Property insurance overhaul passes with last-minute compromise
Bill sets claimant attorney fees based on success of claim
A compromise that reduces the time property owners have to file damage claims, increases oversight of insurance companies, and sets a schedule for claimant attorney fees based on how successful a lawsuit is has passed the Florida Legislature.
The House and Senate both acted on SB 76 on April 30 in the closing hours of the 2021 session.
Sen. Jim Boyd, R-Bradenton, the Senate sponsor of the bill, said an agreement was reached the previous night with the House over the bill’s details.
“Everybody had to give a little bit, but in the end, I think that provides for good policy,” he said.
“This bill truly touches everybody that’s involved,” said Rep. Bob Rommel, R-Naples, House sponsor of the bill. “We’re going to make sure that we have oversight on insurance companies, we’re going to make sure we don’t have abusive practices…. This bill will attract new carriers into the state of Florida. This bill will make sure that homeowners in Florida will have a competitive market, they will have the right to choose the right insurance for themselves, and in that we will have lower rates.”
Senators who had pushed for a more aggressive measure said the final bill didn’t go far enough.
Sen. Jeff Brandes, R-St. Petersburg, said he noted when the Senate passed its original bill and sent it to the House, “I told you we needed a bill that is substantially similar to what the Senate sent over to pass in order to truly reduce rates in Florida. Unfortunately, this bill coming back isn’t it.
“This is a negotiated settlement that is maybe a 40% solution of what is needed in Florida to really begin to bend the cost curve. This hopefully will begin to stabilize rates but it will really do nothing to ultimately lower them.”
“I’m concerned we continue to kick this ball down the road without making changes,” said Sen. Doug Broxson, R-Pensacola. “At some point, this body has got to understand we are in a crisis in this state…. This does not solve the issue and we really need to have a serious conversation about how we solve the real issue.”
But Sen. Gary Farmer, D-Ft. Lauderdale, questioned whether there is a problem.
He called the issue “the insurance industry doing its best impersonation of Chicken Little…. It’s a manufactured crisis, a completely manufactured crisis through manipulation of their books, through the hiding of assets, through the use of things like inflated reserves and managing general agents, and contracting with entities that have common ownership to give appearance of a cost element that really isn’t there….
“No matter what, they’ll come up with another crisis to and another excuse to come here and take away homeowners’ access to courts to get their houses fixed,” Farmer added.
One last minute change prevents either attorneys for property owners or insurance companies from using Florida’s offer of judgment law.
“Based on your comments and Senate amendments, it is my understanding that suits arising under a residential or commercial property insurance policy, both the insurance company and the insured will no longer be able to use the proposal for settlement or offer of judgment statutes. Is that correct?” asked Rep. Cord Byrd, R-Jacksonville Beach, as the House prepared to send the bill to the governor.
“That is correct,” replied Rommel, adding the change applies to both regular and surplus line policies.
The original Senate bill requested the Supreme Court adopt a Bar rule requiring attorneys to report fees and costs they generated from damage suits to the State Department of Financial Services. It also enacted a provision that judges should only grant multipliers to lodestar fee awards in rare and exceptional cases.
Both those provisions were gone from the final version, although it did include a requirement that insurance companies report payments of fees and costs, including expert witness fees, to the state as well as cases where a lodestar multiplier was requested or granted.
The bill sets a fee scale for paying policy holders’ attorneys, based on their success. If the policy holder ultimately gets less than 20% of the initial claim, the attorney would get no fee. If the claimant gets 20% up to 50%, the attorney would get a corresponding percentage of the normal attorney fee. If the claimant gets 50% or more of the initial claim, the attorney would get the full fee. The original Senate version gave full fees only at 80% or more recovery and kept the pro rata reimbursement for recoveries from 20% to 80%.
The bill requires a 10-day notice to the insurance company before litigation is filed. The original Senate version had 90 days.
Other parts of the bill prohibit contractors from soliciting roof repairs. It also bans public adjusters from offering gift cards or other incentives to inspect a residential property owner’s roof or to make an insurance claim for roof damage, or receive referral fees or other inducements that would be paid from the proceeds of a roofing insurance claim.
Aside from attorneys’ fees they pay out, insurance companies also have more reporting requirements including whether public adjusters were involved, date and size of claims and payouts, and when the claim was opened and closed.
The original Senate bill reduced the time property owners have to file claims from three to two years from the date of damage, including supplemental claims. The final bill has the two-year limit on initial claims but kept the third year for supplemental claims.
Another section of the bill allows Citizens Insurance, the state-sponsored property insurer of last resort, to raise the maximum it can annually increase its rates from 10% to 15%, spread out over the next five years.
Removed from the Senate bill was a provision allowing insurance companies to offer policies with pro rata replacement costs for roofs over 10 years old, instead of currently paying for a new roof regardless of the age of the damaged roof.
Brandes, in extensive comments critiquing what he saw as shortfalls in the bill he nonetheless supported, cited the roofing issue.
He said private insurers will be reluctant to insure older, but still serviceable roofs, unless property owners pay to have a new roof installed, He also said the bill makes it more likely that owners of second homes will go to Citizens.
“Now it [Citizens’ policy holders] is going to be second homes and old roofs, and second homes and old roofs are really expensive things to insure, especially when your rates are not actuarily sound,” Brandes said.
When the session started in March, he said Citizens was writing 3,000 new policies a week. Sixty days later, that has risen to 5,000 policies. By the end of the year at that rate Citizens will have 700,000 to 800,000 policies with a potential liability of $100 billion, with only about $7 billion to pay claims, Brandes said.
That liability in turn will affect the state’s bond rating, which will raise expenses for other things, such as road building. And if a major storm or other natural disaster hits, the state will have to put a surcharge on other insurance policies to cover the payouts.
Farmer had different numbers and a different take. He said Floridians pay an average of $450 per policy for insurance company operating expenses, compared to a national average of $290.
“We’re paying too much for insurance, but it’s not the consumers fault and it’s not the lawyers they are forced to hire when they are wronged by their insurance companies,” he said. “This bill, while it has gotten better, still does things that will potentially limit the ability of your constituents to get what they deserve.”
The intricacy of the issue was shown when the Senate took up the issue in the morning, but then Boyd wound up delaying consideration after Sen. Tina Polsky, D-Boca Raton, raised a question about the offer of settlement changes.
That caused a more than two-hour delay while the problem was straightened out. But it did make it back to the House, where it became the last bill passed by the lower chamber before it adjourned for the year.
It passed the Senate 35-5 and cleared the House 75-41.