What you need to know about pending changes to Florida insurance laws

Article Courtesy of The Sun Sentinel

By Ron Hurtibise

Published May 14, 2021

No one was thrilled with the insurance changes that were passed on the final day of the Florida Legislature’s spring session — not the insurance industry and not consumers’ attorneys.

Insurers didn’t get to kill the law that requires them, and not their customers, to pay to replace damaged roofs. Failure to change the law will keep insurance rates rising, they warn.

Attorneys failed to prevent new restrictions on how they get paid when they sue insurance companies, prompting warnings that consumers will have to pay attorneys upfront if they want to sue.

Months of debate unfolded over how lawmakers could help stave off skyrocketing insurance rates in Florida.

Along the way, plenty of other changes cleared the Legislature before the session closed Friday that will bring significant changes to auto insurance, claim filing deadlines, kickbacks from contractors, rate hikes by state-run Citizens Property Insurance Corp. and more.

The bills next go to Gov. Ron DeSantis’ desk. Barring a veto, they will be enacted into law on July 1. Here’s what consumers need to know about them: No-fault auto insurance repeal will raise costs for some, lower them for others

Motorists who have been rolling the dice by purchasing the minimum amount of auto insurance required to register their vehicles — $10,000 in personal injury protection — will have to pay more to cover injuries to other motorists. Vehicle owners must now buy liability coverage that will pay at least $25,000 per occupant and $50,000 per incident.

The new requirement could raise insurance costs by as much as 50% for those who buy the minimum no-fault coverage, said Sen. Jeff Brandes, who voted against the bill. But drivers who are already paying for liability coverage will likely see their costs reduced because they will no longer be required to buy the $10,000 PIP policy, which is considered redundant for motorists who already have health insurance.
The Florida Legislature passed restrictions that will make it harder for roofing companies to force insurers to pay for your new roof.

Motorists will have the option of buying $5,000 or $10,000 in coverage for injuries to themselves. Supporters say this option would be useful to drivers who do not otherwise have health insurance.

In a statement released Friday, the Personal Insurance Federation of Florida urged DeSantis to veto the bill, saying cost hikes will result in more low-income drivers forgoing insurance altogether. About one in five Florida motorists are uninsured.

Restrictions tightened on roofing contractors, public adjusters

A hotly debated proposal that would have allowed insurers to switch out full roof replacement coverage with limited coverage for roofs 10 years or older did not survive the session. The insurance industry wanted to replace full-roof replacement coverage — which they claim is driving millions of dollars in losses — with partial roof coverage that would require owners of older roofs to pay a large portion of their replacement costs.

Insurers requested the change to combat roofing companies they say offered incentives to homeowners willing to let them inspect their roofs for damage they could blame on past hurricanes.

Florida’s building code requires replacement of entire roofs if more than 25% damaged, and insurers contend that contractors are exploiting the requirement by blaming normal wear and tear on hurricanes or hail storms to justify full replacement claims.

The final version of the bill bars contractors from advertising, offering to perform or performing public adjuster services unless they are licensed as public adjusters. That means contractors cannot inspect damage to determine whether it could be covered by insurance, or perform any function connected to submitting a claim.

Insurers have long complained about roofing contractors that advertise their ability to help submit roof claims and get new roofs funded with little or no out-of-pocket costs to consumers.

Public adjusters, who are allowed to inspect damage and submit claims, will be barred from offering property owners anything of value for allowing contractors or themselves to inspect a roof for damage or file an insurance claim for the roof.

Public adjusters are also barred from accepting payment from contractors or attorneys. This is intended to eliminate the ability of public adjusters working as “loss consultants” for law firms that specialize in suing insurers.

A separate bill empowers the Department of Financial Services to levy fines against contractors acting as claims adjusters.

Brandes, a Tampa-area Republican, who supported the roof replacement proposal, said failure to include it in the Legislature’s major insurance reform bill will keep rates for private-market coverage unaffordable and drive more consumers to state-owned Citizens Property Insurance Corp., which he said is growing at unsustainable rates.

Brandes said that without the roof coverage change desired by insurers, the bills that cleared the Legislature this year amounted to just “a 40% solution for what is needed in Florida to potentially bend the cost curve.”

Even though the roof replacement provision was stripped from the final bill, consumers should know that some insurers are seeking authorization from state insurance regulators to offer “actual cash value” roof coverage for older homes they would be otherwise unwilling to insure. Others are selling the reduced roof coverage with dwelling/fire policies.

Either choice would potentially expose homeowners to high out-of-pocket costs, including their deductable, if their roofs must be replaced.

Deadline for filing claims reduced to two years

Concerns that too many hurricane damage claims are being filed long after the storms have passed prompted lawmakers to reduce the deadline for claims from three years to two years. While originally intended to address only hurricane claims, the final version creates a two-year deadline from the time of loss for all types of claims while allowing an additional year to file supplemental claims for damage that occur during repairs or aren’t apparent when first reported.

Insurers said that too many “questionable” claims tied to Hurricane Irma were filed in the third year after the storm, while supporters of the reduction argued that two years is enough time for homeowners to identify and report storm losses.

Ten months after Irma struck in September 2017, state insurance regulators reported claims with estimated insured losses totaling $9.7 billion. By June 2020 with the filing deadline approaching in September, the estimated loss tally had doubled to $17.4 billion. By November 2020, the number had increased by another $3.3 billion.

Insurers must get 10-day lawsuit notification

Policyholders must give insurers 10 days’ notice before filing suit, presumably to give insurers time to correct disputed issues.

Early versions of the bill would have given insurers 60 days’ notice, but opponents said that would have added too much time to already lengthy delays before repairs commence. Current law already gives insurers 90 days to determine whether to cover losses, and the bill bars pre-suit notices until insurers make their coverage decisions.

Rate increase cap lifted for Citizens Property Insurance

The state-owned “insurer of last resort” has become the first choice of too many homeowners shocked by price increases from their insurers. Unlike private-market carriers, Citizens can raise rates for its customers by only up to 10% a year. As a result, Citizens has become an attractive choice compared to companies that have raised their rates by as much as 40% in recent months.

And that’s alarmed lawmakers concerned that if Citizens — currently growing by 5,000 policies a week — gets too big, its $7 billion surplus would be depleted, leaving all insurance customers in the state vulnerable to special assessments to make up any shortfall.

A Senate bill sponsored by Brandes would have increased Citizens premium costs by 15% immediately up to 25% if the company’s policy count exceeded 1.5 million. But a House companion bill never emerged, and a milder version survived that raises the maximum annual rate increase from the current 10% by 1% each year until it reaches 15% by 2026.

Policyholders have 10 days to cancel public adjuster contracts

Homeowners dissatisfied with their decision to hire a public adjuster to represent them when filing their claim with their insurer now have 10 days to cancel their contract with the adjuster. Current law allows three days. The cancellation notice must be sent by certified mail, return receipt requested, or other forms of mail that provides proof that it was delivered.

Original versions of the bill would have required a 60-day pre-suit notice. But plaintiffs attorneys countered that insurers already have 90 days to decide if a claim is covered. Requiring an additional 60-day notice before a lawsuit could be filed suit disputing an insurer’s decision would unfairly delay repairs, they said.

Attorneys fees incentives reduced

Insurers have long complained about the so-called one-way attorney fee provision in state law that they say encourages lawsuits by allowing attorneys to bill insurers for all of their fees if they recover as little as $1 more than the insurer originally offers.

Replacing that provision is one that requires policyholders to pay their attorney’s fee if the lawsuit recovers less than 20% of the difference between what the insurer offers and the policyholder demands. If the suit recovers between 20% and 50% of this difference, the insurer pays the attorney’s fee multiplied by the percentage difference. Insurers will pay the full attorney’s fee only if the lawsuit results in a settlement exceeding 50% of the difference.

Insurers contend the one-way fee has caused litigation to increase sharply over the past decade, while attorneys counter that lawsuits would not be necessary if insurers paid claims promptly and fairly.

Sen. Gary Farmer, a Fort Lauderdale-based plaintiffs attorney and frequent critic of the insurance industry, said the attorney fee restrictions will leave homeowners unable to get legal help from attorneys who currently take cases on a contingency basis.

Farmer derided insurers’ complaints that out-of-control litigation is threatening the financial stability of the industry as a “completely manufactured crisis.” Insurers hide profits in holding companies and other affiliated ventures, he said.

“The bill [restricting attorney fees] chips away at the tools to help the little guy and the little girl take on Goliath,” he said.

Regardless of who’s to blame, there’s little disagreement that rising legal costs threatens affordability of insurance.

A study by insurance consultant Guy Fraker earlier this year found that of $15 billion spent on claims in Florida that resulted in lawsuits since 2015, only 8% went to policyholders to fix damage. Plaintiffs attorneys got 71% and insurers paid their defense attorneys the other 21%.