TALLAHASSEE (CBSMiami / NSF) – Citizens Property Insurance Corp. clients. receive a larger pay increase than originally proposed due to a change in law that was partially blocked by a federal judge this week.
Citizens officials expressed disappointment at Sunday’s ruling in which US District Judge Mark Walker found that the new law passed by lawmakers this spring violated roofers’ right to speak.
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But Citizens’ board of directors used another part of the measure (SB 76) to approve new tariff changes during a meeting on Wednesday.
“These necessary adjustments reflect the efforts of the Florida legislature to get citizens back into their role as residual insurance company,” said Citizen Chairman Carlos Beruff in a press release following Wednesday’s action. “Unfortunately, we have become the first or only choice in too many regions of the country.”
The changes, described as a modification of the increases previously approved in February, mean that the average rate increase for new and renewed policies after August 1 is 2.3 percent, while renewals after February 1, 2022 are 7.6 percent Percent increase.
The increases vary depending on the location and still require the approval of the Office for Insurance Regulations.
The new law, which went into effect July 1, partially changed a 2011 law that capped the annual increase for Citizens customers to 10 percent, meaning many have not paid actuarial rates.
The bill, signed by Governor Ron DeSantis last month, also allows citizens to include additional reinsurance cost estimates when calculating tariffs.
Brandon-based Gale Force Roofing & Restoration LLC filed a lawsuit against the new law last month, arguing that a provision banning roofers from advertising is unconstitutional.
On the roofing company’s side, Walker issued an injunction preventing parts of the law from being enforced. The judge found that the new law violated the rights of the First Amendment by directly punishing protected speech.
Walker’s verdict focused on part of the law that prohibits contractors from using “prohibited advertisements” to solicit homeowners’ insurance claims, which could include emails, door hangers, flyers and brochures.
“It is also clear that the threatened injuries suffered by the plaintiff by banning the plaintiff’s truthful commercial speech outweigh the state’s interest in preventing fraud, protecting consumers from exploitation and stabilizing the insurance market,” Walker wrote in the ruling.
Lawmakers passed the insurance measure on April 30 amid rising property insurance prices and insurers abandoning their policies in Florida.
Citizens President and CEO Barry Gilway said he was “not surprised, but disappointed” with Walker’s verdict.
“I understand the logic behind the order,” said Gilway. “But the end result, in my opinion, was that the recruitment rate is largely driven by the recruitment and aggressive solicitation of claims.”
The new law is also taking steps to limit legal fees and shorten the deadline for filing claims.
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The law is seen as the second new legislative victory for citizens and the insurance industry.
In 2019, lawmakers placed restrictions on policyholders to transfer claims – known as assignment of benefits – to contractors who then demand payments from insurers. Nonetheless, interest rates are rising and politics is moving from private hands to state-supported citizens.
This year’s law increases the 10 percent cap on Citizens ‘annual premium increases by 1 percent per year over the next five years to make government-sponsored insurers’ tariffs more competitive with private insurance coverage. The law also requires citizens to include in its tariffs the reinsurance costs necessary to protect their surplus from a storm for 1 in 100 years, and directs policyholders to private insurance carriers when the premium of a private insurance policy is within 20 percent a comparable insurance premium for citizens.
Citizens officials noted Wednesday that Walker state lawmakers could appeal during the 2022 legislature beginning January. However, they conceded that any positive signs that other parts of the law are working as intended may not be apparent until later in 2022.
“I know that hopefully in the next year or so we will have data to really understand the implications for the upcoming litigation we see,” said Christine Ashburn, Citizens’ director of communications, law and external relations.
In the lawsuit, Gale Force Roofing and Restoration said it is soliciting homeowners to contact the company for inspections of storm damage to roofs.
“The plaintiff (Gale Force Roofing and Restoration) will then truthfully tell the homeowners the type and extent of the damage,” the lawsuit said. “The plaintiff will then encourage homeowners to contact their insurance company to make a claim under their home insurance policy and contract with the plaintiff to transfer the benefits available under the homeowner’s insurance policy to the plaintiff.”
Gale Force argued that the law restricts his First Amendment rights because it forces the company to stop its written advertising, encouraging consumers to contact it to file a roof damage insurance claim.
The company also argued that the new law is aimed more at reducing insurance claims than preventing fraud, saying the law is a “thinly veiled attempt” to discourage homeowners from seeking outside help to make valid insurance claims for Claim home repairs.
However, proponents of the bill and representatives of the insurance industry argued that questionable, if not fraudulent, roof damage claims played an important role in the cost increase.
In court documents, prosecutors denied that the law’s restrictions violated the rights of the First Amendment, arguing that the “prohibited advertising” provision should be viewed as an appropriate restriction on commercial speech to combat consumer exploitation and fraud.
But Walker disagreed.
While the state has the right to regulate contractors and protect Floridians from fraud, Walker wrote in Sunday’s order, “must do so within the limits set by the constitution.”
“Here the legislature has not done this accordingly,” added the judge.
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