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Tuesday, May 28 2019

Long-awaited reforms for Florida’s assignment of benefits (AOB) crisis that the insurance industry and consumer advocates say has led to less coverage and higher rates for Florida property owners will officially become law July 1.

Florida Governor Ron DeSantis signed House Bill 7065 on Thursday, marking the end to a seven-year battle by the industry and reform advocates seeking a solution to escalating abuse of the policyholder benefit.

“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.”

DeSantis previously indicated he would sign the bill after it was passed by lawmakers in April, saying “the exponential growth in AOB abuse has contributed to mounting insurance costs for Floridians for far too long.”

“By signing House Bill 7065, we will better protect consumers from those who would take advantage of them by abusing the Assignment of Benefits process,” Florida Insurance Commissioner David Altmaier said in a statement after DeSantis signed the bill.

The bill’s provisions:

  • Define “assignment agreement” and establishing requirements for the execution, validity, and effect of such an agreement
  • Prohibit certain fees and altering policy provisions related to managed repairs in an assignment agreement
  • Transfer certain pre-lawsuit duties under the insurance contract to the assignee and shifting 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
  • 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 the state’s one-way attorney fee statute to incorporate an attorney fee structure in determining 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 bill also requires savings be passed along to Florida consumers who are covered by Citizens Property Insurance Corp., which has borne the brunt of AOB abuse.

In South Florida in particular, AOB lawsuits have exploded over the last 10 years and Citizens has filed for rate increases to offset litigation costs. It proposed rate increases for 97 percent of its homeowners policyholders for 2019.

Written into the bill is a stipulation stating Citizens “may not implement rate changes in 2019 for DP-3 and HO-3 policies unless the rate filing reflects projected rate savings from this act.”

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%.

Citizens spokesperson Michael Peltier told Insurance Journal in April that the insurer is planning to refile its rate request in the coming months. It plans to release further details at a later date and will work with the Florida Office of Insurance Regulation (OIR) on timing.

Barry Gilway, president, CEO and executive director of Citizens praised the signing of the bill on Thursday.

“This new law represents a major step forward in our efforts to stem rising premiums caused by unnecessary litigation and assignment of benefits abuse. It is going to make a difference,” he said in a statement.

Florida CFO Jimmy Patronis said Florida consumers are the biggest winners with the soon-to-be law’s protections.

“This year, we advocated for Florida homeowners and passed reforms to help stop rampant lawsuit abuse across the state. My fraud detectives, as well as sheriffs, state attorneys and other law enforcement leaders have joined our efforts to create a Fraud Free Florida, and this new law furthers this mission,” Patronis said.

Other industry groups also praised the passage of the bill.

“We are grateful that AOB reform is now officially here for homeowners, so fewer Floridians can be taken advantage of during their times of need,” said Michael Carlson, president of the Personal Insurance Federation of Florida (PIFF).

On Friday, the governor also signed House Bill 337, which contains language providing that the attorney’s fee provisions of HB 7065 takes effect once the bill has been signed by the governor and becomes law. Lawmakers added the effective date for the attorney fee provision to HB 337, which was already the works, in response to claims by law firms profiting off of AOB agreements that they would rush to file cases and continue AOB abuse before the law takes effect on July 1.

Lead Florida AOB attorney Harvey Cohen posted a video within days after the reforms were passed urging vendors to submit their AOB agreements for litigation as soon as possible. The video was circulated by the Florida Consumer Protection Coalition in a news release titled “Shameless.”

“The law takes effect July 1, so you need to have your documents sent to us right away. Make sure we get all of these cases filed well before July 1,” Cohen said. “You can imagine, at the end of June there is going to be a mad rush to get everything filed.”

Fred E. Karlinsky, co-chair of law firm Greenberg Traurig’s Insurance Regulatory and Transactions Practice Group in Florida, said adding the effective date to HB 337 was a wise move by lawmakers.

“This predatory practice has cost the citizens of the state of Florida tens of millions of dollars and the legislature and governor clearly wanted to put an immediate end to it,” he said.

Tuesday, May 28 2019

As many as 8 hurricanes may form in the Atlantic in 2019, a “near normal” season following two years of storms that have left a trail of death and destruction in the Caribbean and U.S. coast.

Nine to 15 named storms are forecast during the six-month season that starts June 1, according to the National Oceanic and Atmospheric Administration, which has been largely correct with its predictions in recent years. Of those, 4 to 8 will become hurricanes and 2 to 4 will be major systems with winds of 111 miles (179 kilometers) per hour or more.

“It only takes one landfalling hurricane to create great destruction to a community, we need to prepare now,” said Daniel Kaniewski, a deputy administrator of the Federal Emergency Management Agency.

The hurricane season will be closely watched because of its potential to take a heavy human toll as well as rattle oil and gas markets across the globe. Over the past two years, storms including Michael, Irma and Harvey led to scores of deaths and over $250 billion in damages. They have also sent U.S. gasoline prices surging, shifted global crude and fuel flows, disrupted production in the energy-rich Gulf Coast and threatened crops.

This year is the fifth time in a row that a system has spun up in the Atlantic before the official June 1 start to the season, with Subtropical Storm Andrea forming earlier this week. A system gets a name when it reaches tropical storm strength with winds of 39 mph.

Still, a lingering El Nino weather phenomenon in the equatorial Pacific could help keep overall storm numbers lower by creating wind shear across the Atlantic that rips budding systems apart, said Neil Jacobs, acting NOAA administrator. In April, Colorado State University predicted 13 storms could be named in the Atlantic this year.

Energy markets will focus on the potential impact in the Gulf Coast, which accounts for 45% of U.S. refining capacity and 51% of gas processing. About 5% of the nation’s natural gas and 17% of crude comes out of the Gulf of Mexico, according to the Energy Information Administration.

There are also more than 6.6 million homes with an estimated reconstruction cost of $1.5 trillion along the Atlantic and Gulf coasts, according to the Insurance Information Institute in New York. Florida is the world’s second-largest producer of orange juice.

In 2018, storms Michael and Florence struck the U.S. South, causing widespread damage that’s still lingering as residents struggle to rebuild. Florence ripped into North Carolina in September, bringing record storm surge and rain that flooded homes and businesses before causing additional destruction across South Carolina. It’s blamed for 52 deaths, according to the National Hurricane Center.

The following month, Hurricane Michael leveled homes in Florida’s panhandle when it came ashore near Mexico Beach. The storm killed at least 16 and caused $25 billion in damage, the National Hurricane Center said. It was the third most intense storm in terms of central pressure and brought the fourth strongest winds of any to hit the contiguous U.S. on record.

Both storm names have been retired from official lists.

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