More insurance changes are in store from the Legislature. Here’s what they mean to you [South Florida Sun-Sentinel]

After enacting two rounds of sweeping property insurance reforms last year that opponents decried as weakening consumers’ abilities to hold insurers accountable, Florida’s Legislature has unanimously passed two bills intended to strengthen consumer protections.

The bills, which now await Gov. DeSantis’ signature, expand authority of state insurance regulators to review how claims are handled and to punish so-called “bad actors.”

The legislation was passed as a response to criticism over reforms enacted last year that curtailed the ability of policyholders to sue insurers over claims handling disputes and collect legal fees when settlements favorable to plaintiffs are reached.

Under previous laws and court precedents, policyholders were not liable to pay insurers’ legal costs if they lost. As a result, insurers contended, the “one-way attorney fee” provisions encouraged law firms to bombard insurers with “frivolous” lawsuits that cost the industry far more in legal fees than the actual cost of the disputed claims.

But while those reforms are expected to eventually reduce losses related to litigated claims by about half, they also left policyholders at a disadvantage if they wanted to dispute insurers’ denials or underpayments of claims, attorneys argued, by reducing attorneys’ willingness to take minor cases with no advance payment, they said.

That means policyholders who want to sue must either pay their attorneys upfront, or agree to fork over a percentage of the money they ultimately win, leaving many unable to complete their repairs, attorneys argued.

Mark Friedlander, communications director for the industry-sponsored Insurance Information Institute, acknowledged in an email that the reforms increases insurer oversight in Florida in a manner that’s not unusual in the country. “The bill is consumer-focused and provides stricter oversight of the insurance industry by the state regulator, which is common across many other states,” Friedlander said.

Claims handling issues triggered reforms

Also driving the insurer accountability push was a March report by the Washington Post detailing complaints by five independent insurance adjusters who said that two insurers slashed their estimates, without their consent, of damage costs for more than 100 victims of Hurricane Ian in Southwest Florida last fall. The adjusters’ names were left on the reports as if they, and not someone in the insurance office, were responsible for the reduced estimates, the story said.

The legislation addresses the complaints by prohibiting insurers from reducing loss estimates in adjuster reports without providing detailed explanations for the changes. Insurers must also create a list of changes and reveal who changed the reports, or retain all versions of the reports for future inspection.

Whether the newest consumer protections will curtail such activities — which several insurers contend is not common practice — remains to be seen.

Some of the protections could increase insurers’ costs by requiring them to track claims more closely and submit more frequent reports to regulators, says Locke Burt, chairman and CEO of Security First Insurance Co.

“This bill does put additional costs on insurance companies and at the end of the day, Florida law allows us to pass those costs onto consumers,” Burt said Friday.

Clarifies legal reforms will last through policy renewal

Several of the new protections were applauded by the Florida Justice Association, a lobbying group for plaintiffs attorneys, even as an association spokesman said the organization would have liked them to go further.

Speaking to senators in April, Ron Haynes, vice chair of the association’s property insurance committee, voiced support for measures that would bar insurers from cancelling or nonrenewing policies for 90 days after a repair is completed, require insurers to submit their claims-handling procedures for review by regulators, and clarify that consumers whose insurance policies were in effect before reforms were enacted in December would still be able to sue under the “one-way insurance fee” law until their policies are renewed.

Haynes called for further reforms, including subjecting insurers that fail to pay claims to punishment under Florida’s Unfair Insurance Trade Practices Act and prohibiting insurers from selling policies that require policyholders to agree to participate in binding arbitration over claims disputes. Those suggestions were not adopted.

However, a proposed restriction on how soon a public adjuster could begin working with policyholders was relaxed following objections by the Florida Association of Public Insurance Adjusters (FAPIA).

The restriction was one of several measures intended to prevent public adjusters from taking advantage of disaster victims before insurers’ adjusters have an opportunity to inspect damaged homes.

FAPIA objected to a provision that would have barred public adjusters from doing any work for a policyholder until after the insurer received a copy of the adjuster’s contract.

“This would have created unnecessary delays for policyholders when they needed help most,” FAPIA executive director Nancy Dominguez said by email.

The final version of the bill replaced that requirement with one that bars the public adjuster from receiving compensation for services provided prior to the insurer receiving a copy of the contract.

Additional reforms

Here are some other elements of the legislation that’s intended to protect consumers and increase insurer accountability:

•Higher hurricane deductibles would be applied to claims beginning with the issuance of a hurricane warning — instead of a watch — and end 72 hours after the last hurricane warning is issued for the state. Currently, deductibles apply from the time a watch is declared until hurricane conditions no longer exist anywhere in the state. The bill also defines a hurricane deductible as applicable to a loss caused by a hurricane.

•State-owned Citizens Property Insurance Corp. would be prohibited from declaring a property ineligible for coverage if that property has a claim for unrepaired damage that’s being serviced by the Florida Insurance Guaranty Association, an industry-funded organization created to pay claims for customers of insolvent insurers.

•Insurers would be required to alert the Office of Insurance Regulation whenever they suspend writing new policies in the state.

•Residential property insurers would be required to create and use claims-handling manuals and provide them to state regulators on request.

•Insurers would be barred from cancelling or nonrenewing a residential property insurance policy for 90 days after a property has been repaired from hurricane or wind damage. For repairsnot due to a hurricane, cancellation or nonrenewal would be barred until a final payment is made or repairs have been completed.

•If a roof deductible is applied to a loss under a residential policy, no other deductible can be applied

•Officers and directors of impaired or insolvent insurers would be prohibited from receiving a bonus from that insurer or other entity under common ownership with that insurer.

•Maximum fines would be increased for failure to timely respond to consumer complaints, and for violations of the Insurance Code related to declared states of emergency.

•Maximum fines would also be increased for unfair methods of competition or unfair or deceptive acts or practices.

•Residential property insurers would be required to post hurricane mitigation discount information on their websites.

•The Office of Insurance Regulation would be required to reevaluate fixtures or construction techniques demonstrated to reduce windstorm losses, and associated insurance premium discounts every five years.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].