Florida Commissioner Enacts Property Insurance Policies Lawmakers Didn’t OK

Orlando Sentinel (FL)

TALLAHASSEE — After the Florida Legislature failed to pass legislation to rein in the property insurance crisis during the regular session that ended March 14, Insurance Commissioner David Altmaier took matters into his own hands, using his power to make changes to such policies.

“What Florida lawmakers failed to legislate this past session in property insurance, the Florida Office of Insurance Regulation (OIR) is now accomplishing to some degree by regulation in encouraging ways,” Lisa Miller, an insurance industry lobbyist, said in her April 11 newsletter.

Altmaier issued several changes at the request of individual insurance carriers. He’s allowed companies to issue roofing deductibles and require policyholders to go to mediation or arbitration instead of going to court. Two of those policy changes have drawn a lawsuit challenging their constitutionality for allegedly violating state law.

Miller applauded Altmaier for taking the initiative to pass new regulations, some of which were contained in the bills that failed to get across the finish line and are likely to be teed up in bills filed for the special session that starts Monday.

But Amy Boggs, a property insurance attorney who represents homeowners and businesses in claims disputes, said Altmaier is doing an end run on the legislative process by approving proposals that failed.

“Arbitration over litigation – that failed. Roofing endorsement failed,” Boggs said. “Here they are in the sphere of the legislative bubble talking about modifying fees, and he’s in the background rubber stamping things.”

The governor’s call for the special session asks the Legislature to look at six things: property insurance, reinsurance, changes to Florida Building Code to improve the affordability of property insurance, the Office of Insurance Regulation, civil remedies, and appropriations.

Political insiders and industry experts had predicted the legislation would likely address these key topics: modifying the Hurricane Catastrophe Fund, a 2% deductible for roof damages, clean up the definition of assignment of benefits to contractors, eliminate automatic payments for lawyers of third parties who are assigned benefits, and limit lawyers’ ability to charge double or triple their normal rate.

After a week of intense negotiating, House and Senate leaders on Friday night filed their bills, which include many of those issues. They also proposed creating a $2 billion fund insurers could tap into for hurricane losses, prohibiting insurers from refusing to write or renew policies on roofs that are less than 15 years old, providing $150 million to harden homes against hurricanes, and strengthening regulatory oversight.

Altmaier has already curtailed so-called free roofs by allowing insurance companies to offer roofing deductibles and a roofing surfaces payment schedule similar to what was proposed in a bill that failed to get approved during the regular session, Miller said.

“Some agents say the effect of this will be negligible because they do not believe consumers will opt-in to buy the coverage,” she said.

In addition, she said, the Florida Building Commission is considering carving out an exemption to the state’s requirement to replace or repair an entire roof if 25% or more is damaged.

“This idea, pushed by the Florida Roofing and Sheetmetal Contractors Association, would help keep otherwise perfectly good roofs in place and avoid expensive replacement costs often borne by insurance companies,” Miller said.

Another change issued by Altmaier eases the rule that replacement materials be an exact match for damaged material.

The OIR was also considering a request to “lower the retention level of catastrophic losses they must incur before tapping into the Florida Hurricane Catastrophe Fund,” which would require legislative action.

Altmaier approved a requested policy change in March from American Integrity Insurance to require homeowners or third parties they assign benefits to agree to mediation and arbitration instead of going to court, Miller said.

If the policyholder or third party hires an attorney to represent them, the carrier won’t be obligated to pay their attorneys’ fees even if the policyholder prevails in the dispute.

Many Florida homeowners hit with huge premium increases in recent months have been given the option to agree to arbitration to get a lower rate on their insurance premiums as a result.

The Restoration Association of Florida and Air Quality Assessors of Orange County sued Altmaier and American Integrity, saying those changes were unconstitutional and contrary to state law.

The same lawsuit alleges Altmaier gave Heritage Property & Casualty Insurance Co. the right to require a homeowner to get approval before they can assign benefits of their policy to a contractor and wouldn’t have to reimburse the homeowner for any repairs made without the company’s approval.

Those changes infringe on policyholders’ constitutional rights to be compensated for legal fees if they prevail in a claims dispute, and to assign benefits to a third party, the lawsuit said.

“By approving the policies, Commissioner Altmaier infringed upon the public policies of the state of Florida as enacted by the Legislature, which will result in injury to plaintiffs if the changes are not rescinded,” the lawsuit said.

Policyholders are giving up their rights and getting nothing in return, Boggs said.

“The real issue for homeowners and policyholders is they have to have this insurance to keep their mortgage,” Boggs said. “They’re in a monopolistic system in that they have no say in the coverage they get, the carrier dictates the price, and the policyholder has no power to negotiate the price.”