Special Legislative Session on Insurance

While many communities are in the process of adopting a budget with significant increases, primarily due to increased insurance premiums, the Florida Legislature is meeting in Special Session to attempt to address the property insurance crisis in our State. Here are some of the highlights from SB 2-A and HB 1-A which are currently being debated up in Tallahassee.

• Attorney’s Fees – The insurance industry has claimed that the policyholder’s right to recover legal fees is a major cause of rate increases. The proposed legislation eliminates one-way attorney fees in suits arising in residential or commercial property insurance. This means the policyholder’s attorney’s fees would have to be taken out of the insurance settlement, thereby reducing the insured’s recovery.
• Assignment of Benefits (AOB) – The legislation would eliminate a policyholder’s ability to execute an AOB for all property insurance policies (but maintains an existing carve-out for seller-to-buyer AOB related to an ongoing insurance claim). Many of you have been asked to sign such documents after a casualty event for the purpose of assigning your right to bring legal action against the carrier to a restoration company.
• Bad Faith – The insurance industry has lobbied hard to make it much more difficult to sue a property insurer for settlement-related bad faith, thereby significantly reducing the risk to the insurer. Unfortunately some insurers do act in bad faith and ignore their contractual obligations to their insureds.
• Notice of Claim – The proposed legislation would reduce the time limit for providing notice of a loss to a property insurer from two years to one year for initial or reopened claims and from three years to 18 months for supplemental claims.
• Mandatory Binding Arbitration – This proposal would provide that insurance companies, for a premium discount, may issue an optional endorsement with consent from the policyholder that requires participation in binding arbitration to settle a claim.
• Notice to Policyholders – In response to policyholders not realizing that their property insurance policy does not cover flood, the new law would require that a property insurer place the “Flood Coverage Not Included” statement on the policy declarations page rather than just “with the policy documents.”
• Citizens Property Insurance Corporation (Citizens) – In an attempt to reduce the enormous risk taken on by Citizens and force policyholders into the private market, the new law would depopulate Citizens by requiring policyholders to accept a renewal or take-out offer from an authorized insurer within 20 percent of a policyholder’s Citizens premium, including surcharges and assessments being levied. In such circumstances, the policyholder would be ineligible to remain in Citizens. Additionally, for new policies, the new law would establish that the risk is ineligible for Citizens coverage if the admitted-market policy is within 20 percent of a policyholder’s Citizens premium; requires Citizens residential lines policyholders to obtain flood insurance as a condition of having coverage from Citizens by 2027.

Many of the foregoing provisions are not consumer friendly and arguably, will take years to accomplish their stated goal of reducing insurance premiums in Florida. This CALL Alert is not intended as a comprehensive review of the extensive proposals being considered. To read the actual Senate and House bills, please see Special Session SB2-A and HB1-A. As always, the best tool at your disposal is to communicate with your public policy makers about this critical issue and what is needed to keep your community both protected and affordable.