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Florida Insurance Council
Sam Miller, Executive Vice President
(850) 386-6668, ext. 223
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Major Property & Casualty Insurance Issues
2011 Florida Legislative Session
(These bills are supported by the Florida Insurance Council.
This is not a complete list of property and casualty bills.)

This document with live links and other background is available from a special report on the FIC Internet site. Go to  Click on FACT Book from the left-hand navigation bar, then on the top chapter, 2011 Legislative Session

This report includes:
•    Property Insurance Cost Drivers
•    Restoring Citizens to Market of Last Report
•    Attacking Auto Insurance Fraud
•    Reform of Insurance Bad Faith Laws
•    Other Insurance Bills

Property Insurance Cost Drivers, Including Questionable Sinkhole Claims
(CS/SB 408, HB 803)

The legislation is the comprehensive property insurance package of the session and addresses sinkhole insurance abuses, restores the RCC/ACV mandatory holdback, establishes a three-year statute of limitations on hurricane claims and includes many other key provisions. It was built around SB 2044, which passed the Legislature during the 2010 session, but was vetoed by then-governor Charlie Crist.

The major sinkhole insurance provisions are intended to eliminate expensive insurance claims for cosmetic damage not involving a true sinkhole. Citizens Property Insurance Corporation and private insurers are expected to pay out up to $2.5 billion during the five years ending in 2010, and the vast majority of claims will involve minor cracks and not true sinkhole damage.

Information on CS/SB 408 is available from the Senate Internet site through this link: CS/SB 408.

CS/SB 408 Summary from Jan. 24 Senate Banking & Insurance Committee Analysis.

Senate Bill 408 makes numerous changes to laws related to property insurance, primarily residential property insurance. The bill addresses the following primary issues:
  • Increases the minimum surplus requirements for residential property insurers to $15 million;
  • Allows insurers offering personal lines property insurance to provide written notice of policy changes to their policyholders without having to non-renew an entire insurance policy due to a change in policy terms;
  • Modifies current replacement cost coverage and actual cash value provisions relating to dwellings and personal property;
  • Requires windstorm and hurricane claims to be brought within three years and sinkhole loss claims to be brought within two years;
  • Modifies provisions related to windstorm damage mitigation discounts for residential property insurance and repeals the provision requiring the OIR to develop a method correlating mitigation discounts to the uniform home grading scale;
  • Renames the Citizens High Risk Account the Coastal Account and extends to December 1, 2013, the requirement to reduce the boundaries of the Citizens’ High Risk Account (wind-only coverage) if the probable maximum loss is not reduced at least 25 percent from the benchmark;
  • Allows an insurer seeking to take policies out of Citizens to do so in 45 days;
  • Clarifies the ethics requirements for specified board members of the Citizens Property Insurance Corp., and provides that Board members abstain from voting under certain circumstances;
  • Allows an insurer to cancel or non-renew a property insurance policy upon a minimum of 45 days’ notice based on a finding that the insurer lacks adequate reinsurance coverage for hurricane risk and other financial factors;
  • Revises the regulation of public adjusters by placing limits on public adjuster compensation, prohibiting certain statements in public adjuster advertising, and revising the contents of the public adjuster contract;
  • Removes the requirement that a property insurer must offer sinkhole coverage and eliminates application of statutes governing catastrophic ground cover collapse and sinkhole loss coverage from commercial property insurance policies;
  • Revises what constitutes a sinkhole loss;
  • Revises procedures for insurers and policyholders relating to standards for sinkhole insurance claim investigations and revises the neutral evaluation process for sinkhole disputes;
  • Provides changes to the procedures pertaining to sinkhole reports by professional engineers or professional geologists and repeals the sinkhole database;
Key Background:
Commissioner McCarty - Cost Drivers Must be Controlled

Insurance Commissioner Kevin McCarty
PCI Florida Insurance Summit, Orlando, January 13

“…New challenges are emerging in our system that are affecting insurance rates, and the underlying insurer costs. These cost-drivers include:
  • Increased Reinsurance Costs (from the phasing-out of the TICL layer)
  • Replacement Cost Methodology
  • Fraud
  • Premium Reductions from Mitigation Discounts; and
  • Reported Sinkhole Claims
“Sinkhole claims and other cost-drivers are affecting rate filings in Florida. During 2010, the Office approved rate increases for several companies ranging up to a 28.8 percent statewide average for personal residential policies and up to 11.3% statewide for commercial residential policies…If we do not address these underlying cost drivers, I am concerned that our state could potentially experience more rate increase requests in the future, which will stress the housing market, impact our economy, and increase the burden on Florida’s families.”

Insurance Commissioner McCarty
Florida Chamber of Commerce Insurance Summit Prepared Remarks
Orlando, January 27

“Chairman Richter has filed SB 408, which is similar to SB 2044 that was vetoed by the Governor during the last session. One of the most important (and perhaps overlooked) elements of last year’s property bill was the requirement to increase minimum surplus for new companies to $15 million, and to phase in this requirement for existing companies. By increasing this threshold we can better protect consumers, and better protect other companies operating in Florida by giving insolvent companies more money to pay claims, and thus reducing the need for assessments. Increasing the statutory surplus increases the “financial cushion” to allow a start-up company to succeed, or if a company fails – to give the receiver more surplus to pay consumers.

“Another element of the property insurance bill will be to address costs, specifically, sinkhole costs.  At this juncture, there are a number of possible solutions, including forming a sinkhole facility to pay sinkhole claims, limiting company liabilities by making the offering of sinkhole coverage optional, or changing the replacement cost methodology to better ensure that sinkhole claims payments are used to fix the problem; not pocketed by the consumer. All of these suggestions have one unifying theme – to change the incentives in the system to discourage frivolous claims.

“SB 408 also modifies the calculation of mitigation credits, improves, and corrects problems related to “replacement cost” methodologies. SB 408 goes a long way toward addressing many of the cost drivers we have identified as impacting the market.  While I am sure that this bill will continue to evolve during the session, I am hopeful that the Legislature will act decisively to address the problems facing the industry.”

Key Background:
Senate Banking & Insurance Chairman Sen. Richter
Warns of $120 Sinkhole Tax

Senate Banking & Insurance Chairman Garrett Richter's opening statement during his committee's January 11 workshop on the sinkhole insurance crisis

“Today our committee staff, Steve Burgess and Kathie Emrich, will present a summary of our sinkhole interim study which I emailed to each of you.  I would like you to hold your questions until they have made their presentation. The study shows that the sinkhole insurance market in Florida is broken and it is affecting every homeowner in the state.   That is because each homeowner, whether they have sinkhole coverage or not, will have to pay, on average, $120 to cover sinkhole claims.

“When most people think of a sinkhole, they think of a large hole in the ground.  However, almost no sinkhole claims involve that sort of situation.

A cottage industry has arisen which is spreading across the state, of people filing sinkhole claims based on minor damage to their house, collecting claim payments or settlements that routinely hit six figures, and then simply pocketing the money instead of repairing their home or property.  As a result of this behavior, property values in some of these counties are plummeting this affects the financial stability of local governments.

“For example, the Hernando County Property Appraiser, Alvin Mazourek, who will testify today, estimates that the county has lost $173 million in total market value as a result of value adjustments to sinkhole homes since 2005.

“When there is a legitimate sinkhole, it is absolutely in the public interest that insurance monies are used to repair the sinkhole, not pocketed by the policyholder.  

“This explosion in sinkhole claims jeopardizes the solvency of property insurance companies and will result in higher insurance premiums for almost all insured homeowners in this state. “

Restoring Citizens Property Insurance Corporation
To an Insurer of Last Resort (
SB 1714)

This is a major initiative being developed by the Office of Insurance Regulation, Citizens Property staff and its leaders and the insurance community. It is sponsored by Sen. Alan Hays, R-Umatilla. It will address Citizens rates and benefits, eligibility for Citizens coverage initially and eligibility to remain in Citizens.

The package is expected to:
  • Change the cap on Citizens rate increases under the glide path; one possibility is going from 10 percent per policyholder to an average 15 percent in each rating territory;
  • Change the 15 percent rule to 25 percent - a risk with a private market offer would be eligible for Citizens only if the private insurer rate was at least 25 percent more expensive than the Citizens rate;
  • Repeal the statute allowing policyholders to veto takeouts which have been negotiated by the Office of Insurance Regulation.
  • Develop a procedure to reduce Citizens coverage benefits;
Key Background:
Citizens Must No Longer Compete with Private Insurers

Insurance Commissioner McCarty
Florida Chamber of Commerce Insurance Summit Prepared Remarks
January 27, Orlando

“Another concern is the role of Citizens in the marketplace. Due to affordability concerns, in 2007 the Florida Legislature froze Citizens’ rates, and these rates remained frozen for three years.  In 2009, the Legislature lifted the rate freeze, and allowed Citizens’ rates to be on a glide path of no more than a 10% rate increase every year. However, there are still concerns that Citizens rates are anti-competitive relative to the private sector.

“To illustrate this point, earlier this year one of Florida’s larger insurers, St. John’s Insurance Company had an actuarial rate indication of 43.4%, yet they asked for a 0.1% rate increase – (essentially zero) to compete with Citizens. This is not an isolated event. In many recent rate filings, the Office has forced insurance companies to accept higher rate increases than what they requested. Florida policymakers need to keep this in mind as they consider rate deregulation.  Put simply, rate freedom may not matter if private insurers’ policies continue to be underpriced by Citizens.

“… First, I expect to see legislation that addresses the role of Citizens Property Insurance Corporation. Let me be perfectly clear about this issue: until systematic and fundamental changes are made to the role and function of Citizens Property Insurance Corporation – Florida’s property insurance marketplace will never function properly as a competitive marketplace. Florida’s policymakers need to make overhauling

“Citizens’ role a priority in order for other insurance reforms to work. Having stated this, we need to be cognizant that there is a limit to rate increases our consumers can absorb; if we make immediate changes that are perceived as being too draconian – we may be back during the next legislative session changing the system again which only adds instability to the insurance marketplace.”

Attacking Auto Insurance Fraud;
Three of the Top Five Cities in Staged Accidents in Florida (Still in bill-drafting)


PCI Special Internet Site; Insurance Fraud Uncovered:

Phantom and fraudulently inflated injury claims by crooked medical clinics from setup crashes have inflicted a “fraud tax” of nearly $100 in higher auto premiums annually for typical two-vehicle Florida families already facing a downturned economy, says the Insurance Information Institute, a statewide alliance of consumer advocates, insurers and government agencies is pursuing reform legislation to save consumers money by cracking down on rampant staged-accident rings that are looting Florida’s no-fault system and raising auto premiums for honest drivers.  The Sunshine Alliance to Erase Fraud was founded by the Washington, D.C-based Coalition Against Insurance Fraud and the Florida Insurance Council and the national property & casualty insurance trades, including Property Casualty Insurers.

Rep. Jim Boyd, R-Bradenton, and Senate Banking & Insurance Chairman Garrett Richter, R-Naples, will be sponsoring this key anti-fraud legislation. It will include consumer protections, effective tools to help insurers and law-enforcement better combat PIP fraud, and common-sense reforms to help stop staged-accident rings from preying on innocent motorists.

Key Provisions:
  • Giving insurers the clear right to interview claimants under oath and have independent medical exams conducted. Helps verify legitimate claims and ensure that honest claimants receive payments to which they’re entitled. The interviews and medical exams also better enable insurers to uncover fraud and counteract a recent Florida State Supreme Court ruling that insurers can’t require these anti-fraud tools.
  • Accident reports must list names, addresses and apparent physical condition of all passengers in a crash.
  • Extends the deadline for insurers to pay claims from 30 days to 120 days. But insurers must determine that a claim appears to be fraudulent before investigating, and must notify claimants about the investigation.
  • Applications for medical clinic licenses must have warnings clearly stating that submitting a false, misleading or fraudulent application is a crime.
  • New owners of medical clinics must file licensing information with the Department of Financial Services within 10 days of purchasing the license.
  • Forbids medical providers from seeking payment from policyholders when an auto insurer delays paying the claims to investigate suspected fraud. Insurers also can delay payment of any part of a claim when fraud is suspected.
  • Consumers can receive premium rebates or discounts from insurers by choosing medical treatment from lower-cost PPOs.
Key Background;
From the Sunshine Alliance to Erase Fraud

Staged crashes are spreading rapidly upstate throughout Florida from their traditional strongholds south in Miami-Dade-Broward. Fake and phantom injury claims from widespread and loosely organized fraud rings lie at the heart of spreading scams. Staged crashes and bogus medical treatment will add about $1 billion in fraud costs to Florida’s no-fault auto system by the end of 2011, says the Insurance Information Institute. Total costs from 2009 to through 2011 could exceed $1.5 billion if current trends continue.

Florida is the nation’s ground zero for PIP fraud. Florida leads the nation in staged crashes, adds the National Insurance Crime Bureau. Tampa, Miami and Orlando rank among the top five cities nationally for suspected staged accidents, NICB says. Florida also accounts for 30 percent of questionable claims involving staged crashes. Widespread no-fault fraud is a driving factor in skyrocketing auto premiums in Florida. In fact, every case of fraud robs $100 from the pockets of Florida’s hardworking families. Progressive Insurance has cited PIP fraud as the “driving factor” behind rate increase requests due to “increased fraud activity.”

Key Background:
PIP Fraud Driving Dramatic Increases in Auto Insurance

Insurance Commissioner Kevin McCarty
PCI Florida Insurance Summit Prepared Remarks
Orlando, January 13

“Traditionally, auto insurance has been one of the most competitive markets in our state. There are numerous competitors, and competition is decentralized. However, similar to homeowners’ insurance, we have noticed an increase in insurer costs that have manifested themselves into rate increase filings. In fact, in 2010 – the Office granted rate increases ranging up to 78% for bodily injury insurance, 52% for
uninsured motorist insurance and 82% for PIP. It should be noted that these are outliers – these examples are at the upper end of rate increases for different large insurers, but they are quite significant nonetheless.

“…Based on 2009 data, Florida’s direct loss ratio (which is losses divided by earned premium) for private passenger auto was 70.2%. This gives Florida the fourth highest loss ratio in the nation behind only Michigan, New Jersey and Kentucky. According to Insurance Service Office (ISO) Fast Track data, recent loss costs for bodily injury and PIP have risen dramatically in the last couple of years, particularly for PIP. To further support this hypothesis – the National Insurance Crime Bureau has cited the Tampa area as being the state’s leader for “suspicious auto accident.” Whatever the cause, these costs are very real, and will continue to affect our marketplace if we cannot change this cost trajectory.”

Chief Financial Officer Jeff Atwater
EViews, the CFO's Weekly Consumer Newsletter, January 14, 2011

“As your CFO, I have pledged to fight insurance fraud. The criminals who perpetrate these crimes are costing us billions of dollars a year in increased insurance premiums. I am committed to putting these thieves in jail.

“…insurance fraud alone costs the average Florida family an additional $400 a year. Year after year, that adds up.

“Three of the top five cities in the country for staged auto accidents are in Florida—Tampa, Miami and Orlando. Organized fraud rings recruit willing participants, fake an accident in which no one is injured, and send the participants to medical clinics or chiropractic offices for treatments that never occur. The clinics fraudulently bill auto insurance companies the maximum $10,000 limit on the participants’ Personal Injury Protection or PIP.

“This type of fraud results in hundreds of millions of dollars in fraudulent billing, and that is money that comes directly out of our pockets. The arrests this week are the first of many in our mission to combat this costly crime.”

AIF, Chamber, Insurers Seeking Reform of Insurance Bad Faith Laws
Senate Judiciary Committee Conducted Three-Hour Workshop (SB 1592)

The Senate Judiciary Committee conducted a three-hour workshop on this issue February 22 and a similar workshop in the House is likely soon.

Special Background:
Status Quo Encourages Lawsuits and Hurts the Business Climate

For additional information, contact
Erin VanSickle, (850) 339-3184
Capitol Energy Communications

Small business owners, Florida business associations, and grassroots Floridians last week announced the formation of a coalition to reform Florida’s "bad faith" insurance laws and protect Florida’s small business owners and consumers from the threat of lawsuit abuse.  The coalition includes Associated Industries of Florida, the Florida Chamber of Commerce, the Florida Justice Reform Institute, and the U.S. Chamber of Commerce Institute for Legal Reform. “We formed this coalition to shine a spotlight on the games that are being played in Florida, and to craft policies that will provide solutions for consumers and businesses,” said William W. Large, President of the Florida Justice Reform Institute.  “The status quo—a system that encourages the threat of lawsuits and hurts the business climate—only benefits one group, and that is the trial lawyers.”

Under Florida’s current law, in the case of an accident, an injured party might file a lawsuit against an insured business or individual—but the law also allows for a trial lawyer to then file a second lawsuit against the insurance company based on the way it handled the claim.  In fact, however, the lawyer has no interest in protecting the insured or settling for policy limits; he seeks a multi-million dollar recovery well above the limits of the insurance policy. As a result, cases that should settle quickly do not.

“Florida’s small businesses need affordable insurance, not a broken system that discourages settlements and encourages thousands of new lawsuits,” noted Mark Wilson, President and CEO of the Florida Chamber of Commerce. “The people of Florida, our struggling business community, and state government can’t afford this system, where there are two lawsuits instead of one and cases aren’t resolved early on to protect the consumer.”  

“The remedy is simple – retain the ability to sue an insurer when it truly acts in bad faith, but create objective standards and a fair process that allows a real analysis,” said Barney Bishop III, President and CEO of Associated Industries of Florida. “Floridians should demand that the Legislature hold insurers’ feet to the fire by establishing a process that provides for an offer to settle, rather than being controlled by a system dominated by games.”  

The coalition will be launching an Internet site soon.

Other Insurance Bills

Continued Rate De-Regulation for Commercial (HB 99, SB 178)
This expands a bill passed by the Legislature during the 2010 regular session and signed by then-Governor Crist exempting from Florida OIR rate regulation certain lines of commercial insurance. Additional lines which would no longer be subject to OIR rate approval include commercial property and all commercial auto. This is supported by many businesses who purchase commercial insurance, as expressed in testimony in support of the bill by Associated Industries of Florida and the Florida Chamber of commerce.

See this link from the Legislature’s Internet site: SB 178.

Flex Rating, Residential (HB 885, SB 1330)

This is the 2011 iteration of the residential rate deregulation initiative. It is not full deregulation as bills from recent previous sessions. Residential insurers would be allowed to raise their rates up to 15 percent on a statewide average – and no more than 30 percent on any individual policyholder – without OIR approval. Larger increases would be subject to normal OIR regulation. Flex rating authority would apply only to insurers purchasing catastrophe reinsurance from the Florida Hurricane Catastrophe Fund and to cover their 100-year probable maximum loss. Some insurers probably would not meet this standard, but it is not clear how many or which insurers. Presumably, the major insurers would qualify.

See this link from the Legislature’s Internet site: SB 1330.

PIP Legal Reforms, Including Attorneys Fee cap (HB 967, SB 1694)

The Florida Insurance Council and other insurer trades support this package, but it is not supported by the Sunshine Alliance to Erase Fraud, discussed above. Many of the fine consumer organizations in that coalition are unable to support controversial provisions of this bill, which insurers believe are essential.

The bill limits attorneys fees under the no-fault law to the lesser of $10,000 or three times any disputed amount recovered by the attorney under ss. 627.730-627.7407. Attorney’s fees in a class action under ss. 627.730-627.7407 are limited to the lesser of $50,000 or three times the total of any disputed amount recovered in the class action proceeding. Insurers routinely pay $10,000 or more in legal fees in suits recovering very small amounts for PIP providers, in some cases less than $10.

The package eliminates the Lodestar multiplier or contingency risk multiplier authorizing trial judges to award huge legal fees in cases considered to be unusually complex or where the chances of success are considered slight. The multiplier produced more than $500,000 in legal fees in one case cited by insurers while the policyholder received only about $9,000 in PIP benefits.

See this link from the Legislature’s Internet site: SB 1694.

Workers’ Comp Drug Re-packaging (SB 1068)

Re-packaging of pharmaceuticals and re-sale at greatly inflated prices by comp providers costs Florida businesses $34 million a year, according to an estimate from the House Speaker’s Office.  Legislation capping charges for prescriptions dispensed by providers passed the 2010 session, but was vetoed by then-Governor Charlie Crist last summer. Sen. Hays’ bill contains similar language:  “If the drug has been repackaged or relabeled, the reimbursement amount shall be calculated by multiplying the number of units dispensed times the per-unit average wholesale price set by the original manufacturer of the underlying drug, which may not be the manufacturer of the repackaged or relabeled drug, plus a $4.18 dispensing fee, unless the carrier has contracted for a lower amount. The repackaged or relabeled drug price may not exceed the amount otherwise payable had the drug not been repackaged or relabeled.”

See this link from the Legislature’s Internet site: SB 1068.