Time running out in Legislature for insurance reform

April 13--Once again, the end of Florida's spring legislative session is drawing near and the property insurance industry is starting to worry that chances to enact reforms to stem financial losses are slipping away.

Three bills that address the so-called "assignment of benefits" problem appear stalled with none currently scheduled for debate by a committee or subcommittee.

However, there's still time to move any or all of the bills as April 25 is the last day for scheduled committee meetings, and legislators can move quickly on bills they want to pass.

But these bills are trying to address subjects of a bitter, years-long dispute between two powerful interests -- insurance companies and trial attorneys -- that reach deeply into the Legislature.

And neither side is inclined to yield much ground to the other. As a result, two Senate bills were created in opposition to each other while a House bill that tries to bridge the differences has languished for a month since its initial passage by that chamber's Subcommittee on Insurance and Banking.

"It's a zero-sum game," said Paul Handerhan, senior vice president of public policy for the Fort Lauderdale-based Florida Association for Insurance Reform, at the beginning of the session. "If anything is going to be passed, one side or the other has to lose."

This is the fifth year that the Legislature has had at least one bill attempting to resolve what insurers say is the cause of mounting lawsuits and losses -- a group of a dozen law firms operating mostly in South Florida, filing costly suits on behalf of water damage repair contractors.

Those contractors convince homeowners to sign over the benefits of their policy claims, insurers say, then submit inflated or unnecessary invoices and file suits if insurers deny or underpay the claims.

State-run Citizens Property Insurance Corp. has been campaigning hardest for legislative solutions over the past three years, warning South Florida customers that failure to stem losses would result in 10-percent rate increases for years to come.

This year, the company abandoned its call for restrictions on homeowners' rights to assign claims benefits. Citizens called instead for changing the state law that forces insurers to pay all legal fees when the insurer settles a litigated claim by paying any amount over its initial settlement offer. However, the law does not require contractors to pay insurers' legal fees if the settlement is at or below the initial offer.

This "one-way attorney fee" was originally intended to allow homeowners to challenge claim denials without risking financial ruin, but has instead been abused because contractors inherit that immunity with an assignment, insurers contend.

Contractors and plaintiffs attorneys contend lawsuits are necessary only when insurers refuse to settle claims fairly.

Citizens in particular "has claims handling denial problems," asserted Sen. Gary Farmer, a Fort Lauderdale-based Democrat and author of a bill favored by the trial lawyers' lobbying group, the Florida Justice Association. Farmer is a trial lawyer and past president of the association.

Insurers favor a Senate bill filed by Dorothy Hukill, R-Port Orange and crafted with input from Citizens, the state Office of Insurance Regulation, the Personal Insurance Federation of Florida and others. The Hukill bill would bar attorneys from getting one-way fees when representing contractors working under assignments.

Farmer's bill includes a few provisions that insurers say they like -- such as requiring contractors to provide estimates when accepting assignments, requiring notification of assignments to insurers, giving policyholders a rescission period, and limiting the assignment to the work being performed.

But Farmer's bill does not address one-way attorneys fees, and would bar insurers from recouping their own legal costs in base rates charged to consumers.

Insurers call that provision a deal-breaker, saying it would ultimately hurt consumers. "It would result in severe harm to the marketplace if it becomes law," said Michael Carlson, president of the Personal Insurance Federation of Florida. "By creating a strong disincentive to litigate claims, the bill would create a strong counter-incentive to pay 'all claims.' This would lead to cost increases, then rate increases, as carriers just pay every invoice they receive."

Insurers with what Carlson called "an appetite for the risk of litigating" would have to pay plaintiffs' attorneys fees "out of profit and surplus -- hurting the company," Carlson said.

Farmer's bill was advanced during an April 3 meeting of the Banking and Insurance Committee -- two days after the Wall Street Journal published an editorial accusing Anitere Flores, a Miami area Republican who is the committee chair, of blocking an effort to "stop a plaintiff's attorney scheme" by refusing to put Hukill's bill on the committee agenda. The editorial told homeowners to remember Flores' name "when they open their next insurance bill."

During the meeting, Flores chastised insurers for not working with their supporters in the Senate to offer amendments to Farmer's bill.

In a thinly veiled shot at Hukill's bill, she recalled supporting a Personal Injury Protection reform bill in 2011 backed by auto insurers who promised it would reduce rates -- which didn't happen. "It was my foolish mistake that I won't make again," she said.

After that meeting, Flores issued a statement accusing the insurance industry of "smearing someone who has always fought for consumers because she won't just do what they say" and asserted the Hukill bill "does nothing to guarantee property insurance will decrease" while it "hinders consumers' ability to protect themselves."

If the Hukill bill "would be amended to ensure that insurance rates will go down for some time as a result ... this committee will be happy to hear it."

In the House, a bill sponsored by Rep. James Grant proposes to reduce litigation by forcing benefits assignees to risk paying insurers' attorney fees if they lose.

Carlson and an industry ally, Edie Ousley, vice president of public affairs at the Florida Chamber of Commerce, both said that House lawmakers expect to pass Grant's bill.

Carlson said insurance allies are having "ongoing discussions" with Grant and the bill's co-sponsor, Rene Plasencia, R-Titusville, as well as with Farmer over on the Senate side.

"I know the House intends to pass meaningful reform, and the sponsor/co-sponsor are actively looking at language in anticipation of a possible hearing by the House Commerce Committee next Wednesday," Carlson said.

rhurtibise@sun-sentinel.com, 954-356-4071, twitter: twitter.com/ron_hurtibise

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