June 17, 2019 • Vol. 97 No. 12
News & Markets
News & Markets
News & Markets
State Farm Cuts Homeowners Rates by 14.4% in Florida
The 2019 Legislative Session: What Passed, What Didn't
What Florida’s ‘Omnibus Insurance Bill’ Means for the Duty to Defend, Appraisal Process
Insurers of Collapsed Florida Bridge Builder to Pay $42M to Victims
What to Expect from Florida’s AOB Reform Law Taking Effect July 1
Commentary: Surplus Lines Support Florida’s Vibrant Insurance Market
Departments 6 People
16 Florida Fraud Roundup
JUNE 17, 2019 INSURANCE JOURNAL | FLORIDA | 3
News & Markets State Farm Cuts Homeowners Rates by 14.4% in Florida
tate Farm has reduced its homeowners insurance rates by an average of 14.4 percent in Florida for current and future home insurance customers. The new rates went into effect May 15, 2019 for new business and July 1, 2019 for renewals. The total state-wide expected savings impact for State Farm customers by this rate decrease in Florida will be approximately $95.9 million, according to the insurer. “Stable non-catastrophe loss trends, improving expenses and losses, along with State Farm Florida Financial
strength were important factors, among many, that supported our decision to make this rate change,” said Dan Krause, State Farm senior vice-president. Overall changes in premiums for individual homeowners will vary depending on the specific details of an individual customer’s policy and chosen coverages, the company said. Customers with questions can contact their local State Farm agent to discuss their individual situation. In addition to this rate reduction, State Farm agents can review with new and exist-
ing customers opportunities for additional discounts that may apply to an individual’s circumstances. State Farm and its affiliates are the largest providers of auto and home insurance in the United States. Its nearly
19,000 agents and approximately 65,000 employees serve approximately 83 million policies and accounts. It offers commercial auto insurance, along with coverage for renters, business owners, boats and motorcycles.
Insurers of Collapsed Florida Bridge Builder to Pay $42M to Victims
nsurers will pay up to $42 million to surviving victims of a 2018 Florida bridge collapse and the families of those killed under a deal announced Friday between the now-bankrupt construction company that built the pedestrian bridge and its insurers. The deal between Magnum Construction Management and the insurance companies, reported by the Miami Herald, marks a step forward in resolving litigation involving families of the six people killed when the Florida International University pedestrian bridge collapsed on March 15, 2018, and eight injured survivors. The settlement agreement was filed in federal bankruptcy court April 30 and must now
be approved by a judge. The Miami Herald previously reported Magnum’s insurers include Greenwich Insurance Company, XL Insurance
4 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
America, Inc., Indian Harbor Insurance Company and The Ohio Casualty Insurance Company. Magnum, formerly known as Munilla Construction Management, filed for bankruptcy earlier this year. More than 20 other defendants are being sued by victims, and they will have to reach their own deals with their insurers. The National Transportation Safety Board said in a preliminary report in November that bridge designers overestimated the strength of a critical section of the bridge, though the report did not assign blame for the collapse. A final report is expected later this year. Magnum
Construction Company did not design the bridge. Orlando Duran, whose daughter Alexa was killed in the collapse, attended a news conference to announce details of the deal and said that he hopes more parties come forward to take responsibility. For example, he said the road under the bridge should have been closed while work continued on completing the modularly constructed bridge. He said there were “so many things that could have been done to stop this tragedy,” which took the “life of my daughter and five other people.” “She was happy, she was outgoing,” Duran said of his daughter. “She was, to me, my personal friend. I lost not only my daughter; I also lost my friend.” Copyright 2019 Associated Press. All rights reserved. INSURANCEJOURNAL.COM
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Baldwin Risk Partners (BRP), a Tampa, Fla.-headquartered insurance distribution and consulting holding company, has promoted Trevor Baldwin to CEO. He will take over for former CEO Lowry Baldwin, who will maintain an active role in the organization as chairman and continue to provide corporate Trevor Baldwin governance and influence BRP strategy, among other tasks. As CEO, Trevor Baldwin will oversee strategic planning. In his prior role as president of BRP, Trevor Baldwin executed on driving BRP’s growth organically and through strategic partnership. He joined the company in 2009. Led by Trevor Baldwin, BRP has partnered with several firms across Florida, Alabama, Texas and Georgia in recent years. In 2018, BRP was ranked the 43rd Largest Independent Insurance Broker in the United States by Insurance Journal. Appalachian Underwriters, Inc. has hired transportation broker Mary Kidd to focus on large commercial transportation accounts in its Sarasota, Fla., office. Kidd will work with accounts with more than $25,000 in premium, across all states. Kidd comes to AUI with 28 years of experience in commercial auto insurance, starting as a commercial auto underwriter and spending the last 10 years as a fleet transportation manager and specialist with another MGA. According to Mark Arnold, the hiring of Kidd marks the company’s entrance into the commercial auto market. The company has added multiple carriers to its Brokerage division and now has an appetite for large transportation risks. Appalachian Underwriters Inc. is a full service managing general agency (MGA) and wholesale insurance brokerage. 6 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
Jimcor Agency Inc., a Montvale, N.J.based independent managing general agent and insurance wholesaler, has hired Joe Chase to serve as underwriter in Florida working in the company’s Southeast Region. He is based in the St. Petersburg, Fla., area. Previously, Chase worked in the E&S side of the business. He worked for Hull & Company for three years as a renewal underwriter assisting in new business and renewals. After Hull & Company, he went on to Tapco for one year as a commercial underwriter delivering new business quotes. Chase specializes in low and high value coastal property, inland marine, general liability and excess. He will work to formulate business relationships and grow the Florida territory.
Assured Risk Cover (ARC) has hired Tom Freeland as market president and
investor. Freeland will be responsible for growing the revenue streams of the Florida-based StormPeace residential and comTom Freeland mercial parametric insurance product. Freeland has worked with startups as well as mature businesses within and outside the insurance industry. He has experience in the property and casualty insurance marketplace, including an engagement at GuideWell Connect, where he led a team that assembled and delivered a suite of auto and home insurance products, including StormPeace, to more than 5 million health care members in Florida. He also held positions with Atlanta Casualty, a Great American/American Financial subsidiary. StormPeace was designed to protect insureds from economic loss incurred by a named hurricane. It is available through a select network of appointed agents. Assured Risk Cover (ARC) is a venture-backed Silicon Valley corporation based in Pleasanton, Calif.
J.M. Wilson has added Keith Driggers as branch manager of its newly renamed Hollywood, Fla., office. Located at 5555 Hollywood Blvd, Ste. 200, the former “Enright & Wilson” office became an Keith Driggers official J.M. Wilson branch office earlier this year. The office will serve independent insurance agents by offering property and casualty, brokerage, professional liability, commercial transportation, personal lines and surety throughout the state of Florida. Diggers will plan the day to day operations of the office and work to grow relationships with new and existing independent insurance agents. Diggers started his insurance career in 1995 in the corporate headquarters of a national retail broker and subsequently held positions at national and regional retail brokers. He was also CEO of a boutique wholesale broker with a focus on construction risks. Driggers currently serves on the Board of Governors of the Florida Surplus Lines Service Office and is a past chair. J.M. Wilson is a managing general agency and surplus lines broker providing independent insurance agents access to specialty markets for both personal and commercial lines. Alliant Insurance Services has added Jamie Costigan to the firm as senior vice president in its Miami office. Costigan will provide risk management services for healthcare clients across the U.S. Costigan joins Alliant with knowledge of the healthcare industry, working with a range of providers, physician groups, and other healthcare entities. In addition to her commercial property and casualty background, Costigan also has experience designing and delivering customized employee benefits programs for healthcare clients. Prior to joining Alliant, Costigan was senior vice president with a national, full service insurance and risk management brokerage firm. INSURANCEJOURNAL.COM
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News & Markets
he Florida Legislature looked at and passed many pieces of legislation in the 2019 session that will impact the insurance industry. The following are summaries of what passed — and what didn’t.
What Passed HB 7065 – AOB Reform:
Provides for substantial changes in the way insurance benefits may be assigned to third parties. Defines “assignment agreement” and establishes requirements for
8 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
the execution, validity, and effect of such an agreement; Transfers certain pre-lawsuit duties under the insurance contract to the assignee and shifts the burden to the assignee to prove that any failure to carry out such duties has not limited the insurer’s ability to perform under the contract; Requires each insurer to report specified data on claims paid in the prior year under assignment agreements by Jan. 30, 2022, and each year thereafter; allows an insurer to make available a policy prohibiting
assignment, in whole or in part, under certain conditions; Revises the state’s oneway attorney fee statute to incorporate an attorney fee structure in determining the fee amount awarded in suits by an assignee against an insurer; requires service providers to give an insurer and the consumer prior written notice of at least 10 business days before filing suit on a claim. Signed by Governor: May 23, 2019 Takes Effect: July 1, 2019
continued on page 10
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News & Markets continued from page 8 HB 301 – Insurance “Omnibus” bill:
Allows insurers to provide multi-policy discounts when homeowners and auto policies are purchased through the same agent; increases the reimbursement from the Florida Hurricane Catastrophe Fund for loss adjustment expenses from 5 percent to 10 percent of reimbursed losses beginning with contracts issued after June 1, 2019; provides that workers’ compensation insurance applicants and their agents are not required to have their sworn statements notarized. Also enacts several updates for the Florida Surplus Lines industry, including eliminating a prescriptive cap on surplus lines agent policy fees (currently $35) and replacing it with a requirement that the fee be “reasonable” and separately disclosed to the customer. In addition, the residential dwelling replacement cost has been decreased to $700,000 from $1 million as it relates to “diligent effort” procedures. Makes changes to civil remedy notices and the appraisal process. Signed by Governor: Presented June 6, 2019 Takes Effect: July 1, 2019
HB 617 – Flood Insurance Disclosure:
Revises circumstances under which insurers issuing homeowners insurance policies must include a specified statement relating to flood insurance with policy documents at initial issuance and renewals. Fixes an oversight in previous legislation that required property insurance policies to prominently display that they don’t provide flood or other coverages, which didn’t contemplate “endorsement” of coverages onto property insurance policies. This bill requires the flood insurance portion of the notice only when the policy does not include flood coverage. Signed by Governor: Presented June 5, 2019 Takes Effect: July 1, 2019
HB 107 – Hands Free Driving Requirement:
Prohibits a person from operating a motor vehicle while using a wireless 10 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
communications device in a handheld manner in a designated school crossing, school zone or work zone; authorizes a law enforcement officer during a specified period to stop motor vehicles to issue warnings to persons who are driving while using a wireless communications device in a handheld manner in a designated school crossing, school zone or work zone; requires all law enforcement agencies to maintain such information and report it to the Department of Highway Safety and Motor Vehicles in a form and manner determined by the department, etc. Signed by Governor: May 17, 2019 Takes Effect: July 1, 2019
HB 311 – Autonomous Vehicles:
Exempts autonomous vehicles and operators from certain prohibitions; provides that human operator is not required to operate fully autonomous vehicle; authorizes fully autonomous vehicle to operate regardless of presence of human operator; provides that automated driving system is deemed operator of autonomous vehicle operating with system engaged; provides requirements for insurance and operation of on-demand autonomous vehicle networks; revises registration requirements for autonomous vehicles; provides for uniformity of laws governing autonomous vehicles. Signed by Governor: Presented June 5, 2019 Takes Effect: July 1, 2019
SB 1024 – Blockchain Technology Task Force:
Establishes the Florida Blockchain Task Force within the Florida Department of Financial Services that will develop a specified master plan specifying duties and procedures of the task force, etc., related to blockchain technology. According to CFO Jimmy Patronis, who championed the bill, blockchain technology increases the difficulty of amending transaction records and creates a “vital avenue of transparency for the state.” Signed by Governor: May 23, 2019 Takes Effect: July 1, 2019
HB 1393 – Modifies Areas Regulated by
the Florida Department of Financial Services:
Amends various licensing statutes administered by the Division of Agent and Agency services, including creating a temporary license for personal lines agents; gives DFS authority to help insurance consumers understand the mediation process; and helps to more easily return unclaimed property to Floridians. Also provides DFS the discretion to deny, suspend, revoke or refuse to continue an insurance agency license on the grounds that another jurisdiction has taken an adverse action against a professional license held by a majority owner, partner, manager, director, officer or other controlling person of the agency. Signed by Governor: Bill Enrolled May 1, 2019 Takes Effect: July 1, 2019
HB 7091 – Hurricane and Flood Loss Model Trade Secrets:
Removes the scheduled repeal date of the public record and public meeting exemptions maintaining that the public record exemption for a trade secret used in designing and constructing a hurricane or flood loss model and provided by a private company to the Florida Commission on Hurricane Loss Projection Methodology, the Office of Insurance Regulation, or the consumer advocate; removes the public meeting exemption for any portion of a Florida Commission on Hurricane Loss Projection Methodology meeting or of a rate proceeding on an insurer’s rate filing at which such confidential and exempt trade secret is discussed; and removes the public record exemption for the recording of an exempt meeting. Signed by Governor: May 14, 2019 Takes Effect: Oct. 1, 2019
SB 426 – Firefighters Cancer Benefits:
Makes firefighters who are diagnosed with certain cancers eligible to receive certain disability or death benefits. In lieu of pursuing workers’ compensation coverage, a firefighter is entitled to cancer treatment and a one-time cash payout of $25,000, upon the firefighter’s initial diagnosis of cancer. INSURANCEJOURNAL.COM
Signed by Governor: May 3, 2019 Takes Effect: July 1, 2019
HB 1253 – Prescription Drug Monitoring Program:
Gives Florida Attorney General access to information in the state’s prescription drug database to track sales of opioids. The move will help the AG’s efforts to sue drug manufacturers and pharmacies for overselling pain pills. Patient information will be protected. Signed by Governor: Enrolled May 3, 2019 Takes Effect: July 1, 2019
malpractice action under limited circumstances and created an optional communication and resolution program.
HB 751 – Duty of Good Faith:
Bill called for removing the violation of duty of good faith from claims for civil remedies; providing an administrative remedy for violation of duty of good faith; provided notice and complaint requirements; required DFS to determine sufficiency of complaints.
SB 538/HB 387 – Nonadmitted Insurance Markets: Bills would have made several changes to Florida Surplus Lines law.
SB 983 – First Responder PTSD:
Ratified DFS’ rules related to workers’ compensation wage replacement benefits that are now provided in specified circumstances for post-traumatic stress disorder (PTSD) suffered by a first responder, regardless of whether the individual’s PTSD is accompanied by a physical injury requiring medical treatment. Specifies the types of third-party injuries qualifying as grievous bodily harm of a nature that shocks the conscience for the purposes of allowing wage replacement benefits for first responder PTSD. Signed by Governor: Enrolled April 26, 2019 Takes Effect: Upon becoming law
What Didn’t Pass HB 323 – Motor Vehicle Insurance Coverage for Windshield Glass:
Bill called for prohibiting motor vehicle repair shops and employees from offering anything of value to customers in exchange for making insurance claims for motor vehicle glass replacement and repair, including offers made through certain persons. •“A”-Rated Non-Admitted Carrier • $10 Credit to Your
SB 1052 – Motor Vehicle Insurance/ Personal Injury Protection (PIP):
Bill called for repealing provisions that comprise the Florida Motor Vehicle No-Fault Law.
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Card with each policy.
• Quick Claims Handling
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• Optional Premium Financing
and ACH Payments Accepted
HB 7077 – Medical Malpractice:
Bill called for specifying that patients had waived their right to bring medical 1/2 v.indd 1
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News & Markets What to Expect from
Florida’s AOB Reform Law
Taking Effect July 1
By Amy O’Connor
he countdown is on for Florida assignment of benefits (AOB) reform that will take effect July 1, and the insurance industry is getting ready to respond to new requirements as a result of the law as well as evaluating how the changes will impact their books of business. The industry says of most importance is that the bill is a consumer-friendly law that will bring relief to Florida policyholders. “This is a consumer protection measure, not just in terms of impacting the overall premium they have to pay, but also giving them some protections that they didn’t have before,” said Barry Gilway, president and CEO of Florida’s Citizens Property Insurance Corp. The industry is also preparing for what the next “scheme” will be as those who have profited off of AOB’s for many years look for ways around the new law. Florida Governor Ron DeSantis signed House Bill 7065 on May 23, marking the end of a seven-year battle by the industry and reform advocates seeking a solution to escalating abuse of the policyholder benefit they say has led to less coverage and higher rates for Florida property owners. “I thank the Florida Legislature for passing meaningful AOB reform, which has become a racket in recent years,” DeSantis said in a statement. “This legislation will protect Florida consumers from predatory insurance practices.” The bill's multiple provisions: • Define “assignment agreement” and establish requirements for the execution, validity and effect of agreements • Prohibit certain fees and alter policy provisions related to managed repairs in an assignment agreement • Transfer pre-lawsuit duties under the insurance contract to the assignee and shift the burden to the assignee to prove that any failure to carry out such duties has not limited the insurer’s ability to 12 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
perform under the contract • Require each insurer to report specified data on claims paid in the prior year under assignment agreements by Jan. 30, 2022, and each year thereafter • Allow an insurer to make available a policy prohibiting assignment, in whole or in part, under certain conditions • Revise Florida's one-way attorney fee statute to incorporate an attorney fee structure in determing the fee amount awarded in suits by an assignee against an insurer • Require service providers to give an insurer and the consumer prior written notice of at least 10 business days before filing suit on a claim The Florida Office of Insurance Regulation told insurers in a draft memo in early June that no form or rate filings are required to comply with the new assignment agreement provisions in the bill because they do not relate to the terms of an insurance policy itself. Insurers can choose to notify their policyholders of the new assignment agreement provisions without filing a notice with OIR. However, OIR said if insurers chose to modify their policy forms “to provide, for instance, a designated location for the receipt of assignment agreements,” they must file the policy form change and have it approved. Insurers making rate changes will need to file with OIR, as is current standard practice. The required data elements for the first insurer data call due in 2022 will be specified in a rule to be promulgated by the Financial Services Commission, OIR said, and must include data about claims adjustment and settlement timeframes and trends, grouped by whether litigated or not litigated and by loss adjustment expenses. OIR said in an email to Insurance Journal it will issue a data call in February 2020. It will include a data call template when it officially releases its informational memo-
randum to the industry. The draft memo also notes the standards for policies to restrict an assignment, which the new law allows insurers to do so long as several requirements are met, including offering a comparable policy that does not restrict assignment and offering the restricted policy at a lower cost than an unrestricted policy. Industry experts are mixed on whether insurers will utilize this provision. Trade association APCIA, which represents 54 Florida-domiciled insurers, said it anticipates its member companies will want to “utilize these tools for their products.” Gilway said Citizens is looking into the possibility but that it’s a “decision we have not yet made. We’re going to wait and see what the overall reaction in the market is.” OIR said in preliminary discussions,
some insurers have indicated they may be interested in offering policies restricting assignment agreements in whole or in part, but no insurer has filed to as of yet. Michael Carlson, president of the Personal Insurance Federation of Florida, an association representing Allstate, State Farm, Farmers and Progressive, said some companies are uncertain about how to price a non-assignable or limited assignment policy.
Citizens policyholders will see rate relief sooner rather than later thanks to the bill requiring that the expected savings from AOB litigation costs be passed along to INSURANCEJOURNAL.COM
its insureds. The company currently has about 425,000 policyholders. Citizens has borne the brunt of the abuse, particularly in South Florida where AOB lawsuits have exploded over the last 10 years. Citizens filed for rate increases for 97 percent of its homeowners policyholders this year to offset litigation costs, but the bill says the insurer may not implement rate changes unless the 2019 rate filing reflects projected rate savings from the new law. The insurer will present a new rate filing at its Board of Governors meeting on June 19. Gilway said it anticipates the Citizens Board will approve the rate filing and it will then be sent to OIR. He could not say what the rate filing requests since it had not yet been approved by the Citizens Board, but he noted that “from a premiums standpoint, a substantial number of individuals that would have received an increase will now receive a decrease.” Citizens said in a statement after the passage of the bill that its actuaries estimated reforms would reduce the statewide average rate need from 25.2% to 10.1% for homeowners policyholders. In South Florida, the average rate need would drop from 30.4% to 12.8%. Other insurers have said they expect rate reductions thanks to the new law, but they aren’t required to file for lower rates like Citizens. What those actual rate decreases will be is still uncertain. “The new law is expected to reduce costs by reducing the amount of litigation, however, three active hurricane seasons in a row also impact insurers costs, especially as it relates to reinsurance rates, which are also increasing,” said Logan McFaddin, Southeast regional director for APCIA. Reinsurance rates were up an average 10 to 20% in Florida this year, according to KBW. Jeff Grady, president of the Florida Association of Insurance Agents, said he is hopeful both for agents and consumers INSURANCEJOURNAL.COM
that insurers will bring capacity back to areas where they pulled out of because of the abuse, such as in South Florida. He expects there will be a gradual improvement in the Florida property insurance market, but rate changes will not happen “overnight.” “If we really did patch the hole in the dam, it should bring back interest in our market and it should result in lower rates. Of course, that takes a while. You have to file for those rates and implement those rates,” he said. Gilway said it will “be interesting to see” how private market insurers react to the legislation and how their appetite changes. He said for most companies, particularly those with heavy exposures in southeast Florida, the reduction in litigation coming from AOB should outpace the impact of reinsurance rate increases. Still, he said, “I don’t think anything will happen for the next 12 months. Frankly, I think people are going to wait and see what the overall impact of this bill is.” Regulators and lawmakers will hold the insurance industry accountable both for implementation of reforms and for rate changes that reflect a reduction in costs, said PIFF’s Carlson. “I know that [Commissioner David Altmaier] will expect that after all this time and effort, the bill will have a positive effect on consumers,” he said. “Our members have pledged to work collaboratively … and hopefully the market will reflect positive changes and we’ll see changes to benefit consumers. That’s the whole purpose of this effort.” OIR said it anticipates it will take some time for the provisions of the new law to be reflected in losses and insurer loss adjustment expenses and rate indications.
Carriers say they will need agents and brokers to help them communicate the various changes in the new law to customers, especially its consumer protections. “There’s a huge communication role for our agents relative to advising our consumers about what their rights are and what the opportunities are for them relative to an AOB,” Gilway said of Citizens, which has
7,000 appointed agents in Florida. Citizens and agent associations like FAIA are already working on trainings and seminars on what agents need to know. Phil Visali, president of We Insure, an independent agency franchise with 94 locations throughout Florida, said the company has included education on the new bill during its monthly trainings. “It’s on us, the insurance agent, insurance professional, to educate the homeowner,” he said. Michael Packer, attorney and shareholder with Marshall Dennehey Warner Coleman & Goggin, said agents and brokers should read the bill’s statutes and speak to an attorney they trust so they know what’s going on and the current state of the law.
Onto the Next Scheme
Though the industry is celebrating this legislative victory, it is well aware that another insurance-related scheme is just around the corner. “We have a whole team looking at what’s next because Florida is a whack-amole state … we know that attorneys are already working on how they can circumvent the new legislation,” said Gilway. Lead Florida AOB attorney Harvey Cohen posted a video within days of the reform’s passage declaring the AOB “dead” and urged vendors to submit their AOB agreements before the bill takes effect on July 1. In response, lawmakers added a provision to another bill making the effective date for the attorney fee provision the date the governor signed the AOB bill. Packer said while he thinks this bill will have an impact on stemming AOB lawsuits and could lead to a reduction in the usage of AOB agreements, he isn’t as optimistic about a long-term reduction in litigation. “Lawyers on both sides of the fence always come up with different, new and better ways to get around or use these types of statutory provisions to their benefit." Carlson also emphasized not to “forget about auto glass” — a similar AOB scheme in the auto market that has led to an explosion in windshield claims. “This may be the next fertile ground for abuse now that we’ve kind of put some limits around AOB property abuse,” he said. JUNE 17, 2019 INSURANCE JOURNAL | FLORIDA | 13
News & Markets
What Florida’s ‘Omnibus Insurance Bill’ Means for the Duty to Defend, Appraisal Process
hile most of the news out of the 2019 Florida Legislative Session surrounding insurance has focused on House Bill 7065 and the wide-spread assignment of benefits (AOB) reform it promises, another piece of legislation that makes some big insurance-related changes – HB 301 – By Michael Packer awaits the governor’s signature (as of press time). HB 301, which some refer to as an omnibus insurance bill, primarily focuses on updating laws related to Florida surplus lines but it also contains two provisions which will have far-reaching effects on Florida’s insur14 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
ance industry. HB 301 essentially changes the interplay between insurance companies when more than one insurance company owes an insured the duty to defend. Historically, when two or more insurance companies covered a loss and one carrier paid, under Florida law, the paying insurance carrier would be entitled to contribution for that indemnity from other companies providing coverage. However, there was no right to contribution for the defense costs incurred by the insurer that provided a defense. The courts reasoned that an insurance company has an independent obligation to provide a defense to its insured and when it issued the policy, it did so without contemplation that another insurance company might also be liable
to defend the insured should a suit or claim be brought. This has been the long-standing rule of law in Florida. Now, with the creation of Florida Statute 624.1055, a liability insurer who owes a duty to defend an insured has a right of contribution for defense costs against any other liability insurer who owes a duty to defend the insured against the same claim, suit, or other action. The apportionment of costs will be assessed in accordance with the terms of the liability insurance policies. This will have a wide impact on the insurance industry, especially in the context of construction defect claims and litigation where, oftentimes, an insured is covered under multiple insurance policies. Prior to the enactment of this law (applies to any claim, INSURANCEJOURNAL.COM
suit, or other action initiated on or after Jan. 1, 2020), the first insurer to pick up the defense was essentially penalized for protecting its insured while the other carrier(s) benefited by not having to contribute to the defense for no other reason than they failed to act in a timely fashion. In addition, HB 301 makes some minor but important changes to Florida Statute 624.155 (Florida’s bad faith statute). The bill precludes a party from filing a Civil Remedy Notice (CRN) for 60 days after appraisal is invoked in a residential insurance dispute. The significance of this change is that it allows a minimum of 120 days for the appraisal process to proceed and for an insurer to pay an appraisal award if appropriate, with no potential liability for extra contractual damages. While it does not completely eliminate the potential bad faith exposure for participating in appraisal as discussed in the Cammarata v. State Farm case, it does provide a more reasonable time basis for a residential carrier to participate in appraisal without the concern of a bad faith claim being perfected. Lastly, HB 301 removes certain language from Florida Statute 624.155 that is significant. Since the enactment of 624.155, it has been presumed that the Florida Department of Financial Services (DFS) reviews each CRN to ensure it complies with the statute, and either rejects or refuses to accept those CRNs which do not comply. Courts have historically presumed that if a CRN is accepted by DFS, it must be valid. This is simply not true. DFS does not review each CRN to determine its compliance with 624.155; rather, it accepts every CRN as long as it is uploaded properly. While HB 301 does not go so far as to repudiate this presumption, it does remove the language which suggests that some review process is undertaken by DFS for which non-compliant CRNs are rejected. The statutory interpretation of this change should lead courts to understand that the mere filing of a CRN and acceptance by DFS does not lead to the
presumption that the CRN complies on its face with 624.155. Rather, Florida courts should conduct an independent review, evaluation and analysis of each CRN to determine whether it complies with Florida Statute 624.155 and when it does not, they should be prepared to dismiss a first party lawsuit for
Michael A. Packer is a shareholder and co-chair of the Insurance Coverage/Bad Faith Litigation Practice Group in the Fort Lauderdale, Fla., office of Marshall Dennehey Warner Coleman & Goggin. He may be reached at firstname.lastname@example.org.
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Florida Fraud Roundup est, hardworking consumers. We hold Florida’s licensed insurance agents to the highest standard of honesty and professionalism and it’s despicable when this trust is broken just to make a quick buck,” Patronis said. Tecchio surrendered to the Orange County Jail and was arrested on March 6. Tecchio faces counts of scheme to defraud, false and fraudulent motor vehicle insurance application and grand theft. If convicted, Tecchio could face up to 70 years in prison.
Miami Insurance Agent Arrested for Stealing $620K in Premiums
Florida Serial Arsonist Sentenced to 18 Years in Prison
A serial arsonist in Florida was sentenced in March to 18 years in prison and 12 years of probation for two counts of arson to an occupied dwelling and one count of arson to a motorcycle, according to a statement from Florida Chief Financial Officer (CFO) and State Fire Marshal Jimmy Patronis Shawn Vincent was arrested in May 2017 by CFO Patronis’ arson team for two fires in the Bradenton area after a two-year investigation by arson detectives from the Florida Department of Financial Services, along with the Manatee County Sheriff’s Office, and the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF). During the investigation, Vincent claimed responsibility for over 100 fires spanning a 30-year period, including fires he set in New York.
Orlando Insurance Agent Arrested in $16K Commission Fraud Scheme
A licensed insurance agent out of Orlando, Fla., was arrested in March for allegedly submitting fraudulent insur16 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
ance applications to multiple carriers, according to a statement from Florida CFO Jimmy Patronis. Sheila De Lima Torres Tecchio with Enterprise Insurance Agency, Inc. is accused of preparing and submitting fraudulent auto insurance applications to multiple insurance carriers in an effort to defraud her customers out of insurance coverage and steal $16,763 in commissions. Fraud detectives with the Florida Department of Financial Services discovered that Tecchio was writing and submitting fraudulent insurance applications to multiple insurance companies. Tecchio allegedly misclassified the vehicles as either personal use or limited business purpose vehicles without the owner’s knowledge. Tecchio then submitted the fraudulent applications resulting in her receiving commissions of approximately $16,763 for 39 vehicles between March 12, 2017, and March 30, 2018. Because of these actions multiple consumers went without insurance coverage, Patronis said. “Insurance fraud is not a victimless crime and it drives up rates for hon-
A former Florida licensed insurance agency owner was arrested in March after allegedly stealing more than $620,000 in insurance premiums, according to a statement from Florida CFO Jimmy Patronis. Orestes Valentin Rodriguez, owner of Blue Guard Insurance Group, Inc., is accused of pocketing insurance premiums from a property management company representing a Miami homeowner’s association and never paying the association’s insurance. The charges came as a result of an investigation by CFO Patronis’ fraud detectives and Division of Insurance Agent and Agency Services, in partnership with the Miami-Dade State Attorney’s Office Division of Economic Crimes. In all, Rodriguez allegedly: • Used a premium finance company to finance over $100,700 to pay for a $110,000 policy, keeping the money and never paying off the policy. • Collected down payments of more than $9,200 with customers paying $74,600 to the finance company for policies Rodriguez never purchased on their behalf. • Applied for nearly $1 million dollars in additional premium financing, allegedly generating 21 fraudulent premium finance contracts, and ultimately obtaining more than $430,000 from this premium financing. • Stole more than $2,900 in premium INSURANCEJOURNAL.COM
money from a home policy and a business liability policy. In total, Rodriguez allegedly stole more than $620,000 in this fraud scheme. His insurance license has been revoked and he has been permanently barred from the insurance business in Florida, Patronis said. Rodriguez was arrested March 20 and transported to the Turner Guilford Knight Correctional Center. Rodriguez faces one count of first degree grand theft, 21 counts of uttering a forged instrument, 12 counts of second degree grand theft, seven counts of third degree grand theft and one count of first degree organized fraud. If convicted, Rodriguez could face up to 25 years in prison
municipalities. In some cases, construction work was never completed, and in others the work never even began. Green was booked into the Duval County Jail on April 12, on charges of organized scheme to defraud, grand theft and forgery. If convicted, Green faces up to 35 years in prison.
the checks into his bank account. The investigations revealed that Green and his employees purchased 58 false bank endorsement stamps from an online manufacturer to aid in this scam. Employees of Green also admitted to forging customer signatures on construction documents required by counties and
Florida Contractor Arrested Over $40K AOB Insurance Fraud Scheme
A Florida restoration contracting company owner was arrested in April for allegedly stealing more than $40,000 from consumers who assigned their insurance benefits to him through assignment of benefits (AOB) contracts, according to a statement from Florida CFO Jimmy Patronis. Wyatt Green, owner of Storm Restoration Specialists LLC, and his staff are accused of forging customer signatures on construction documents and insurance claim payment checks that required signatures from both the homeowner and mortgage lender. An AOB gives a third-party authority to file a claim, make repair decisions and collect insurance payments without the homeowners’ involvement. Detectives from the Florida Department of Financial Services discovered that Green was hired by four homeowners to perform contracting work. Green’s office would directly receive insurance checks that required three signatures—one from the homeowner, one from the mortgage lender, and one from Storm Restoration Specialists LLC. Allegedly, Green directed his staff to forge homeowners’ signatures on the checks as well as added the mortgage lenders’ endorsement before depositing
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Idea Exchange: Commentary Surplus Lines Support Florida’s Vibrant Insurance Market
he Sunshine State is one of the top three consumers of surplus lines insurance in the country. As Florida focuses on attracting jobs and welcoming By Michael Franzese opportunity, the surplus lines insurance industry is helping the state’s economy grow by supporting risk takers. In addition, the surplus lines market – often dubbed a “safety valve” – covers risks that the standard market won't, including both business and personal insurance needs. When it comes to partnering with Florida’s job creators, the surplus lines industry writes almost $2 billion in premiums worth of commercial property coverage annually in Florida, protecting a tremendous amount of brick and mortar businesses, such as retailers, hotels and restaurants. In addition, it writes nearly $2 million of business income insurance, which covers lost profits resulting from damage to properties. As for homes, condos and apartments, owners and renters alike rely on the surplus lines market to the tune of nearly $800 million per year. It is important to note that most personal lines risks are required to try to find coverage in the standard market first, which means there is a significant block of risk the admitted market either cannot or will not insure. This leaves the surplus lines market as the only choice between insurance and no insurance for many Floridians. The surplus lines market also covers creative risks, such as animal mortality, protecting against the premature death of an animal; guard service liability; jeweler’s block; marina operator’s legal liability; and prize indemnification, supporting payouts for things like hole-in-one and fishing tournaments. Unfortunately, there can be misconceptions about surplus lines insurance from lack of understanding and facts. The reality is that if surplus lines insurance was not in Florida, many business and personal 18 | INSURANCE JOURNAL | FLORIDA JUNE 17, 2019
risks would go uncovered. Imagine not just fewer fishing and hole-in-one tournaments, but shuttered marinas that cannot get satisfactory coverage to dock the boats used to enjoy Florida’s natural beauty. Closed hotels and theme parks. Fewer innovators. Fewer employers. It is true that surplus lines insurance is regulated differently than the standard market, but that’s because it serves a markedly different purpose – insuring what the standard market cannot, or will not. It also serves to assist risks the residual market is unable to take, such as homes that Citizens Property Insurance Corp. is unable, by law, to write. Surplus lines insurers have several sections of Florida law that govern their behavior and regulatory compliance, including perhaps most notably, the same laws applicable to the standard insurance market regarding fair dealing and trade practices. Surplus lines agents are also independent insurance professionals regulated in the exact same way retail insurance agents are regulated. Moreover, according to data from the Florida Department of Financial Services, the surplus lines market also has a lower volume of complaints than the
admitted market. One thousand surplus lines agents routinely work with retail agents across the state to help unserved or underserved people and businesses looking for coverage. Licensed agents are best suited to match their customers with the most appropriate risk management options, and their credentials can be verified using the resources available at www.myFloridaCFO.com. Always consult with a trusted, licensed professional when identifying any insurance options. It is critically important that the fourth largest state in the country have a vibrant insurance marketplace that meets the needs of the many different facets of our diverse state. This means we should all support policies that ensure a strong admitted insurance marketplace, as well as a competitive surplus lines marketplace to back it up. That is good for Florida businesses, large and small, as well as the millions of Floridians who support our economy. Michael J. Franzese works at R-T Specialty in Tampa, Fla., and serves as the president-elect for the Florida Surplus Lines Association (FSLA). He can be reached at: Michael.email@example.com
Top 10 Surplus Lines Premium States* WA
*2017 premium in millions. Premium data from the 2017 NAIC Insurance Department Resources Report Vol. II
1. California - $7,102 2. Texas - $5,457 3. Florida - $5,213 4. New York - $3,921 5. New Jersey - $1,555 6. Illinois - $1,488 7. Louisiana - $1,385 8. Pennsylvania - $1,200 9. Massachuse�s - $1,050 10. Washington - $896
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