Over the next few days, a decision will be made as to whether Florida consumers will lose valuable property insurance coverage in insurers’ efforts to fight fraudsters that are driving up costs for everyone.
Critics warn of several insurance industry-backed reform proposals that have already been approved by the Senate but still face uncertainty in the House of Representatives.
Heads of state and government planned to present a revised version of their property insurance reform law on Friday that could include or omit controversial Senate coverage cuts. The latter choice would signal that the cuts would likely not be part of a compromise bill presented to all legislators before the end of its spring session.
The revised house bill is to be examined by the trade committee on Monday at 10 a.m.
The competitive proposals include efforts to reduce full roof replacement coverage, which is part of most property owners’ insurance coverage, lessening the incentives for lawyers by lowering the fees they can claim in litigation, and a 60-day consumer wait to impose a lawsuit on a claim.
The roof replacement and attorney fee reforms were included in an earlier version of the House’s Insurance Reform Act before being removed without explanation by the bill’s sponsor last month. However, critics say they are concerned that lawmakers backing the insurance industry are maneuvering to get them back on the bill.
Insurers say the reforms are needed to reduce fraudulent claims and litigation, as well as slow, skyrocketing rate increases that all policyholders have to pay to cover those losses – if their insurer doesn’t drop them and put them in state-run Citizens Property Insurance Corp., the insurer, is forcing the last resort.
Lawyers and contractors suing them claim that costly litigation would not be necessary if insurers had properly paid their claims and not forced clients to seek relief in court.
The most dramatic proposal to reduce coverage would relieve insurers of the obligation to provide full roof replacement coverage as part of the most commonly purchased all-perils property insurance. Currently, insurers must replace any roof that has been more than 25% damaged by storms, falling trees, fires or other hazards.
Under the Senate’s proposal, full replacement coverage would be limited to roofs that are 10 years old or less. Owners of houses with roofs over 10 years old would receive between 25% and 70% of the replacement costs after applying the deductible, depending on the type of roofing material.
Homeowners would still have the option to purchase full replacement coverage for an additional premium.
Insurers say the change is needed to combat a huge increase in fraud by roofers searching neighborhoods to find damaged roofs and then suing insurers who refuse to pay to replace them.
However, critics claim the reform would result in middle- and low-income homeowners whose roofs are damaged falling into deep debt to meet their stakes or being forced to forego repairs and instead live with blue tarpaulin or leaks .
“Very few residents can come out of their own pockets to replace their roofs to prevent mold and leakage, or to get small businesses back up and running,” said Michael Higer, partner and litigator for insurance claims at the Miami law firm Berger Singerman.
Paul Handerhan, president of the consumer-oriented federal association for insurance reform, says it may be necessary to offer insurers reduced roof coverage in order to keep insurance affordable for low-income homeowners. However, he says that any law should require insurers to notify customers of the change before renewing their policies.
As suggested, the law only requires in the policy documents that customers be notified in the mail a week or two after their renewal, which most people never read, Handerhan said. Ideally, insurance agents would notify their customers of the changes before renewing. “However, I’ve seen too many examples from brokers who haven’t explained the differences well,” he said.
Another change would revise the way lawyers can collect fees from insurers after a case is settled. Under current law, lawyers can bill insurers for all of their fees when the insurer handles a case for any amount of money over its original claims settlement offer. Insurers claim that the so-called “one-way lawyer’s fee” law, which has been on the books for more than a century, is being exploited by a small group of law firms filing hundreds of cases every month to collect the fees.
The proposal would reduce lawyers’ eligibility to collect one-way fees by tying that eligibility to the difference between the original settlement offer and the amount the insurer is ultimately willing to pay. In some cases, the attorney received nothing and was forced to collect his fees from the policyholder.
The One-Way Attorney Fee Act, which has been part of Florida law since 1893, was designed to ensure insurance customers can sue their insurer without running the risk of paying insurance fees if they lose their case. Higer said fewer attorneys will agree to represent homeowners without reassurance that their fees will be paid upon settlement. Some lawyers will require homeowners to pay before they handle their case – which will reduce the number of consumers who are able to sue for unpaid claims, Higer said.
Broward County’s mayor-elect Steve Geller, who also represents the Florida Association of Public Insurance Adjusters, said that forcing customers to pay out of pocket for legal representation would mean a benefit reduction.
Another proposal in the Senate bill would harm policyholders, critics say, by requiring insurers a 60-day notice period that they intend to file a lawsuit. Currently, insurers have 90 days to investigate claims and submit a settlement offer. If the policyholder rejects the offer and triggers the 60-day notice period, the insurer can request an additional 60 days for investigation, so that the consumer has to wait a total of 210 days after filing a litigation claim. As the pages go back and forth, the policyholder’s damage would not be repaired, Geller said.
“This doesn’t seem designed to get the insurance company to settle claims quickly,” he said.
It remains to be seen whether the revised house bill will extend the waiting period of 60 days. As currently written, the House version only requires a 10 day letter of intent to sue.
Both Senate and House bills would cut the time it takes to file a hurricane damage claim from three to two years after a storm. A few years ago this period was reduced from five to three years.
Insurers say too many fraudulent Hurricane Irma claims were filed in the third year after the 2017 storm. However, opponents of the proposal say that homeowners are not allowed to reopen or change their claims to fix damage that may not be noticeable until repairs begin. Given the investigation into hurricane claims, often months or years after the storm, it does harm to policyholders not to acknowledge the possibility of additional related claims.
Rather than reducing coverage for policyholders, critics say lawmakers should devote more resources to uncovering fraudulent activity by contractors and shady lawyers.
One of the upcoming house bills would authorize the state’s financial services department to take administrative action against licensed adjusters and contractors by fines or revoking licenses. But none of the bills offer more resources to punish fraud by the criminal justice system that deals with more serious crimes, Handerhan said.
Handerhans Association would like the state to set up its own homeowner insurance enforcement department to investigate criminal activity. “There is a lot of fraud, but extremely limited enforcement,” he said.
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