Insurance Journal Florida Supplement 2021-06-07

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June 7, 2021 • Vol. 99 No. 11

Contents

News & Markets

News & Markets

News & Markets

3 Florida Insurers Drop Thousands of Policies

Florida Passes Property Reform but Will it Be Enough?

How Climate Change Could Accelerate Non-Hurricane Storm Losses in Florida

4 6

Understanding Florida’s Sweeping New Immunity Law for COVID-19 Claims

Departments 8 Fraud Roundup

12 16

The Potential Liabilities for Cities, Insurers from Florida’s New ‘Anti-Riot’ Law

10 People

18

News & Markets 3 Florida Insurers Drop Thousands of Policies

By Amy O’Connor

M

ore than 50,000 Florida policyholders are now looking for a new carrier for their homeowners insurance after three Florida-based companies were approved by the state regulator to drop the policies.

In consent orders signed by Florida Insurance Commissioner David Altmaier, Universal Insurance Co. of North America (UICNA) was approved to drop 13,294 personal residential policies and Gulfstream Property & Casualty was approved to cancel about 20,311 personal residential policies.

Both insurers were to remove the policies over a 45 day period and as the state enters hurricane season.

Southern Fidelity Insurance Co. was approved to nonrenew approximately 19,600 personal residential policies over the next 14 months, with approximately 2,300 receiving less than the required statutory written notice of nonrenewal.

The early cancellation and nonrenewals of policies is “an extraordinary statutory remedy reserved to address insurers which are or may be in hazardous financial condition,” the Florida Office of Insurance Regulation stated in the orders, which also require the insurers to take other steps to stay solvent.

The regulator’s actions are another indicator of Florida’s stressed insurance marketplace that has been described as “spiraling towards collapse.” Altmaier and others have previously warned of problems for Florida’s domestic companies thanks to spiking litigation, dishonest contracting practices, catastrophe events and high reinsurance costs.

Florida insurers were reported to have lost a combined $1.7 billion in 2020.

“OIR remains focused on the protection of consumers and fostering stability in Florida’s insurance marketplace,” OIR said in a statement to Insurance Journal.

“Allowing for the early cancellation or nonrenewal of policies is not a decision made lightly, and requires a finding that such action is necessary to protect the best 4 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

interests of the public or policyholders.”

Financial analysis firm Demotech President Joseph Petrelli said the Florida companies it rates are looking to lower their exposure in certain geographic areas and their reinsurance costs with these moves.

Demotech advised in March that several companies may need to remove certain policies from their books “whose underwriting characteristics generate a disproportionate cost of reinsurance,” to sustain their ratings.

“Between the geographical issues and the disproportionate reinsurance cost issues, we think that’s a smart move on behalf of companies,” Petrelli told Insurance Journal in response to the orders.

Universal Insurance Co. of North America (UICNA)

UICNA’s cancellation of 13,294 of its 57,000 Florida policies will occur as part of a financial restructuring plan that includes a merger with and into Universal North America Insurance Co., a Texas domestic company.

UICNA reported net losses of $4.1 million in 2019 and $22.5 million in 2020, and had decreased its surplus by more than $9 million as of Dec. 31, 2020, OIR stated in the order approving the policy cancellations.

Financial projections from UICNA showed without the cancellation of the approximately 9,341 homeowners policies and 3,953 dwelling policies, the company’s financial condition would further deteriorate to an unsustainable level, OIR said.

The policy cancellations are also a condition of the company’s merger plan.

Southern Fidelity Insurance Co.

Southern Fidelity’s order, signed April 28, is one of many moves OIR took to “remediate the financial condition” of the company and to facilitate a long-term financial restructuring plan. OIR said it previously approved a rate increase, a

merger with its sister company Capitol Preferred Insurance Co., the cancellation of an identified block of policies, and a capital contribution plan developed by Southern Fidelity’s new indirect owners, HSCM Bermuda.

The 19,600 policies Southern Fidelity will nonrenew have generated significant losses, and OIR found after evaluation that dropping the policies is “necessary to protect the best interest of its policyholders and the public.”

Gulfstream Property & Casualty Co.

The financial condition of personal residential insurer Gulfstream, which has 56,000 policies in Florida, will deteriorate to an unsustainable level by mid-2021 without action, the May 6 consent order from OIR states. As such, the company was approved to early cancel approximately 20,311 personal residential policies.

Gulfstream has also signed a letter of intent with a new investor that stipulates the policy cancellations as a condition of its investment.

The company will no longer have risk on any policies outside of Florida, except for about 90 policies in Texas that will non-renew by June 20, 2021, as part of an ongoing renewal rights transaction and withdrawal from the state of Texas.

Gulfstream reported a decrease in surplus of more than $5.2 million as of Dec. 31, 2020, compared with the same date in 2019, the order states.

Gulfstream has voluntarily ceased writing new business, OIR said, and may only resume doing so if its revised business plan is approved by the regulator.

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News & Markets

Understanding Florida’s Sweeping New Immunity Law for COVID-19 Claims

F

lorida became one of the first states in the country in March to pass and sign into law a statute directed toward proBy Ryan Burns viding immunity to businesses for COVID-19 related lawsuits.

To be clear, the law does not prevent all COVID-19 related lawsuits, but it does impose significant restrictions and hurdles to litigants seeking to bring such claims.

The statute applies to all “COVID-19related claims,” which is defined broadly to include any claim “which arises from or is related to COVID-19” and includes any type of damages one could seek in that regard. The law creates two new statutes: Sections 768.38 – applying to all businesses, governmental entities, and schools except health care providers; and 768.381 – applying to health care providers.

The effect of both statutes is to increase the burdens on potential plaintiffs in a case. The general statute says a plaintiff’s complaint is required to be plead with particularity, including facts that would be sufficient to establish each element of the claim. Those elements are now different than a typical negligence case. Instead of proving mere negligence, such as a failure to use reasonable care that legally caused 6 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

harm to the plaintiff, a plaintiff must now prove that the business, governmental entity or school was “grossly negligent.”

This term is not defined in the statute, but is a term defined and used in Florida’s punitive damages statute. The new immunity statutes have a catch-all provision that notes they are to be read in conjunction with existing Florida statutes. Presumably, the definition of gross negligence as well as the attendant and extensive case law on the subject will apply to the standards and facts necessary for proof of these elements in a COVID-19related claim.

The new statute also requires the complaint to have attached to it an affidavit from a physician attesting that the alleged conduct of the defendant caused the COVID-19 damages alleged in the complaint, and the physician must state that this is an opinion reached within a reasonable degree of medical probability.

The new law creates a preliminary review process by the court, where the court will examine whether the complaint is sufficiently plead, has the required physician affidavit and also considers evidence (presumably in an evidentiary hearing similar to those required for punitive damages) on whether the defendant failed to make a “good faith effort to comply with authoritative or controlling govern-

ment-issued health standards or guidance at the time the cause of action accrued.”

The burden is placed on the plaintiff to demonstrate the defendant did not make this good faith effort as defined. If the plaintiff fails to meet that burden, the defendant is immune from liability. Even if the plaintiff does meet that burden, the plaintiff still has to prove gross negligence of the defendant with the higher standard of “clear and convincing evidence.”

The statute’s language suggests that the preliminary stage is decided by the court, but if a plaintiff can get past that stage, they would be able to try the gross negligence component of the claim to a jury as well as damages.

While a failure to plead with particularity or failure to attach the required affidavit is supposed to result in a dismissal of the lawsuit without prejudice under the statute, a finding by the court as to whether the plaintiff has proven that the defendant failed to make a good faith effort appears to be potentially dispositive with prejudice. In other words, if the court rules at this preliminary hearing that the plaintiff has failed to meet their burden to prove that the defendant failed to make a good faith effort, the court’s ruling under the language of the statute suggests immunity from that lawsuit, which in turn would arguably prevent the plaintiff from reasserting the claim in the future.

In cases where the court makes such a finding, the interpretation of the statute could become a future focus of litigation.

The hurdles for potential claimants as to claims against health care providers are slightly lower than they are for the other entities covered by the law, but similar.

Lastly, both statutes provide a very limited window of opportunity to bring claims, providing for a one-year statute of limitations from either the date of enactment of the statute or the date the cause of action accrues (whichever is later).

Ryan D. Burns is a shareholder in the Fort Lauderdale office of Marshall Dennehey Warner Coleman & Goggin. As a member of the firm’s Casualty Department, Burns handles a wide array of general liability areas as well as general PIP litigation and insurance coverage matters. He may be reached at rdburns@ mdwcg.com.

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Florida Fraud Roundup

2 Arrested in Florida Fake Public Adjuster, $65K Claims Scheme Against Citizens

Two Miami residents have been arrested for allegedly acting as public adjusters without a license and filling false insurance claims with Citizens Property Insurance Corp., according to a statement from the Florida Department of Financial Services (DFS).

The CFO’s Division of Investigative and Forensic Services (DIFS) partnered with the state-run insurer to execute the operation, which utilized a house located in Broward County and undercover fraud detectives posing as homeowners.

Carmen Rosa Contreras and Alexandra Isabel Cano were arrested for allegedly filing fraudulent insurance claims that were submitted to Citizens for $65,420.

The covert operation was initiated by DIFS fraud detectives in September 2019, with the cooperation of Citizens, based on allegations that Contreras was acting as a public adjuster without a license and allegedly creating or enhancing damages to homeowner properties.

The following month, Contreras met with an undercover detective to provide a free home inspection. Contreras inspected the home and pointed out nonexistent damage throughout the house. Two insurance claims were filed against Citizens for the alleged property damages noted by Contreras.

On the day of the inspection, Contreras sent her associate, Alexandra Cano, who was then identified as a second subject and was acting as a public adjuster as well. Cano arrived at the home before the inspection and instructed the undercover detective not to say anything to the Citizens adjuster. Cano identified alleged property damage to use for the insurance claim and Citizens inspection.

8 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

Additionally, a second undercover detective posing as the homeowners’ spouse spoke to Cano prior to a threeway call with Citizens and previously had been coached on what to disclose and not disclose to Citizens regarding the alleged damages.

Contreras and Cano surrendered to DIFS fraud detectives and were booked into the Broward County Jail. Each face charges of acting as public adjusters without a license and false and fraudulent insurance claims.

If convicted, each could face up to 10 years in prison. Individuals charged with a crime are presumed innocent until proven guilty.

Miami Construction Co. Owner Arrested in $88K Workers’ Comp Fraud Scheme

A construction company owner has been arrested in Florida for workers’ compensation premium fraud and grand theft for allegedly concealing payroll information to avoid paying more than $88,000 in workers’ compensation premiums, according to a statement from DFS. CFO Jimmy Patronis said Yoni O. Martinez, president and owner of LAMX Construction Company Corp. was arrested May 3, 2021, after an investigation by the DIFS Bureau of Workers Compensation Fraud.

The investigation revealed that Martinez actively concealed payroll to avoid paying a higher workers’ compensation premium. Martinez claimed $119,150 in annual payroll to Southeast Personnel Leasing for the policy periods of July 2014 to January 2017. Due to the estimated annual payroll provided, the estimated premium calculated for the policy period was $19,433.

During the investigation, detectives discovered that the company cashed more than $635,636 in labor instead of the $119,150 Martinez had originally reported when obtaining the policy with Southeast Personnel Leasing. DFS said had the payroll been properly reported, LAMX Construction Co. Corp. would have been charged a total of $107,549 in workers’ compensation premium. This resulted in a net loss of $88,116 in workers’ compensation premiums based on the owners’ alleged fraudulent actions, DFS said.

Martinez was arrested on May 3 and booked into the Turner Guilford Knight Correctional Center in Miami-Dade County. Martinez faces charges of workers’ compensation premium fraud and grand theft. If convicted, he faces up to 20 years in prison. Individuals charged with a crime are presumed innocent until proven guilty.

Florida Man Accused of Failing to Pay $193K in Workers’ Comp Premium A Florida man was arrested in April

for workers’ compensation premium fraud and additional charges for allegedly concealing payroll information to avoid paying more than $193,000 in workers’ compensation premiums, according to a statement from DFS. Julio Enrique Maldonado, owner of G.G.M. Construction LLC, faces charges of workers compensation fraud, underreporting payroll greater than $100,000, workers compensation fraud — false statements on application greater than $100,000, and Florida communication fraud aggregated value of $50,000 or more.

The charges follow an investigation by the DIFS Bureau of Workers Compensation Fraud that found Maldonado claimed $120,000 in annual payroll to Builders Insurance Co. for the policy periods of February 2018 to November 2019. Due to the estimated annual payroll provided, the estimated premium calculated for the policy period was $15,780.

During the investigation, detectives discovered that Maldonado cashed several checks from January 2019 through December 2020, which totaled over $5.5 million. Maldonado did not respond to the request from Builders Insurance Co. to conduct an audit. Based on Maldonado grossly underestimating/reporting his business payroll, Builders Insurance Company, was deprived of $193,284 in premiums, DFS said.

Maldonado was arrested on April 30, 2021 and booked into the Orange County Jail. If convicted, he faces up to 30 years in prison. Individuals charged with a crime are presumed innocent until proven guilty.

INSURANCEJOURNAL.COM

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People Florida

Co-founder and CFO of The Florida Peninsula Insurance family of companies Francis L. Lattanzio retired in March after serving in Frandic L Lattanzio the position since the company’s inception in 2005.

Lattanzio remains with the company as a consultant. Prior to co-founding the company, Lattanzio served as CFO at Aetna Personal Lines and as a partner at Price Waterhouse and Tillinghast - Towers Perrin.

Gary Cantor, also a co-founder of the company who has served as EVP since 2005, assumed the CFO position. Cantor was previously co-foundGary Cantor er and president of Seven Seas Communications.

Prior to Seven Seas, he was the general manager of Boatphone, the first cellular carrier in the Eastern Caribbean.

The company also hired Michael Williams as vice president of claims and litigation. Williams joins the company’s executive management Michael Williams team and will be responsible for managing the overall claims process.

Williams has experience with all major lines of personal and commercial products. Prior to joining Florida Peninsula, he was a claims executive at Aon Reinsurance Solutions. He also served as the chief claims officer of AmWINS Specialty Auto.

Appalachian Underwriters Inc. (AUI) has appointed Kimberly Monahan to its

Brokerage Department as a property and casualKimberly Monahan ty broker.

Monahan is located in Daytona Beach, Fla., and covers the Northeast Coast of Florida over to the Panhandle. Her focus will be accounts not 10 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

readily available in the standard markets of property/casualty.

Monahan has more than 25 years of experience as both broker and underwriter. She previously worked for three years with AUI before working on property/ casualty insurance in Florida and Georgia.

Monahan’s experience includes writing small commercial package policies, from large commercial builder’s risk to construction, condominiums, apartment complexes, manufacturers and chain restaurants.

Florida-based homeowners insurance provider Security First Insurance has appointed Greg Moraski as vice president of Claims.

Moraski will oversee the company’s claims department, which includes specialized areas such as catastrophe response, special investigations and fraud prevention, and litigation.

His hiring is part of Security First’s plan to combat insurance fraud. The company is building an in-house legal counsel team, creating 30 new positions with plans to hire 17 attorneys and 13 paralegal and administrative staff. This new team will also fall under Moraski’s oversight.

Moraski has experience in catastrophe response and the management of high severity and complex losses, as well as claims leadership, and more than 35 years of claims and litigation management experience. He spent the last 27 years of his career with Nationwide, most recently serving as associate vice president of Southeastern Regional Claims. As associate vice president of Personal Lines Field Claims, he led a team of more than 600 claims professionals across seven states.

Security First also promoted David Lockhart to chief financial officer, effective June 1.

Lockhart reports to David Lockhart Security First President Melissa Burt DeVriese and succeeds Clive Becker-Jones, who is retiring from the company after serving as CFO for 10 years.

Lockhart joined Security First Insurance

as controller in November 2016, bringing nearly 15 years of accounting and insurance experience to the organization.

Prior to joining Security First Insurance, Lockhart held a variety of positions across insurance and finance companies including CFO, controller and auditor.

Lockhart is responsible for managing the company’s overall accounting functions, including financial reporting, controls, and operations.

Security First also named Brad Jones as controller. Jones has worked with the company since 2019 as an assistant controller and has more than 18 years of accounting experience. He will continue reporting to Lockhart. Lockhart oversees a team of insurance professionals including the controller, statutory accountants, treasury accountant, corporate staff accountant, and support specialists.

Security First is headquartered in Ormond Beach, Fla. VP of Underwriting at Florida-based GIC

Underwriters Juan Carlos Diaz-Padron

has been named to the national board of Juan Diaz-Padron the Latin American Association of Insurance Agencies (LAAIA).

Diaz-Padron has more than 12 years of experience in the insurance industry.

Diaz-Padron joins eight other insurance business leaders from various states serving on the National LAAIA board.

The Latin American Association of Insurance Agencies (LAAIA) represents more than $1 billion in premiums. It is a 501 (c) (6) not-for-profit professional association administered by a volunteer board of directors.

JAG Insurance Group (JAG), a South Floridabased commercial insurance agency, has added Andy Fajardo as director of Marine insurance.

Andy Fajardo As a commercial lines coverage specialist, Fajardo has more than five years of experience, most recently INSURANCEJOURNAL.COM

working as a commercial consultant with WWF, focusing on small to mid-sized businesses with entities in the maritime, manufacturing and distribution, and non-profit sector.

Fajardo will work to grow JAG’s book of business in the marine industry and expand the company’s footprint in key sectors.

Independent agency

Century Risk Advisors (CRA) of Florida has named Ramon Lo as

director of marketing.

In this role, Lo will spearRamon Lo head CRA’s branding and marketing initiatives.

Prior to joining CRA, Ramon worked at a trade publication and as an event organizer covering the airport concessions industry where he served in a variety of roles including publisher, director of marketing, and editorial director. Lo

also served as director of marketing for a commercial real estate firm in South Florida.

CRA also named insurance and financial executive Doug Sawyer as Commercial & Private Client advisor for Strategic Relationships.

Doug Sawyer Sawyer is responsible for expanding the firm’s presence in the financial, commercial, and wealth industries where he will work to connect these markets to CRA’s insurance services. Prior to joining CRA, Sawyer held numerous executive level positions with South Florida financial institutions, having overseen commercial lending, asset management, private banking, retail and bank support divisions.

The Villages Insurance Partners of Florida has made changes to its commercial risk management (CRM) team.

Shane Finley has moved from senior advisor lead to CRM sales manager and Kelly Burrows has moved to CRM senior account manager/team lead from commercial account manager.

Finley joined The Villages Insurance Partners in July 2013 and has worked in sales and service, while establishing commercial lines presence in The Villages and other areas in Florida. In his new role as the CRM Sales manager, he will work on new business development. Finley has more than 10 years of experience in the industry.

Burrows joined The Villages Insurance Partners CRM team in 2016 and has focused on service and operations support across the CRM platform. In her new role, she will be responsible for building out the service platform, market applications, and coordinating delivery of client proposals.

Burrows has more than 25 years of service in the insurance industry.

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JUNE 7, 2021 INSURANCE JOURNAL | FLORIDA | 11

News & Markets

By Amy O’Connor

A

bill passed by the Florida Legislature to address the state’s property insurance crisis has created optimism among many stakeholders, but others say it will not reduce rates over the next 18 to 24 months or stop the state’s out of control claims litigation.

This year’s effort to pass property insurance reforms came down to the wire with the passage of Senate Bill 76 on the last day of session. The bill attempts to solve 12 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

some of the issues plaguing the state’s homeowners insurance market in which insurers lost more than $1.5 billion in last year. Consumers are facing double-digit rate increases, restricted coverage, or having to turn to the state’s insurer of last resort, Citizens Property Insurance.

Shortly after the bill passed, three Florida insurers were approved by the state regulator to drop more than 50,000 homeowners policies as the state heads into hurricane season.

The passed bill includes changes to the

state’s one-way attorney fee statute, the eligibility and glidepath of Citizens, and the deadline to file claims. It also places new requirements and restrictions on roofing contractors.

But two pieces the industry and experts identified as critical to addressing cost drivers and stabilizing the market were left out of the final bill — the elimination of the state’s attorney fee multiplier and allowing insurers to implement policy language to mitigate roof replacement costs.

The provisions were sticking points in INSURANCEJOURNAL.COM

both legislative chambers.

“It’s a watered-down bill that won’t restore market stability. It will not curb rate increases,” said American Integrity CEO Robert Ritchie. “Everybody is set up for these expectations and everybody’s going to be mad at each other.”

“In my view, the most important provisions are the ones that didn’t get in it,” said Joseph Petrelli, president and founder of ratings analysis firm Demotech, which rates more than 40 Florida domestic insurers. Petrelli previously warned that it will be harder for several companies to enhance their financial results, and sustain their ‘A’ ratings, if the Florida Legislature did not pass “meaningful” reform this year.

Sen. Jim Boyd, also an insurance broker and owner of Boyd Insurance & Investments in Bradenton, Fla., acknowledged that what passed didn’t have everything he — or the industry — wanted, but he is confident what did pass will make a difference in stabilizing the market, encourage the return of insurance investment capital into the state, and cut down on contractor and litigation abuse in the system.

“Rates aren’t going to go down tomorrow, of course,” Boyd said. “But I firmly believe this will have a definite downward impact on what has been continually rising homeowners rates in Florida … I really, truly believe we have done a lot of good toward getting at the root causes of the problem.”

Sen. Jeff Brandes, who co-sponsored the legislation, voted to pass the bill but said it was only a “40% solution for what is needed in Florida to bend the cost curve.”

“Hopefully, it stabilizes rates, but really will ultimately do nothing to actually lower them,” he told his Senate colleagues.

If signed by the governor, the legislation would take effect July 1 and includes: • Changes the eligibility, rate glidepath and actuarily sound rate indication for Citizens Property Insurance Corp.

• Replaces the one-way attorney fee-statute to make the recovery of attorney fees and costs contingent on obtaining a judgment for indemnity that exceeds the pre-suit offer made INSURANCEJOURNAL.COM

by the insurance company.

• Reduces the claims deadline on all claims to two years from the date of loss, except for on supplemental claims which will have an additional year.

• Requires plaintiffs to file a pre-suit demand at least 10 days before filing a lawsuit against an insurer that includes

an estimate of the demand, the attorney fees and costs demanded and the amount in dispute; disallows pre-suit notices to be filed before the insurance company can make a determination of coverage; and allows an insurer to require mediation or other form of

continued on page 14

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JUNE 7, 2021 INSURANCE JOURNAL | FLORIDA | 13

News & Markets continued from page 13

alternative dispute resolution after receiving notice.

The bill also makes several changes to tackle what insurers claim has been an explosion of roofing claims and litigation, including making it illegal for roofing contractors or any person acting on their behalf to make a “prohibited advertisement,” including an electronic communication, phone call or document that solicits a claim.

Offering anything of value for performing a roof inspection, an offer to interpret an insurance policy or file a claim or adjust the claim on the insured’s behalf will also be prohibited.

Additionally, contractors are prohibited from providing repairs for an insured without a contract that includes a detailed cost estimate of the labor and materials required to complete the repairs. Violations could result in fines of $10,000.

Florida’s insurance regulator is optimistic the new reforms will have a positive effect on the state’s marketplace over the longer term.

“I think it’s a pretty meaningful step forward, in terms of stabilization, but certainly as with most things, there’s no quick fix, and this is going to take some time to implement,” said Insurance Commissioner David Altmaier.

“We’re going to be very carefully monitoring a lot of different data points — most importantly, the impact to consumer rates.”

Locke Burt, chairman and CEO of Florida-based insurance company Security First, said the bill will ultimately change “the way that roofers do business, the way public adjusters do business, the way plaintiff’s attorneys do business, and the way that insurance companies do business,” which is “significant.”

But “it is not going to cause rates to go down [now]; the best that can happen is it will flatten the curve in 2023 or 2024,”

he said. “It’s not going to make agents’ life easier in the foreseeable future.”

Litigation Reform

Altmaier called the reforms to the one-way attorney fee statute one of the more impactful features of the bill. The new statute stipulates that if a claimant recovers at least 50% of the disputed amount (the difference between the presuit demand excluding attorney fees and costs and the indemnity award obtained at trial), full attorney fees would be awarded to the plaintiff attorney. If the indemnity award obtained is less than 20% of the amount in dispute, then no attorney fees are awarded to the plaintiff attorney. Indemnity awards between 20% and 50% of the disputed amount would merit the same proportional award of attorney fee and costs as the percentage of the disputed amount obtained at trial.

The fee reforms were modeled after the assignment of benefit legislation that passed in 2019, Altmaier said, which appears to be having a “meaningful impact in reducing the incentive for some of the excessive litigation that we were seeing with AOB.” The Florida Office of Insurance Regulation sent a report to lawmakers during session that found while Florida homeowners insurance claims accounted for just over 8% of all homeowners claims opened by U.S. insurers in 2019, homeowners insurance lawsuits in Florida accounted for more than 76% of all litigation against insurers nationwide.

“Litigation trends in Florida have been consistently many times higher than any other state,” the report stated, citing data from the National Association of Insurance Commissioners showing that Florida lawsuits rose steadily from 64.4% of all nationwide homeowners lawsuits in 2016, to 68% in 2017, to 79.9% in 2018 and 76.4% in 2019.

“I really think that [attorney fee reform] is going to go a long

“I firmly believe this will have a definite downward impact on what has been continually rising homeowners rates in Florida”

14 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

way in helping to disincentivize some of the excessive litigation, while still allowing the opportunity for consumers to pursue civil remedies against their insurance companies if they feel as if they’ve run out of other options,” Altmaier said.

Burt said the changes to the one-way attorney fee statute, which has been in place for 125 years, are a “big deal,” but noted it is hard to quantify at this point what litigation savings companies will see.

The pre-suit demand requirement will also be “very significant” for insurers.

“It is usually very difficult to extract that information from plaintiff attorneys,” he said. “Now we will know what we are dealing with in terms of a demand.”

Roofing Claims Abuse

Many in the industry, like American Integrity’s Ritchie, said addressing roofing claims was a critical element left out.

“Seventy percent of my lawsuits are for uncovered roof claims. Will this curb the lawsuits for roofs? I say no,” Ritchie said.

Sen. Boyd called roofing claims “one of the biggest drivers of rate increases” for Florida homeowners, but the House rejected provisions in the passed Senate bill aimed at stemming these losses by allowing insurers to only offer homeowners policies that adjust roof claims to actual cash value if the roof is older than 10 years. Also rejected was allowing property insurers to offer homeowners to purchase a stated value limit for roof coverage and implement a reimbursement schedule for total losses to a primary structure.

OIR did not support the roof ACV provisions, Altmaier said. He expects carriers will see positive results from the combination of curbing roof claims solicitations

INSURANCEJOURNAL.COM

and the one-way attorney fee reforms.

“I think those two things combined are going to make the absence of those other two items much less significant in the overall impact of the bill,” he said.

State agencies will be responsible for enforcement of the roofing provisions in the law. The Florida Department of Professional Regulation will handle licensing and the Florida Department of Financial Services will investigate and work to prosecute insurance fraud related to roofing solicitations and claims.

“As we await the Governor’s signature on consumer protection legislation passed this session, the Department is preparing to implement measures to curb unlicensed adjusting by holding anyone accountable who looks to profit off of a business model of improperly soliciting insurance consumers and coming between them and their insurance claims,” DFS Communications Director Devin Galetta said in a statement to Insurance Journal.

Today’s Market

For the insurers that are struggling now, there isn’t time to wait and see if the bill goes far enough.

Demotech’s Petrelli said Florida companies are taking action to nonrenew and cancel policies to lower their exposure in particular geographic areas and their reinsurance costs. Southern Fidelity Insurance, Universal Insurance Co. of North America and Gulfstream Property & Casualty were recently approved by OIR to drop more than 50,000 policies because of hazardous financial conditions.

“Between the geographical issues and the disproportionate reinsurance cost issues, we think that’s a smart move on behalf of companies,” Petrelli said.

Without addressing the other major cost drivers for insurers going forward, Petrelli said the passed legislation is merely “nibbling around the edges.” He does not expect more investment capital or competition in the state and said there soon could be less. Demotech is waiting to review the first quarter results and final reinsurance programs of the companies it rates, but Petrelli noted about five compaINSURANCEJOURNAL.COM

Future of Florida’s PIP Repeal Uncertain

In addition to property insurance reforms, the Florida Legislature passed a controversial bill to repeal the state’s no-fault personal injury protection (PIP) system and instead require mandatory bodily injury coverage starting at $25,000 for all drivers in the state of Florida.

Senate Bill 54 will also create a new framework to govern motor vehicle claims handling and third-party bad faith failure to settle actions against auto insurers.

If signed into law, SB 54 would make it optional for insurers to offer medical payments coverage (MedPay) and includes an optional $5,000 MedPay death benefit. There is also language around bad faith claims against insurers, including a statement that the statute governing bad faith actions is not intended to expand or diminish any cause of action currently available against insurance agents who sell motor vehicle liability insurance policies in this state.

The insurance industry and stakeholders argued against the bill’s passage, saying it is a flawed solution that will increase auto rates for consumers. Many have called on the governor to veto the bill, but no action had been taken as of press time.

“It’s hard to predict market forces, but overwhelmingly the data shows we will see a [rate] reduction,” said State Senator Danny Burgess, a Republican who sponsored the bill. “Certainly not a steep reduction, but I do believe we will see a reduction.”

Florida Senator Jeff Brandes disagreed,

saying rates and the number of uninsured drivers will go up.

“Florida already has some of the highest rates in the country and unfortunately if you are just struggling to make it… [and] buying just PIP today, rates will go up 40%,” Brandes said.

Insurer trade group the American Property Casualty Insurance Association (APCIA) opposed the bill’s passage. It worked on an actuarial study to assess the impact of the bill and said its analysis shows the cost of the average auto insurance policy would increase by as much as 23% or $344. Drivers who carry the lowest levels of coverage could see increases as high as $805 a year.

APCIA said more than 28,000 letters from Floridians were sent to lawmakers opposing the bill. The group is encouraging the governor to “protect Florida drivers from higher auto insurance costs and help keep our roads safer by vetoing this legislation.”

Insurer Allstate also sent letters to its policyholders asking them to contact DeSantis and urge him not to sign SB 54.

“We rarely reach out to our customers about pending legislation, but we are concerned about a proposed law that threatens to increase auto premiums approximately 25% for the average Florida auto customer,” the letter states.

The governor’s office had not indicated either way what he will do with the bill as of press time. The new law will take effect Jan. 1, 2022, if signed.

nies could be downgraded.

The ratings firm would have been more lenient if Florida had passed “meaningful” reforms, and "there was a true light at end of a litigation tunnel,” Petrelli said. “What would have saved companies, in terms of their rating, is reforms that had immediate teeth. I don’t see these as being immediate nor having the sharpest of teeth.”

Florida Association of Insurance Agents (FAIA) President and CEO Kyle Ulrich said while the association is encouraged and supportive of the reforms that passed and thinks it will have a positive impact on the market, significant changes aren’t likely

for at least 18 to 24 months.

FAIA is advising agents to become comfortable with placing business with Citizens, if they aren’t already, as it is likely more policies are headed that way.

“Unfortunately, as much as agents don’t want to have to do it, there are going to be some relying on Citizens in ways that they either never have, or haven’t had to in probably 10 years,” Ulrich said. “The good news is, at least from our perspective, is that Citizens is in a much better place right now to handle that and are easier to do business with than they have been in the past.”

JUNE 7, 2021 INSURANCE JOURNAL | FLORIDA | 15

News & Markets

The Potential Liabilities for Cities, Insurers from Florida’s New ‘Anti-Riot’ Law

T

he right to protest in America is a fundamental right guaranteed by the First Amendment to the United States Constitution, which

By Jamie Cole protects both the “freedom of speech” and the “right of the people peaceably to assemble, and to petition that the Government for a redress of grievances.” and Eric Stettin The right to protest is, however, limited – “peaceable” being the operative word.

In response to recent demonstrations across the United States, 16 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

Florida Governor DeSantis signed the “Combatting Public Disorder Act” on April 19, 2021. The most reported result of the new law is the creation of new criminal offenses and the enhancement of criminal penalties for applicable existing offenses. The potential chilling of First Amendment rights has already resulted in a judicial challenge.

Far less reported, however, is the potential impact of a separate provision in the Act that could have a significant financial effect on local governments and the insurance companies that insure them: namely, the waiver of sovereign immunity and establishment of a new cause of action for unlimited damages against local governments by any person who is killed, injured or suffers property damage as a result of the local govern-

ment’s failure to provide reasonable law enforcement protection during a riot or unlawful assembly.

Specifically, the Act creates a duty on municipalities to allow its municipal law enforcement agency to respond “appropriately” to protect persons and property during a riot or an unlawful assembly based on the availability of adequate equipment to its municipal law enforcement officers. If the governing body of a municipality or a person authorized by the governing body of the municipality breaches that duty, the municipality is civilly liable for any damages, including damages arising from personal injury, wrongful death or property damage proximately caused by the municipality’s breach of duty.

Sovereign immunity for the municiINSURANCEJOURNAL.COM

pality is specifically waived – the damages recoverable under the Act by a person who is killed, injured or suffers property damage is not barred by sovereign immunity, nor is any recovery limited by sovereign immunity caps of $200,000 per person and $300,000 per incident contained in Florida Law (Section 768.28).

And, as discussed below, there is a possibility these types of losses may be limited and/or excluded by insurance policies.

This new cause of action represents a major expansion of potential liability for municipalities. Historically, municipal decisions as to how to allocate police resources could not be challenged and second-guessed by courts.

The leading precedent on the issue is the 1970 decision of the Florida Supreme Court in Wong v. City of Miami. In that case, several merchants sued the City of Miami claiming that they had suffered over $100,000 in property damage because the city decided to withdraw police officers that had been stationed in their vicinity during public protests at the 1968 Republican National Convention in Miami Beach.

The court rejected the claim, saying, “The sovereign authorities ought to be left free to exercise their discretion and choose the tactics deemed appropriate without worry over possible allegations of negligence. Here officials thought it best to withdraw their officers. Who can say whether or not the damage sustained by petitioners would have been more widespread if the officers had stayed, and because of a resulting confrontation, the situation had escalated with greater violence than could have been controlled with the resources immediately at hand?”

As the result of the passage of the Combatting Public Disorder Act, such decisions during stressful times will potentially expose municipalities to unlimited liability. What may seem reasonable to the local decision makers may be interpreted differently by plaintiffs seeking recompense for their damages.

Even worse, because the Act became INSURANCEJOURNAL.COM

effective immediately, an affected municipality may in the short-term face potentially uninsured liabilities due to limitations and exclusions (such as riot or intentional act exclusions) in its existing insurance policies.

Just as the portions of the Act regarding criminal penalties potentially violates the U.S. Constitution, this aspect of the Act creating a new unlimited cause of action against municipalities may violate multiple sections of the Florida Constitution.

Article VII, Section 18 of the Florida Constitution generally provides that any law that requires a local government to expend funds must contain a specific legislative finding that the law fulfills an “important state interest.” The Florida Legislature must either provide sufficient funds or the legislation must be approved by two-thirds of the members of both the House of Representatives and the Senate.

The Act did not contain the legislative finding of an “important state interest” and did not obtain a two-thirds vote in either the House of Representatives (76 of the 120 voting yes) or the Senate (23 of the 40 voting yes). Instead, the staff analysis of the bill merely concluded that it “does not appear to require cities and counties to expend funds.” It later conceded that it “may have an indeterminate impact on municipalities.”

It is, of course, difficult to determine the cost of this measure to municipalities because it is not known how many protests will take place in a given municipality, whether they will be “peaceful” and whether anyone will be injured or killed. However, given the new risk, municipalities that self-insure will need to set aside more funds to cover potential impacts, and those that purchase insurance could pay higher liability insurance premiums (or excess insurance). Municipalities would also incur additional training costs to implement the Act. Thus, a strong argument can be made that the enactment of the Act vio-

lates Article VII, Section 19 of the Florida Constitution.

In addition, Florida municipalities have historically been protected by governmental function immunity for planning level decisions, such as deciding how to allocate police resources. This immunity is premised upon the Separation of Powers provision of the Florida Constitution (Article II, Section 3), because, without it, the courts would be second guessing the police power and political decisions of other branches of the government. Given the constitutional foundation of governmental function immunity, municipalities could contend that it cannot be waived by the Florida Legislature and governor and thus the Act’s new cause of action is invalid.

Municipalities and insurance companies that insure local governments should carefully review the details of the new law and plan for the potential financial consequences of this new cause of action.

Insurance companies will need to evaluate the new risk in underwriting policies for local governments, and local government will need to either ensure that they have adequate coverage or otherwise budget accordingly.

“This new cause of action represents a major expansion of potential liability for municipalities.”

Jamie Alan Cole is a member of the law firm Weiss Serota Helfman Cole + Bierman, PL. Cole regularly represents local officials and governments in matters that help to improve their communities and preserve home rule power. He has served as the city attorney for the City of Weston, Fla., since 1999 and previously served as city attorney for Hollywood, Fla., and Miramar, Fla. He also serves as special counsel for numerous municipalities across Palm Beach and Broward Counties. He can be reached at 954-763-4242 or jcole@wsh-law.com.

Eric Stettin is a member of the law firm Weiss Serota Helfman Cole + Bierman, PL. Stettin has more than 32 years of experience representing local governments and insurance companies that insure local governments, specializing in the areas of personal injury, police liability, workers’ compensation and insurance coverage disputes. He can be reached at 954-763-4242 or at estettin@wsh-law.com.

JUNE 7, 2021 INSURANCE JOURNAL | FLORIDA | 17

News & Markets

How Climate Change Could Accelerate Non-Hurricane Storm Losses in Florida

T

he state of Florida has a long and storied relationship with severe weather, and hurricanes have topped the list of

By Dr. Sara Sienkiewicz impactful events.

However, Florida is also known to be the lightning capital of the United States, mostly from non-severe daily thunderstorms that form and dissipate relatively quickly during the summer months and that don’t cause much damage.

With climate change accelerating, the rate of destructive severe convective storms (SCS) is expected to increase across the Southeast. SCS — storms exhibiting a rotating updraft that can produce damaging wind gusts, tornadoes and hail — can form when, in addition to moisture and instability, sufficient vertical wind shear is available. SCS can produce significant damage throughout the entire state of Florida at any time of the year.

SCS activity in Florida in 2020 was well above normal. Severe weather reports for tornadoes, damaging wind gusts and hail were 77% higher than average. The high18 | INSURANCE JOURNAL | FLORIDA JUNE 7, 2021

est increase was seen in reported damaging wind gusts which can directly damage structures or indirectly cause damage by felling trees and large branches.

The most impactful Florida SCS events in 2020 occurred in the late winter and early spring. A multi-day event in February led to 50-plus reports of damaging wind gusts in Florida. The jet stream dipped far into the Southeast, bringing robust vertical wind shear and onshore flow off the warm Gulf of Mexico waters, with insured losses over $100 million.

In April 2020, above average activity for the region included an outbreak around mid-month with over 150 reported tornadoes across the Southeast, the third-most tornadoes occurring in a 24-hour period on record and the most since April 2011.

Dozens of reports of damaging wind gusts and a few tornadoes impacted Florida during this event resulting in approximately a quarter billion dollars in losses.

Insured losses in Florida for the entirety of 2020 were over $1 billion and approximately three times the Florida industry average for SCS activity. The intense SCS can be linked to an anomalously positioned southern jet stream, robust verti-

cal wind shear and much above-normal Gulf of Mexico sea surface temperatures enhancing moisture and instability, i.e. fuel for thunderstorms.

So far in 2021, SCS insured losses are below average for the U.S. as a whole, and SCS activity has been average for Florida.

Late January through mid-February saw a few events with damaging wind gusts and isolated tornadoes. An event in mid-April produced hail larger than golf balls near Orlando and Melbourne.

The remainder of 2021 is expected to continue to be active in Florida due to a robust southern jet stream remaining through the spring. Normal summertime activity is expected and the fall normal to slightly above normal due to the expected behavior of the jet stream and the warm sea surface temperatures. While SCS activity is likely to be above average, it is not expected to be as high as 2020.

But scientists believe the meteorological conditions of 2020 in the Southeast may become more common with climate change. In a warming climate, low-level instability is expected to increase as the Gulf of Mexico sea surface temperatures increase, according to research reported in the Oxford Research Encyclopedia of Climate Science. This can be linked to the potential for stronger updrafts within thunderstorms, or the possibility that more thunderstorms become severe if the other necessary ingredients — moisture and vertical wind shear — are present.

Research reported in npj Climate and Atmospheric Science and the Bulletin of the American Meteorological Society has shown that this increase is most likely to occur during the winter and early spring months across Florida.

Combining the expected hazard trends with the expected increase in exposure due to population growth, insured losses from severe thunderstorms will likely continue to increase in Florida.

Dr. Sara Sienkiewicz is a senior atmospheric scientist for catastrophe modeling firm Karen Clark & Co. Sienkiewic contributed to the development of the U.S. Winter Storm and SCS Reference Models and the Europe Windstorm Reference Model. She previously worked as a meteorologist-developer at the National Weather Service’s Weather Prediction Center.

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