• 300 Words (more or less), 2010

    AdvocacySmallEach year, FAIA's advocacy staff develops succinct summaries of insurance-related issues to help lawmakers, the media, and the public better understand these often-complicated insurance topics. 

    Motor Vehicle Records
    Public Adjusters
    Condo Insurance
    Commercial Insurance Rate Regulation Modernization
    Workers' Compensation Attorneys' Fees
    Consumer Choice Bill
    Slip and Fall
    Parental Authority
    Consumer Choice 2010 (Citizens' Assessments) 

    Motor Vehicle Records 

    PROBLEM—When SB 1778 passed last year, MVR fees more than tripled, increasing from $2.10 to $8.00 for a three-year history and from $3.10 to $10 for a seven-year history. These dramatic increases have placed an unfair burden on those who purchase insurance and others who must access those records on their behalf, such as insurance agents. Commercial vehicles are also adversely impacted, creating a disincentive to order MVRs to determine a driver’s record, protect the public, and avoid potential liability. Preliminary reports from the Department of Highway Safety and Motor Vehicles (DHSMV) indicate that MVR requests decreased nearly 30 percent and increased revenues are not as promised or anticipated.

    BACKGROUND—During last year’s legislative session, the state was faced with significant shortfalls in revenue and fees were increased to cover the cost of some services and as one way to offset the loss. In some cases, such as MVRs, the increase went far beyond the level necessary to cover the cost of providing the services.

    Normally, such an increase would be spread over a large group of users, but with MVRs, one group, insurance agents and their clients, are disproportionately impacted. To sell auto insurance, agents must obtain an MVR. While the law does allow an agent to charge consumers for the cost, shopping for coverage is curtailed because it doesn’t apply when, for whatever reason, the consumer does not ultimately purchase a policy. Either agents must pay the higher MVR fee or the applicant must pay the increased fee even though insurance was not purchased.

    It’s worse for commercial coverage, such as a fleet of vehicles. Agents often run MVRs on both current drivers and prospective hires. This can cost thousands of dollars annually. With MVR fees tripled in cost, most agents can no longer afford the expense, and owners of commercial fleets are incented to avoid the expense all together. Ultimately, this endangers the public and may increase the cost of commercial auto liability insurance

    SOLUTION—Since the anticipated increase in state revenues is not being realized from last year’s fee increases for MVRs, they should be repealed.

    Public Adjusters

    PROBLEM—The actions of some public adjusters unjustly interfere with the insurance claims handling process, impacting property insurance in Florida by increasing the cost.

    BACKGROUND—When an insured suffers a covered loss, Florida Statutes provide for the claim to be handled by one of three types of adjusters:

    • An insurance company employee adjuster
    • An independent adjuster who contracts with a number of insurance companies
    • A public adjuster (PA) who is hired by a consumer or policyholder.

    All company and independent adjusters are highly regulated, as is the entire claims adjustment process, and subject to sanction by the carrier and the Office of Insurance Regulation (OIR). Additionally, they are paid by the insurance company out of a filed expense approved by the OIR as part of the overall premium with additional cost to the insured; and, because “independent” adjusters are paid a percentage of the claim, there is an incentive to adjust the claim as high as the insurance contract legally permits.

    Public adjusters are paid from policyholder claim payments—10 percent if resulting from hurricanes, 20 percent for everything else. This, and a flawed alternative dispute resolution process, works to create a substantial incentive to file false or inflated claims. Current law, including the Unfair Trade Practices Act (§626.9541, F.S.), has not curtailed aggressive, false, and misleading advertisements by public adjusters. Lawmakers mandated a study by the Florida Office of Program Policy Analysis and Government Accountability (OPPAGA). It found that public adjusters often file supplemental claims or re-opened claims years after they were settled, driving some (at least one carrier) out of business and helping put others on the brink. According to OPPAGA, it elevated Hurricane Wilma, a Cat 2 storm, to rank only behind Hurricane Andrew as Florida’s worst natural disaster. This negatively impacts the price of reinsurance, Citizens and Cat Fund assessments, rate increases, carrier surplus, and the overall solvency of Florida’s property marketplace.

    DISCUSSION—SB 2264 by Sen. Bennett and HB 1181 by Rep. Long address the problems arising from the actions of some public adjusters, while fairly regulating the actions of the majority. Under the provisions of the legislation:

    • Public adjusters may not solicit professional employment from prospective customers when the PA has no prior professional or family relationship or when a significant motive is the public adjuster’s pecuniary gain. 
    • Unsolicited written communication seeking employment is prohibited unless it includes the word “ADVERTISEMENT” written in bold red print on the first page.
    • Communication may only be sent by regular mail and by any other form of restricted delivery. Additionally, the communication cannot resemble any type of legal document.
    • The communication may not contain any information about the public adjuster’s record of obtaining claims payment or settlements.
    • No communication may be mailed until 30 days after the claim-making event.
    • Public adjusters are prohibited from using a third party to solicit insureds. Current law only prohibits such indirect solicitation during the first 48 hours after the loss.
    • It clarifies that the insured’s percentage payments are based only on the benefits they obtain.

    Finally, the legislation provides a duty for the insured to make any claim for hurricane wind loss to residential property within three years after the windstorm or hurricane first made landfall or caused the damage. Claims made after that time are barred.

    CONCLUSION—Support SB 2264 by Sen. Bennett and HB 1181 by Rep. Long

    Condo Insurance 

    BACKGROUND—During the 2008 legislative session, the Legislature passed HB 601, a lengthy rewrite of Chapter 718, dealing with condominiums. While many of the changes were necessary, some created unintended consequences. So, during the 2009 legislative session, the Legislature passed SB 714 to fix the glitches created in 2008. However, the governor vetoed SB 714 due to language included in the bill, which would have extended the retrofit date by 11 years for fire sprinkler safety systems to be installed in condominium common areas. Thus, three unintended consequences from the 2008 legislation still must be addressed:

    1. That the association be an additional named insured on each of the unit owner’s policies. This means that if the association common property gives rise to a liability suit, the liability protection of each unit owner’s policy could be called upon to respond.
    2. That each unit owner’s policy have $2,000 of special assessment coverage, rather than the correct term of loss assessment coverage. The literal interpretation of this means that if, for example, the association made a special assessment to repave the parking lot, the policy would be expected to cover it.
    3. That the association request that unit owners show proof of insurance at least once a year and allows the association to forceplace the coverage if proof is not forthcoming. This is, essentially, a mandate that unit owners must buy an O-6 or other similar type policy. It is up to the association to enforce this requirement as there is no enforcement mechanism in the statute. There is no reference to how much and what type of coverage must be purchased; again, the board would be the entity to determine what the unit owner must carry. If the unit owner fails to purchase such policy, the board may do so and collect the premium in a manner specified in the assessment statute.

    SOLUTION—House Bill 561 by Rep. Bogdanoff and SB 1196 by Sen. Fasano make four important modifications to the 2008 legislation:

    1. It removes the language that the association be an additional “named” insured in all unit owners’ policies. This will prevent the unit owner’s policy from being exposed to liability suits resulting from injury in the common areas of the association.
    2. It replaces the term “special assessment coverage” with the more insurance-specific term “loss assessment coverage.
    3. It removes the requirement that the association must request the unit owners show proof of insurance coverage at least once a year and removes the association’s ability to force place the unit owner’s coverage.
    4. Finally, the bill makes numerous insurance-related technical changes such as changing hazard insurance to property insurance, and deleting inappropriate references to casualties and casualty insurance.

    CONLCUSION— Support HB 561 by Rep. Bogdanoff and SB 1196 by Sen. Fasano, which repair the 2008 glitches.

    Commercial Insurance Rate Regulation Modernization

     PROBLEM—Over-regulation of rates for commercial insurance stifles competition and leads to a dysfunctional marketplace.

    BACKGROUND—Florida has one of the most comprehensive systems of rate regulation in the entire nation. The Office of Insurance Regulation (OIR) regulates for solvency by saying rates can’t be inadequate. The OIR regulates to prohibit any insurer from having a rating system that unfairly discriminates on the basis of such criteria as race, religion, and age. Finally, to protect small, unsophisticated policyholders against unwarranted rate increases, the OIR also regulates against “excessive” rates.

    However, the argument for rate regulation, review, and approval breaks down when dealing with competitive markets, uniqueinsurance products, and sophisticated “commercial” insureds.

    SOLUTION—Senate Bill 2176 by Sen. Peaden and HB 1563 by Rep. Drake have been filed in an attempt to modernize commercial insurance rate regulation by excluding certain categories of commercial insurance from the OIR’s rate filing and approval process. The rates for these categories will continue to be subject to the standards set forth in §627.062(1), F.S., which prohibits insurers from utilizing rates that are excessive, inadequate, and unfairly discriminatory, and to the provisions in §627.062(2), F.S., which define these standards. The bill requires insurers to develop rates for these categories according to the statutory rate standards, notify the OIR of these rates, and maintain supporting data for these rates subject to audit by the OIR. But the rates will not have to be filed with andapproved by OIR.

    The bill sets forth the specific categories of commercial insurance that fall within the purview of commercial rate modernization, which does not include workers’ compensation, medical malpractice, personal automobile, or property insurance policies (including small business package policies, i.e. “BOPs”). All of the designated categories are highly competitive, not subject to the violent market swings caused by catastrophic events such as hurricanes, and are purchased by sophisticated customers. The bill’s “free market” approach for these sophisticated risks will allow carriers to lower rates in order to compete or increase market share, without fear that they can’t ever increase rates in the future.

    CONCLUSION—Support SB 2176 by Sen. Peaden and HB 1563 by Rep. Drake.

    Workers' Compensation Attorneys' Fees

    PROBLEM—Trial lawyers have been attempting to work their way back into the workers’ compensation delivery system since the passage of major reform in 2003.

    BACKGROUND—Most experts agree that a key ingredient in the success of the 2003 workers’ compensation system reforms was the fee schedule limiting attorneys’ fees. Proof of this can be found in the rate increase directly attributable to the Supreme Court’s liberalization of those limits in the Murray decision and the immediate reduction occurring upon the reinstatement of the fee limitations by last year’s legislation. During the debate on that reform package, the Senate Judiciary Committee adopted an amendment that would have removed most cases dealing with “first responders,” as defined in §112.1815, F.S., including firefighters, EMTs and paramedics, and police who are employed by state and local government, from under the fee limitations. It also includes volunteers to these organizations in certain circumstances. Previously, organized labor has pushed to expand the definition of “first responder” to include other occupations, such as employees making repairs to electrical power lines.

    While the language exempting first responders from the attorneys’ fee limitations did not ultimately pass, it did receive a majority of the votes in the Senate Judiciary Committee and many predicted that it would only be a matter of time before the issue was raised again.

    Now, legislation has been introduced to exempt first responders from the workers’ compensation attorneys’ fee limitations. In those cases involving first responders, SB 2634 by Sen. Chris Smith and HB 611 by Rep. Dwayne Taylor directs the court to follow the standards adopted by the Florida Supreme Court in the ill-fated Murray decision. These are known as the Lee Engineering standards. Rather than basing the fee on a schedule, attorneys would be awarded fees based on criteria such as:

    • The time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal services properly. 
    • The fee customarily charged in the locality for similar legal services. 
    • The amount involved in the controversy and the benefits payable to the claimant. 
    • The time limitations imposed by the claimant or the circumstances. 
    • The experience, reputation, and ability of the attorney performing services. 
    • The contingency or certainty of a fee.

    As all of these standards are more generous than the current fee schedule, the legislation will do nothing but increase costs in workers’ compensation cases. While state and local government employ the first responders, this "nose under the tent" would increase attorney involvement and could easily expand to involve other businesses as well.

    SOLUTION—Oppose SB 2634 by Sen. Smith and HB 611 by Rep. Taylor.

    Consumer Choice Bill

    BACKGROUND—Last year 85 percent of lawmakers voted for the Consumer Choice Bill, HB 1171. However, it was vetoed by Governor Crist in part because it favored a few large insurers (those with more than $500 million in surplus) to the detriment of those writing the bulk of Florida’s homeowners business—smaller domestic carriers.

    "DIRE" RESULTS—Many of Florida’s domestic homeowners companies are struggling. Some are bound by “takeout” plans from Citizens or loan agreements under the state Incentive Capital Build-Up (ICBU) program. Others have become insolvent or are struggling for other reasons. This is despite the fact that Florida hasn’t had a storm in four years. Here are some alarming facts:

    • During a four-year period in which insurance companies should’ve been building surplus, more than half are showing losses and many have serious surplus depletions.
    • Commissioner McCarty said the reports are “dire” and that 102 of 210 insurers had net underwriting losses.
    • Several companies have folded recently. Coral Insurance went bankrupt last year. Magnolia, the twelfth largest property insurer in the state with more than $24 billion in exposure, including 44,000 policyholders in Palm Beach, Broward, and Miami-Dade Counties, has been taken over by regulators. Additionally, American Keystone was declared insolvent late last year and is currently being liquidated.
    • The OIR is brokering deals for companies to absorb the policies of others that are falling behind, such as Edison and Magnolia. But, it is also communicating with a number of additional companies with concerns over their ability to pay claims.
    • Rate inadequacy has led to 44 of Florida's top 73 property insurance writers posting net underwriting losses.
    • Soon, the 2009 year-end figures will be out and it is anticipated the results will be even more “dire.”

    CONSUMER CHOICE—The state offers all Floridians access to a not-forprofit public option insurer—Citizens. It pays no income taxes, is subsidized by assessments, and provides substantially the same coverage as private carriers, but it does so at steeply discounted prices (frozen rates, annual caps, OIR-established rates, etc.). This year’s Consumer Choice bill, SB 876 by Sen. Bennett and HB 447 by Rep. Proctor, not only addresses the governor’s concern by applying to “all” residential property writers, it allows access to Citizens or any carrier offering a regulated rate as well. It assists struggling domestics by allowing them to more quickly charge actuarially sound rates to pay claims after the next storm and/or to solve problems created by a Citizens takeout plan, the ICBU program, or steep price increases for mandatory reinsurance.

    CONSUMER PROTECTION—The Consumer Choice Bill maintains OIR oversight for discriminatory pricing, unfair trade practices, insolvency protection, and requires complete consumer disclosure regarding the availability of Citizens, regulated pricing options, Citizens first-tier assessment requirement, and the OIR shop and compare website.

    THE RESULT—Instead of financially struggling (or insolvent) private carriers, consumers can choose between solvent private carriers or a discounted state-owned company with substantially the same coverage. What’s wrong with that? Over time, this approach will decrease the level of assessments on non-Citizens policyholders, attract new capital to Florida, increase competition, and provide homeowners with true Consumer Choice!

    ACTION—Vote “YES” on SB 876 by Sen. Bennett and HB 447 by Rep. Proctor.

    Slip and Fall 

    PROBLEM—A decision by the Florida Supreme Court has liberalized the standards for determining liability in “slip-and-fall” cases.

    BACKGROUND—In Owens v. Publix Supermarkets, Inc., 802 So. 2d 315 (Fla. 2001), the Court held that a plaintiff need not demonstrate that the store had constructive knowledge of the foreign substance or object that caused the slip-and-fall. Instead, the Court said that the defendant (store) had to demonstrate that it had used reasonable care. More importantly, the Court ruled that the mere existence of a substance on the floor created a rebuttable presumption that the store didn’t maintain the premises in a reasonably safe condition. In other words, the business is “guilty until proven innocent.”

    The following year, the Legislature tried to fix the problem by shifting the burden of proof back to the plaintiff, but the Legislature fell short by failing to require the plaintiff to show at least “constructive notice” on the part of the storeowner. In order to appear before a jury, the plaintiff only must show that another customer of the store could have conceivably produced the hazardous condition. This opens the door to frivolous lawsuits and, in the opinion of some, could lead to fraud where one customer “drops” a foreign substance on the floor and a cohort comes along right behind and “slips” on the spill.

    RECCOMENDATION—This year, SB 1224 by Sen. Gardiner and HB 689 by Rep. Aubuchon corrects the problem. It creates a new §768.0755, F.S., which provides that if a person slips and falls on a “transitory foreign substance” in a business, the injured person must prove that the business had either actual or constructive knowledge of the dangerous condition and should have taken action to remedy it. As to showing “constructive knowledge,” it can be proven by circumstantial evidence that:

    • The dangerous condition existed for such a length of time that, in the exercise of ordinary care, the business should have known of the condition
    • The condition occurred with regularity and was therefore foreseeable.

    These are reasonable tests that protect the rights of injured customers without opening businesses up to frivolous, and perhaps even fraudulent, lawsuits.

    SOLUTION— Support SB 1224 by Sen. Gardiner and HB 689 by Rep. Aubuchon.

    Parental Authority  

    PROBLEM—A recent decision by the Florida Supreme Court (Court) ruled that parents have no right to sign a pre-injury release from tort liability on behalf of their minor child. Since minor children cannot sign such releases on their own behalf, the effect is to make all such releases invalid.

    BACKGROUND—In Kirton v. Fields, 997 So. 2d 349 (Fla. 2008), the Court addressed the enforceability of a pre-injury release form, signed by a parent, that provided a pre-injury waiver of liability given to a service provider in exchange for the minor child’s participation in a motorcycle event. While this particular ruling applies to a for-profit operation, if an after-school athletic club charges for participation to cover expenses, it could also beapplicable. It is also not too much of a stretch to believe that church or scout-sponsored summer camps, as well as a host of other similar activities, could also be covered. Since minor children do not have the authority to sign such waivers on their own behalf, businesses and other organizations sponsoring such events have no protection against lawsuits, even if both the parents and children know that there is a risk of injury associated with the activity. This will have a serious effect on a child’s ability to participate in organized sports and other activities deemed potentially risky.

    Last year, legislation was introduced to reaffirm the right of a parent to sign these types of waivers. However, trial lawyers raised a “parade of horribles” as to how last year’s bill could be read to provide immunity for gross negligence in the maintenance of a facility or to give protection to child molesters at summer camp. Because of this rhetoric, last year’s bill failed.

    DISCUSSION—This year, amended legislation has been filed to specifically address the issues raised last year. House Bill 285 by Rep. Horner and SB 1578 by Sen. Baker provides that a release signed by a minor is valid if also signed by the minor’s parent or guardian. More specifically, parents are authorized, on behalf of their minor children, to waive and release, in advance, any claim or cause of action that accrues to any of their minor children to the same extent that any adults may do so on their own behalf.

    To address some of the issues raised by the trial bar last year, the bill specifically excludes:

    • Intentional misconduct, including sexual misconduct committed against a minor
    • Gross negligence, if exhibited by clear and convincing evidence

    This language should go a long way towards giving reasonable protection from frivolous lawsuits against businesses, while at the same time, giving protection to children.

    SOLUTION—Support HB 285 by Rep. Horner and SB 1578 by Sen. Baker.

    Consumer Choice 2010 (Citzizens' Assessments)

    BACKGROUND—Citizens is required to levy a first tier assessment up to 15 percent on its policyholders for deficits that could occur in three accounts, but is most likely to occur in just the High Risk Account (HRA) because it provides wind-only coverage. This assessment is levied only if there is a deficit and it is intended to be paid before the private market is assessed. This is current law.

    PROBLEM—Because the assessment is collected as a surcharge to be paid only upon renewal, policyholders can avoid the surcharge or assessment by non-renewing their policy. This means:

    1. Its effectiveness as an entry barrier is completely eliminated for those who were in Citizens because it had a lower price. They will continue to go there knowing they can leave without paying the intended surcharge or assessment.
    2. Because it’s a “renewal surcharge,” those insured in Citizens who cannot find coverage from private carriers (such as mobile home owners or those in sinkhole prone areas) are the only ones who will have to pay a Citizens first tier assessment. It’s simply not fair to only charge those who can least afford to pay.
    3. To the extent that there are fewer insureds in Citizens to pay the assessment, new applicants (and perhaps others) would have to pay, over time, to cover the shortfall.

    DISCUSSION—This year’s Consumer Choice bill fixes the unintended problems above by mandating that anyone who enters Citizens must be informed about the potential of the first tier assessment and that assessments cannot be avoided by non-renewing.

    Having the assessment stay with the policyholder is how all assessable private market carriers—including assessable mutuals, assessable reciprocals, workers’ compensation group self-insurance funds, medical malpractice funds, condo association pooling arrangements— avoid the problem. However, other assessable mechanisms have unlimited, joint and several assessments without any cap. Citizens’ policyholders are safeguarded by the 15 percent cap. For example, if a Citizens policyholder had an annual premium $1,200 in the HRA, their assessment could not exceed $180. This is current law.

    SOLUTION—While there may be other methods of ensuring the assessment is actually paid, the 2010 Consumer Choice bill provision uses the most common approach employed by other assessable risk transfer mechanisms. Support SB 876 by Sen. Bennett and HB 447 by Rep. Proctor.