Special session goal: Prop up failing property insurers, not strapped homeowners [Orlando Sentinel]

TALLAHASSEE — On the same day the Florida Legislature opened its special session to fix the property insurance industry, FedNat Holding Co. announced it had filed for bankruptcy.

The company said in May it was leaving Florida and planned to dump 56,000 policyholders.

The news came on the heels of last week’s announcement by United Property and Casualty that it would be the seventh company this year to abandon Florida, leaving some 140,000 homeowners scrambling for another insurance provider.

Yet none of the measures offered by the Republicans who hold a supermajority in the Legislature help those abandoned homeowners or any others immediately, even after lawmakers were roundly criticized for ignoring homeowners during a special session in May when it provided $2 billion to prop up insurers.

Republican lawmakers are targeting trial lawyers and roofers that have filed lawsuits on behalf of homeowners, without addressing companies that refuse to or delay paying legitimate claims.

Major features of their bill include a $1 billion reinsurance fund, eliminating one-way lawyers’ fees and “assignment of benefits” — a law that allows homeowners to have their insurance benefits paid directly to their contractors.

It would also force more people out of Citizens, the state-backed insurance company of last resort, which has seen its policyholders more than double to 1.1 million in the last two years.

That the Legislature is coming around to passing such measures is a sign of how bad things have gotten, said Sen. Danny Burgess, R-Zephyrhills.

“If we don’t do something drastic here, we’re gonna wish we did, because all the growth, all the greatness we’ve seen in Florida these past several years can come to a grinding halt,” Burgess said during a committee debate on the Senate version of the insurance reform bill approved Monday afternoon.

The failure of insurance companies was predicted months ago by Richie Kidwell, president and CEO of Restoration Services. He has filed lawsuits against the Office of Insurance Regulation, which he claims is not doing its job.

”Wait until they’re unable to pay claims and file court documents to place them in receivership and liquidation, and transfer their policies to Citizens,” Kidwell said.

Republican Sen. Jim Boyd, an insurance agent from Bradenton, said the legislation fixes what he sees as the underlying problem with the state’s insurance industry and why Florida rates are three times the national average. It’s because of the huge cost insurers face defending themselves against claims lawsuits filed by homeowners, he said.

“We hope to root out frivolous litigation [that is] driving up the cost,” Boyd said.

Boyd also said the bill would also shrink Citizens, and get it back to the original goal of being an insurer of last resort. Florida residents would have to leave Citizens if a private insurer offered similar coverage for up to 20% more than the rate charged by Citizens.

The bill also requires property owners in flood zones to buy separate flood insurance to avoid future litigation over wind versus water damage, he said.

Those measures should protect Floridians from future assessments by Citizens, he said.

Citizens president and CEO Barry Gilway praised the legislation. “I’m highly optimistic that, should the bill pass in the proposed format, it will attract more capital to the market and eventually improve the reinsurance picture.”

Democrats and other critics said the legislation would take away one of the few tools homeowners have in fighting for their rights to a reasonable settlement.

“You are taking away people’s access to the courts,” said David Murray of the Florida Justice Association. “This piece of legislation is not designed to help any insured. It’s designed to help only the companies and reduces the rights of the insured to have someone help them in their time of need.”

The rising cost of reinsurance is a larger contributor to rising rates, said newly elected Rep. Hillary Cassel, a property insurance attorney from Broward County. “The Republican bill does nothing to bring down the cost of reinsurance or make insurance affordable.”

Reinsurance is what insurance companies buy to protect themselves from the huge payout that come from catastrophic events such as hurricanes.

A Democratic bill filed in the House but rejected by the Republican leadership would require greater transparency and accountability of the insurance industry and to document and report fraud to the Office of Insurance Regulation, she said. The bill also would require that information to be made public, she said, otherwise “this fraud is really nothing more than a talking point, without the data to back it up.”

A lot of information that purportedly backs the claims of litigation and contractor fraud is not forthcoming under the protection of trade secret exemptions, Cassel said.

Insurance is the only product where the consumer is blamed for using it, she added. “We have consumers in their greatest time of need, having paid their premiums for a product they are entitled to, worked for and earned and paid for and when they try to use it and it fails, they’re blamed for the failure.”

House Democratic Leader Rep. Fentrice Driskell of Tampa said constituents are more concerned about the rapidly escalating rates that have priced many people out of the housing market and the chance of acquiring the American dream.

“We listened to the Republican ideas. We came up with a product that does more than nibble around the edges,” Driskell said during a media availability before the special session began.

She said Democrats didn’t intend to come up and accept that the “cake was already baked,” as one insurance lobbyist reportedly put it. But the Republican leadership stymied Democrats’ efforts to discuss their proposals, she said.

Their plan would lower the cost of reinsurance, require mortgage companies that receive money from insurance proceeds to pay the interest on those proceeds to the homeowners, cap premium increases to the Consumer Price Index, and elect an insurance commissioner who is accountable to the public.

Driskell also referred to a report of exorbitant salaries to insurance executives during the several years when Florida had no hurricanes but were still suffering from rising cost of insurance.

In other action Monday, somewhat reluctant Democrats agreed with a second bill designed to provide relief to people whose property is damaged by hurricanes and other natural disasters. The measure, sponsored by Sen. Travis Hutson, R-Palm Coast, in response to hurricanes Ian and Nicole this year, would dedicate more than $750 million to hurricane recovery efforts and housing repairs.

It also would refund property taxes for residential improvements rendered uninhabitable by certain hurricanes. Several Democrats raised concerns about the impact on local governments in the middle of a budget cycle, but Hutson assured them that the issue would be addressed during the upcoming regular session in March.

Boyd said Florida residents would have priority over out-of-state residents on the housing repair funds.

“If you buy a beach house, Floridians shouldn’t subsidize insurance on those dwellings,” he said.

The House will take up nearly identical versions of the insurance and disaster relief measures Tuesday, as well as a bill to provide a one-year toll relief program to frequent users of the Florida Turnpike System and other toll roads. Both chambers will meet in full session Wednesday and possibly Thursday to complete the bills and pass them.

©2022 Orlando Sentinel. Visit orlandosentinel.com. Distributed by Tribune Content Agency, LLC.