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Florida lawmakers passed two bills on the last day of their 2021 legislative session that make major changes to the state’s auto and property insurance markets.

The actions follow weeks of back-and-forth debate on the proposals between the House and Senate chambers.

Stakeholders say neither of the potential new laws will do enough to accomplish lawmakers’ goals of reducing rates or weeding out fraud in their respective insurance industries. Both bills are now headed to Governor Ron DeSantis, who will have to sign them before they can become law.

Senate Bill 76

The bill attempts to address some of the issues plaguing the state’s homeowners insurance market in which insurers lost more than $1.5 billion in last year. It passed Friday in the Senate by a vote of 35 to 5 and 75 to 41 in the House.

The legislation was revised significantly from its original form at the start of the session and includes:

• Changing the eligibility, rate glidepath and actuarily sound rate indication for Citizens Property Insurance Corp.
• Replacing 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 by the insurance company.
• Reducing 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.
• Requiring 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 to make a determination of coverage; and allows an insurer to require mediation or other form of 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. Specifically, SB 76:

• Makes 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.
• Prohibits the offering of 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.
• Prohibits a contractor from providing repairs for an insured with a contract for repairs that does not include a detailed cost estimate of the labor and materials required to complete the repairs.
• Adds potential for $10,000 fine for each violation by roofers.

Removed from the final legislation was the elimination of the state’s attorney fee multiplier and allowing insurers to include policy language that offers actual cash value instead of full replacement cost on roofs. The industry had urged lawmakers to include these provisions to address cost drivers, but it became a sticking point in both chambers. An amendment passed Friday also eliminated offers of judgment for the insured or the insurer.

Senator 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 colleagues.

Locke Burt, chairman and CEO of Florida-based insurance company Security First, said he was disappointed lawmakers didn’t take up reforms to the effects of two Florida Supreme Court cases – Joyce vs. FedNat (2017), and Sebo vs. American Home Assurance (2016) – that are said to be partly to blame for perpetuating litigation in the state, as noted in a recent report from Florida Insurance Commissioner David Altmaier. But, Burt said, the legislation that passed makes some much needed changes and is a “step in the right direction.”

“I would characterize this a single step,” he told Insurance Journal. “But I would also tell consumers that their rates are going to continue to go up.”

Senator Jim Boyd, who is also an insurance broker, acknowledged that the bill is far from perfect and that no one, including the insurance industry and the trial bar, are happy with the result.

However, he noted, “we have got to do something. We cannot wait until next year to solve what is an incredibly large problem for our constituents.”

Representative Bob Rommel, who worked on the House version of the bill, said the legislation would provide oversight on insurance companies, help attract new carriers to the state of Florida and “make sure homeowners will have a competitive market and have the right to choose the right insurance for themselves.”

The Florida Office of Insurance Regulation (OIR) said in a statement that it “appreciates the tireless work of the Florida Legislature to pass meaningful property insurance reform. SB 76 protects consumer’s rights and addresses the current challenges in the property insurance market.”

If signed by DeSantis, the new law will take effect July 1, 2021.

Senate Bill 54

Florida’s passage of this bill will 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. Earlier versions of the legislation required insurers to offer medical payments coverage (MedPay) in the amount of $5,000 or $10,000, but the passed version makes the offering optional and includes an optional $5,000 MedPay death benefit.

The bill will also create a new framework to govern motor vehicle claims handling and third-party bad faith failure to settle actions against motor vehicle insurance carriers. A House amendment passed this week added a statement that the statute governing these 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.

Brandes, one of three senators to vote against the bill, said its sponsors had not done enough to study how the bill would affect rates.

“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.

But bill sponsor Danny Burgess, a Republican, argued that a 2016 study from OIR showed rates would go down if the state repealed PIP. He said the provisions addressing bad faith will also help stop fraud that has been rampant with PIP and lead to further rate reductions.

“It’s hard to predict market forces, but overwhelmingly the data shows we will see a [rate] reduction,” he said. “Certainly not a steep reduction, but I do believe we will see a reduction.”

However, many in the industry and stakeholders have countered that assessment.

Insurer trade group the American Property Casualty Insurance Association (APCIA) opposed the bill’s passage, saying it could increase rates on Florida drivers and increase the state’s current uninsured rate of 20%.

It worked on an actuarial study to assess the impact of the bill and said its analysis shows it could increase the cost of the average auto insurance policy 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 veto the legislation.

“As SB 54 heads to Governor DeSantis’ desk, he has the opportunity to protect Florida drivers from higher auto insurance costs and help keep our roads safer by vetoing this legislation,” APCIA said.

Also encouraging the governor to veto the bill is the Personal Insurance Federation of Florida (PIFF) and the Consumer Protection Coalition (CPC).

“We are extremely concerned that this bill would substantially increase rates for our customers and Florida residents who can least afford an increase, while forcing hundreds of thousands of Floridians already struggling to pay current premiums to drive without insurance,” said Michael Carlson, president and CEO of PIFF.

“On behalf of Florida consumers, the CPC urges Governor Ron DeSantis to examine the potential cost impact this legislation will pose on Florida consumers and consider vetoing the bill if it is found to raise rates and not decrease litigation,” the group said.

If signed by DeSantis, the new law will take effect Jan. 1, 2022.