Sort out claims on property insurance

Because of the Legislature’s inaction, Floridians will get no property insurance relief this year.

There is debate about how the state should respond to what insurers contend are excessive claims for non-emergency water damages. Unfortunately, the Legislature didn’t even have the debate.

The issue is assignment of benefits — when homeowners authorize contractors to negotiate insurance claims on their behalf. It happens regularly with health insurance. A doctor or a hospital pays the insurer’s designated amount to the insurer. In most cases, there are no problems.

With homeowner coverage, however, insurers say the system is being abused in claims for non-emergency water damages. Policyholders assign benefits to contractors, who hire lawyers. According to the insurance industry, contractors overbill, the carrier denies the claim, the contractor’s lawyers sue, and the carrier has to settle, thus overpaying for the work and paying legal fees. Companies then raise rates.

The Florida House passed legislation that would have made it harder for policyholders to assign benefits and would have limited attorney fees. Senate Banking and Insurance Committee Chairwoman Anitere Flores, R-Miami, however, wanted any reform bill to include mandatory rate reductions. When the industry wouldn’t go along, Flores refused to consider any Senate bill.

As with gambling, the Legislature kicked property insurance reform down the road for another year. Unlike gambling, however, property insurance affects most Floridians, directly or indirectly. Property owners pay higher premiums. Landlords raise rents to cover those increases. Home insurance costs are the dry rot in the state’s economy and quality of life.

Rep. Evan Jenne, D-Hollywood, filed an amendment to the House bill that would have delayed rate increases for a year. After that, companies would have had to reduce rates by 6.5 percent, in tandem with the anti-fraud provisions. Jenne chose 6.5 percent because state-run Citizens Property Insurance Corp. filed for an increase in that amount, citing non-emergency water claims.

Jenne, who notes that he is not an attorney, knew that his bill had no chance. He wanted to make a point for the eventual debate. “The fraud is real,” Jenne told the Sun Sentinel Editorial Board. But the House bill, he said, was too friendly to the insurance industry.

As with most big issues, there’s a potential compromise. Here is what we suggest:

First, the Legislature should get an objective study of non-emergency water claims. Most information that guides insurance legislation comes from the insurance industry or from groups the industry finances. Similarly, most information on the other side of the issue tends to come from trial lawyers.

With credible information, the Legislature could craft legislation aimed at stopping what seems to be the usual small group of “bad actors” committing most of the abuses. The goal might be to impose restrictions on assignment of benefits for nonemergency cases only.

Almost certainly, however, any bill would have to include mandatory rate reduction. If a company raises rates because of the abuse, ending the abuse should result in a proportional decrease.

The Legislature’s handling of auto insurance offers a lesson. In 2012, Sen. Joe Negron, R-Stuart — now the chamber’s president — sponsored legislation to end the no-fault system that requires all drivers to purchase Personal Injury Protection coverage. Given the projected billions in savings, Negron asked for mandatory rate cuts.

Insurance lobbyists pushed back. So did Gov. Rick Scott. The result was a bill that contained most of what the industry wanted, but set only targets for premium reductions. Five years and several court cases later, Florida drivers are still waiting to see those lower premiums.

Compare the inaction on those insurance issues with the Legislature’s response to Florida Supreme Court rulings on attorneys’ fees that raised the cost of workers compensation insurance, which employers pay. House Republicans passed a bill that limits fees for lawyers who represent injured workers but not for those who represent employers. As of Thursday, the Senate version had passed three committees and was headed for a final vote.

The Wall Street Journal ran two editorials critical of Flores for not caving to the insurance industry. In fact, the Legislature has done countless favors for insurers, such as eliminating coverage in basic policies for perils such as mold and sinkholes.

As Jenne said, the Legislature must find “balance” between the industry and consumers. That search starts with data that doesn’t come from the industry.

With credible information, the Legislature could craft legislation aimed at stopping what seems to be the usual small group of “bad actors” committing most of the abuses.