South Florida Sun-Sentinel Palm Beach (Sunday)
Insurance reforms aim to end roof fights
Bills look to fix issues that have driven up coverage losses, rates
The days of insurers cancelling homeowner policies for not replacing perfectly good roofs could be coming to an end.
So could the days of roofing contractors and attorneys enriching themselves by forcing insurers to replace roofs with little or no damage.
Legislative bills filed three days before a special session on insurance reform is scheduled to begin aim to resolve expensive roof-related issues that have driven steep coverage losses for insurers and sharp rate increases for homeowners.
Roof coverage reforms are among a long list of proposals that Florida’s Legislature will debate beginning Monday in Tallahassee. Other proposals include restrictions on attorneys fees that insurers blame for killing their industry’s profitability over the past five years, and creation of a $2 billion reinsurance fund to ensure financially shaky companies survive the upcoming hurricane season.
The two Senate versions of the bills were filed by Sen. Jim Boyd, a Tampa Bay Republican and chairman of the Senate Banking and Insurance Committee. Boyd is an insurance agent who has been active in recent insurance-related legislation.
“I believe the legislation I will file for your consideration during the special session will address the many issues leading to the instability of the current property insurance market in our state,” Boyd wrote in a memo to senators. “The proposal balances fair costs and protections for consumers while adding reasonable guardrails for insurance companies against the frivolous litigation and fraudulent
claims that drive up rates for everyone.”
The bills are an effort to respond to growing demands to stabilize Florida’s precarious property insurance market. Insurers have been warning for the past three years that the industry in Florida is in danger of collapse — an unthinkable prospect that could suffocate the state’s all-important real estate market.
Those warnings are being realized with the failure and dissolution of six Florida-based insurers since 2018, including four over the past year, cancellations and non-renewals of tens of thousands of homeowner policies and rapid growth of stateowned Citizens Property Insurance Corp., Florida’s insurer of last resort.
If recent debates over insurance reforms are any guide, the special session promises to be contentious despite limited opportunity for public participation. On Monday and Tuesday, the bills will be debated by Senate and House appropriations committees before heading to the Senate and House floors Tuesday and Wednesday.
Lobbyists for insurance companies, repair contractors, plaintiffs attorneys and homeowners are likely to show up in force to deride proposals that will cost them money and defend the ones that work to their advantage.
How many of the proposals in the bills will survive the push and pull remains to be seen. And consumers will likely have to wait to find out whether whatever emerges will roll back or at least slow rate increases that have doubled coverage costs for many over the past few years.
Mark Friedlander, communications director for the industry-funded Insurance Information Institute, called the proposals “a first step.”
But he sought to temper expectations. In an emailed statement, Friedlander said, “We realize all of the market’s problems cannot be addressed in a five-day session and whatever legislation that passes next week and is signed into law will not immediately stop the escalating costs of property insurance for Florida homeowners or resolve all of the financial challenges facing many residential insurers.”
The roof coverage proposals seek to untangle a costly and complicated dilemma that went largely unaddressed over the past two legislative sessions.
Insurers say their financial stability has been undermined by roofing contractors who go door to door promising homeowners that they can get their insurers to pay for new roofs. Insurers say the contractors get permission to inspect the roofs for damage and, after inevitably finding or creating damage, persuade the homeowners to sign a contract transferring to the roofers their right to bill the insurer for the replacement cost.
That’s when plaintiffs attorneys step in, filing suit to compel the insurers to pay up. Rather than spend the money on protracted litigation, the insurer settles and the attorneys pocket legal fees that exceed the cost of the new roof. While some homeowners enjoy “free” roofs, all of the insurers’ other customers are forced to cough up higher premiums to cover the costs of the claims.
Other homeowners aren’t so lucky. They get notices cancelling their policies because they live in neighborhoods with high rates of roof claims, or they’re told they must spend thousands of dollars to replace their roofs as a condition of renewing their policies.
Being ordered to replace their roof can be particularly unfair, some targeted homeowners have complained, when the roofs in question were built to the latest codes, have no significant damage or leaks, and were determined by qualified inspectors to have several years of useful life remaining.
The bills attempt to resolve the issue with several proposals:
▪ Insurers would not be allowed to refuse to write or renew policies on homes with roofs less than 15 years old solely because of the roof’s age.
▪ For a roof at least 15 years old, homeowners would be allowed to have the roof inspected before an insurer can require its replacement as a condition of writing or renewing the policy.
▪ If the inspection shows the roof has five or more years of useful life, an insurer would not be allowed to use the roof’s age to justify refusing to write or renew the policy.
▪ Advertising used by roofing companies to solicit homeowners to file insurance claims must make clear that waiving a deductible is a felony.
▪ Insurers would be allowed to offer separate roof deductibles with opt-out provisions in exchange for a policy discount.
▪ Florida’s building code would be revised to allow only damaged portions of roofs to be replaced if the roof was built in compliance with 2007 or newer versions of the building code. Currently, the code requires replacement of the entire roof if an inspection determines that 25% or more of the roof is damaged.
Sen. Jeff Brandes, a Tampa Bay-area Republican and a vocal critic of how the Legislature has been dealing with the insurance crisis, praised many aspects of the bills as “not bad” but said provisions requiring insurers to provide roof coverage would create problems.
Legal fee incentives would be reduced
Other proposals seek to eliminate financial incentives that insurers say motivate plaintiffs attorneys to collude with contractors and bombard carriers with costly litigation.
Third-party assignees of policyholders would be denied the right to collect so-called “one-way” attorneys fees in any lawsuit arising from a claim dispute.
The one-way attorney fee statute, in place for a century in Florida law, was intended to empower policyholders to sue insurers without having to fear paying insurers’ legal fees if they lose. But contractors have exploited the statute by convincing policyholders to sign over their rights to bill their insurers.
Attorney fee multipliers — when attorneys seek payment of 1.5 to 3 times their normal fees from insurers — would no longer be awarded except in “rare and exceptional cases.” A 2017 state Supreme Court ruling threw out the rare and exception requirement and allowed fee multipliers to be applied in nearly every case.
And prevailing in lawsuits charging insurers with acting in “bad faith” would require proof that an insurer breached the insurance contract.
Plaintiffs attorneys’ lobbying organization, the Florida Justice Association, has not yet commented on the attorney fee proposals. But the organization has vigorously fought similar reform proposals in the past. Insurers are using the issue to erode consumers’ rights to pursue legitimate claims, the group told NBC News.
In a comment for a story posted on NBC News’ website before the reform bills were filed, the association called insurers’ claims about fraud and frivolous lawsuits overblown and said the companies are to blame for bad financial management.
Brandes praised the attorney fee reforms, saying they would bring Florida’s laws in line with national standards. But he criticized as insufficient a proposal to create a $2 billion state-backed reinsurance program to help undercapitalized companies secure sufficient claims-paying ability in time for the upcoming hurricane season.
The program would address growing fears that some Florida-based insurers would not be able to secure reinsurance, which is insurance insurers must buy, putting those companies at risk of being ordered into receivership by state insurance regulators.
Brandes and others, including the consumer-focused Federal Association for Insurance Reform, have been calling for the state to make $4 billion of additional reinsurance capacity available.
Other highlights of the bills include:
▪ $115 million in grant funding would be made available through the Department of Financial Services for homeowners to upgrade their properties to withstand hurricane damage. Owners of homes valued at $500,000 or less would be able to receive up to $10,000 for home-hardening improvements, or $2 for every $1 they spend.
▪ The Office of Insurance Regulation would be required to publish an annual report disclosing key financials for regulated insurers, including total values of earned and written premium, total losses incurred, the ratio of earned premium to losses, and the companies’ complaint ratios.
▪ Reports would also be required to shed light on events leading to insolvencies.
▪ An “insurer stability unit” would be created within the Office of Insurance Regulation to detect potential insurer insolvencies before they occur.
Information from the News Service of Florida was used in this report.