Florida Insurance Reform Proposals Could Hurt Consumers, Critics Say

The next few days will determine whether Florida consumers will lose valuable property insurance coverage to insurers’ efforts to fight fraudsters who are driving up costs for everyone.

Critics are warning about several insurance industry-backed reform proposals that have already been approved by the state Senate but still face uncertainty in the House.

House leaders planned to submit a revised version of its property insurance reform bill on Friday that could include controversial coverage reductions passed by the Senate or leave them omitted. The latter choice would signal that the reductions likely would not be part of a compromise bill introduced to the full Legislature before its spring session concludes.

The revised House bill is scheduled to be considered by the Commerce Committee at 10 a.m. Monday.

The fought-over proposals involve efforts to reduce full roof replacement coverage that’s part of most property owners’ insurance coverage, reduce incentives for attorneys to sue by slashing fees they can recover in lawsuits, and impose a 60-day waiting period before a consumer can file suit over a claim.

The roof replacement and attorney fee reforms were in a previous version of the House’s insurance reform bill before they were removed without explanation by the bill’s sponsor last month. Critics, however, say they are worried that lawmakers backing the insurance industry are maneuvering to get them back into the bill.

Insurers say the reforms are necessary to reduce fraudulent claims and litigation and slow skyrocketing rate increases that all policyholders must pay to cover those losses — if their insurer doesn’t drop them and force them into state-owned Citizens Property Insurance Corp., the insurer of last resort.

Attorneys and contractors that sue them contend that high-cost litigation would not be necessary if insurers properly paid out claims and didn’t force customers to seek relief in court.

Roof replacement

The most dramatic coverage reduction proposal would absolve insurers from the requirement to provide full roof replacement coverage as part of the most commonly purchased all-perils property insurance policies. Currently, insurers must replace any roof that’s more than 25% damaged by storms, falling trees, fires or other perils.

Under the proposal passed by the Senate, full replacement coverage would be limited to roofs 10 or fewer years old. Owners of homes with roofs over 10 years old would receive between 25% to 70% of the replacement cost, depending on the type of roof material, after the deductible is applied.

Homeowners would still have the option to purchase full replacement coverage for an additional premium.

Insurers say the change is necessary to combat a huge surge in fraud committed by roofing contractors that canvass neighborhoods to find damaged roofs, then sue insurers that refuse to pay to replace them.

But critics contend the reform would cause middle- and low-income homeowners whose roofs get damaged to fall deeply into debt to cover their portions, or be forced to forgo repairs and instead live with blue tarps or leaks.

“Very few residents can come out of pocket to replace their roof to prevent mold, leaks or, in the case of small businesses, get their businesses back up and running,” said Michael Higer, a partner and insurance claims litigator at the Miami-based law firm Berger Singerman.

Paul Handerhan, president of the consumer-focused Federal Association for Insurance Reform, says allowing insurers to offer reduced roof coverage might be necessary to keep insurance affordable for low-income homeowners. But he says any law should require insurers to notify customers of the change before renewing their policies.

As proposed, the law requires notification only in the policy documents that customers are mailed a week or two after they renew, which most people never read, Handerhan said. Ideally, insurance agents would notify their clients about the changes before renewal, “but I’ve seen too many examples of agents not doing a good job of explaining the differences,” he said.

Attorneys fees

Another change would overhaul how attorneys can recover fees from insurers after a case is settled. Under current law, attorneys can bill insurers for all of their fees if the insurer settles a case for any amount of money over their initial claim settlement offer. Insurers contend the so-called “one-way attorney fee” law, on the books for more than a century, is being exploited by a small group of law firms that file hundreds of cases each month solely to collect the fees.

The proposal would reduce attorneys’ eligibility to collect “one-way” fees by tying that eligibility to the difference between the initial claim settlement offer and how much money the insurer ultimately agrees to pay. In some cases, the attorney would receive nothing and be forced to collect their fees from the policyholder.

The one-way attorney fee statute, part of Florida law since 1893, was intended to ensure that insurance customers could sue their insurer without risking having to pay insurers’ fees if they lose their case. Higer says fewer attorneys will agree to represent homeowners without assurances that their fees will be paid upon settlement. Some attorneys will demand payment from homeowners before taking their case — which will reduce the number of consumers able to sue over unpaid claims, Higer said.

Steve Geller, Broward County’s elected mayor, who also represents the Florida Association of Public Insurance Adjusters, said forcing customers to pay out of pocket for legal representation would amount to a benefit reduction.

Delayed lawsuits

Another proposal in the Senate bill would hurt policyholders, critics say, by requiring a 60-day notice to insurers that they intend to file suit. Currently insurers have 90 days to investigate claims and make a settlement offer. If the policyholder rejects the offer and triggers the 60-day notice, the insurer could request an additional 60 days to investigate — forcing the consumer to wait a total of 210 days after filing a claim to initiate a lawsuit. While the sides go back and forth, the policyholder’s damage would remain unrepaired, Geller said.

“This is not something that seems designed to get the insurance company to settle claims quickly,” he said.

Whether the revised House bill will add the 60-day waiting period remains to be seen. As currently written, the House version requires only a 10-day notice of intent to sue.

Both Senate and House bills also would shorten the amount of time to file a hurricane damage claim from three to two years after a storm hits. A few years ago, that deadline was shortened from five years to three years.

Insurers say too many fraudulent Hurricane Irma claims were filed in the third year after the 2017 storm. But opponents of the proposal say it does not allow homeowners to reopen or modify their claims to address damage that might not be apparent until repair work commences. With investigations of hurricane claims often stretching months or years after storms strike, failing to acknowledge the possibility of additional related claims hurts policyholders, they say.

Shady contractors

Rather than reducing coverage for policyholders, critics say the Legislature should provide more resources to uncover fraudulent activity by contractors and shady attorneys.

One of the pending House bills would empower the state Division of Financial Services to take administrative action against licensed adjusters and contractors by imposing fines or revoking licenses. But none of the bills provides more resources to punish fraud through the criminal justice system, which is preoccupied with more severe crimes, Handerhan said.

Handerhan’s association would like to see the state create a dedicated homeowners’ insurance enforcement unit to investigate criminal activity. “There’s a lot of fraud but extremely limited enforcement,” he said.

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