Florida Senate Passes Property Insurance Reform Bill

A bill backed by the Florida insurance industry and other stakeholders aimed at addressing the state’s insurance market woes was passed in the Senate chamber this week but faces an uncertain future as the companion bill in the Florida House greatly differs from the Senate proposal.

Senate Bill 76, sponsored by Florida Senate Banking & Insurance Committee Chair Jim Boyd, also an insurance broker, was passed 27-13 by the full Senate Wednesday.

“We want to make certain that Floridians have access to property insurance that is both reliable and affordable. Right now we have a situation in our state where homeowners are paying more for their property insurance, and yet insurance companies are suffering massive losses,” said Boyd. “One of the biggest drivers of rate increases is the extraordinary number of roofing claims in Florida. This bill provides a needed update to roofing policies to both protect homeowners and prevent the abuse of claims by predatory attorneys and contractors.”

The bill allows property insurers to only offer homeowner’s policies that adjust roof claims to actual cash value if the roof is older than 10 years. The bill also allows property insurers to offer homeowners the option of purchasing a stated value limit for roof coverage. A homeowner that is offered such a policy would receive a disclosure that their insurance policy does not provide replacement cost coverage insurance for the roof. In a total loss of the primary structure, a reimbursement schedule and stated value sublimit do not apply and the insurer’s liability will be for the total amount of insured property as provided in the policy. The bill also creates a uniform 2-year period for filing a property insurance claim, supplemental claim, or reopened claim.

The bill also target excessive litigation facing insurers by requiring detailed notice of property insurance claims prior to litigation and changes how attorney fees are awarded. Before a lawsuit is filed, the insurer must be notified of the claim in detail and be given sufficient time to inspect the property before a lawsuit is filed.

Currently, an insurer must pay a reasonable attorney fee to the insured’s attorney, even if the insured only recovers a small amount in the litigation. Under this legislation the insurers’ obligation to pay the insured’s attorney fees will be directly related to how successful the insured was in recovering the amount demanded in the litigation. If the claimant recovers at least 80 percent, the insurance company must pay all reasonable attorney fees. If the claimant recovers 20% or more of the demand but less than 80%, the insurer will be required to pay the same percentage of fees related to the recovery that the claimant recovered in the action.

The bill also adopts the federal court standard for awarding attorney fee multipliers in claims arising under property insurance policies and directs courts to presume that the Lodestar fee is reasonable and provides that multipliers will only be awarded in rare and exceptional circumstances.

“This legislation ensures there is a clear understanding between homeowners and their insurance companies regarding when a roof replacement will be covered in full and establishes a clear and reasonable two-year time period for filing a claim,” said Senate President Wilton Simpson. “These reforms seek to reduce frivolous claims by those who take advantage of areas that were affected by hurricanes when claims spike at the end of the three-year claim window and often have no damage related to the hurricane.”

The bill’s companion, House Bill 305 was equal to SB 76, except for the requirement that claimants provide notice of intent to initiate litigation. However, the original version, Representative Bob Rommel, for a different version that “changed significantly” from when it was first introduced, Rommel told a House Committee in March.

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 is included in both HB 305 and SB 76.

House Bill 305 is now in Florida House Commerce Committee.

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