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Differences in Property Legislation Remain at Session’s Midpoint

Differences in Property Legislation Remain at Session’s Midpoint

As we have now reached the midpoint of the 2011 legislative, some of the key elements of this year’s property insurance legislation still differ in significant ways between the House and Senate versions.  Property legislation tends to go down to the wire each year, and this year looks like it will be no exception.

Some of the key differences in the House and Senate bills relate to the Florida Hurricane Catastrophe Fund, the rate filing process, sinkhole coverage and rates, and holdbacks on replacement cost policies.

The Senate bill contains provisions relating to the Florida Hurricane Catastrophe Fund that would define its losses to include attorneys’ fees andpublic adjuster fees paid by insurers.  This would address a situation that received attetnion in a dispute between Sunshine State Insurance Company and the FHCF.  The definition of losses also would exclude certain types of costs and expenses.  The House bill differs in its treatment of attorneys’ fees and public adjuster costs, and interested parties continue to work on this issue.

The bills also differ in several rating provisions.  The Senate bill would prohibit use and file rate filings until May 1, 2012, whereas the House bill would repeal the prohibition in the current rating law because it expired at the end of 2010.  The Senate bill instead expands the expedited filing provisions of the rating law, which is not necessary under the House’s approach.

The Senate bill would create additional flexibility for sinkhole rates as part of its effort to address problems with this coverage.  The Senate proposal would allow the OIR to disapprove the sinkhole portion of a rate only if it is inadequate or relies on an unlawful rating consideration.  The House has not addressed the rating aspect of sinkhole coverage.

The Senate bill also would make a series of changes to Citizens Property Insurance Corporation that are not addressed in the House bill.  However, the House is considering a separate bill addressing Citizens, and the chambers will continue to debate reducing the potential assessment burden created by Citizens’ inadequate rates as balanced by a desire to moderate the rate impact that would result to many Floridians if Citizens’ rates were to increase.

The House and Senate bills both would begin to fix replacement cost coverage as a cost-driver of rate increases by restoring the holdback provision on the dwelling portion of claims.  However, the Senate bill also would give insurers the option of also offering a holdback policy for contents, which is an option not currently allowed by the House version.

Both chambers also will continue to debate solutions for Florida’s sinkhole insurance problem.  Each chamber would address the current definition of structural damage, although they differ somewhat in their proposed definitions.  The respective proposals also differ in their treatment of procedural requirements and legal standards relating to sinkhole claims.  These provisions are likely to be revised as the session goes on as both chambers continue to evaluate the extent to which some type of coverage should remain available and how that coverage can be viable in the market.

The resolution of these issues probably won’t come until the last week, and maybe even the last day, of the legislative session.  However, there will be a lot of debate on these points between now and then.  We’ll continue to monitor these issues as they go along, and we’ll have a full wrap up in our Florida Insurance Report following the session.  THe subscriptions page of our website allows users to sign up to receive our Report either electronically or by mail.