Special Session Proposals Address Property Market Concerns
The Florida House of Representatives and Senate have released their proposals for next week’s special session on property insurance reform. The special session follows last month’s call from Governor Ron DeSantis for a special session dealing with the crisis in Florida’s residential property insurance market.
Although their proposals are subject to change when the session commences next week, both the House and Senate seek to balance several important considerations. With respect to the availability and affordability of reinsurance, the legislature is considering a new “Reinsurance to Assist Policyholders” (RAP) program that would make $2 billion in capacity available to insurers below the Florida Hurricane Catastrophe Fund’s typical attachment point. The legislature recognizes that some insurers have placed their 2022 programs already. Therefore, the RAP proposal contemplates that each participating insurer will have the option of participating in 2022 or 2023. In either case, an insurer will be required to submit a rate filing recognizing the cost savings of participating in RAP compared to the private reinsurance market.
The legislature also is proposing several measures to address concerns with roof claims and the insurability of homes with roofs with remaining useful lives. One proposal would preclude an insurer from refusing to insure a home solely based on the age of a roof if it is less than 15 years old. For a roof more that 15 years old, the homeowner could submit a roof inspection demonstrating that the roof has at least five years of useful life remaining.
The proposals also include requiring contractors soliciting roof claims to provide certain disclosures to homeowners. The disclosures would refer to their responsibility for the deductible and the penalties for engaging in insurance fraud. The legislature would set parameters on how roof deductibles are implemented. Further, the bills would allow roofs to be repaired even if more than 25% damaged if the roofs already comply with the modern building code requirements.
The legislature proposes to add to and centralize the Florida Office of Insurance Regulation’s processes for monitoring struggling insurers. The bills also provide for enhanced analysis and reporting by the Department of Financial Services of the reasons for insurer insolvencies.
Likewise, the bills increase insureds’ access to information about insurers’ loss estimates. The proposals further provide for the Office of Insurance Regulation to publish statewide data about insurers’ market activities such as new policies written and policies canceled or nonrenewed.
Reducing Claims-Related Litigation Incentives
The Florida legislature also will be considering proposals to rebalance the incentives that have led to Florida’s having a grossly disproportionate share of the countrywide property-related claims litigation. As has been widely publicized, Florida has about 8% of the nation’s property insurance claims but nearly 80% of its property insurance litigation.
To address this concern, the legislature is considering a proposal that would allow attorneys’ fee multipliers only in “rare and exceptional” cases. The legislature also would preclude the assignment of the right to attorneys’ fees and would mandate that a bad faith action must be predicated on an established breach of contract.
The one-week special session begins May 23, so the outcome of these proposals will be known soon.