Eskamani said.
Aside from shortening the time to file claims, the bill requires a 10-day pre-suit notice by homeowners to insurance companies; prohibits roofers, contractors, or public adjusters from offering incentives to homeowners to file a roof damage insurance claim; requires insurance companies doing business in Florida to provide more information about litigation costs; limits, with some exceptions, the maximum salaries Citizens can pay its employees; requires insurance companies to submit information about managing general agents, or MGAs, that they hire to perform certain functions; and raises the cap on allowed annual Citizens’ rate increases from 10% to 15% over the next five years. The bill also requires Citizens to charge at least 20% more than a property owner could get from a private carrier, up from 15 % currently.
“Our property casualty insurance in Florida is on a collision course with disaster,” said Rep. Bob Rommel, R-Naples, who is managing the bill.
Citizens is adding 5,000 policies a week, up from 3,000 a week in November. And Rommel said every 100,000 policies leaves the state potentially on the hook for $50 billion in losses, and new carriers are not coming to the state. CS/CS/CS SB 76 does not have provisions affecting Citizens Insurance.
“I think that this bill helps create a better glide path for a marketplace to attract new carriers. It will get rid of some of the bad actors. And it will hold insurance companies accountable,” Rommel said. CS HB 305 goes next to the Commerce Committee.