Legislature Looks at Property Insurance Reform

TALLAHASSEE, Fla. – In the face of rising rates for property insurance, the Florida Legislature will consider a range of bills this week in a special session called to tackle the issue. Given the bills introduced, it appears the solution is seen as an array of options, with possibly a menu of items approved.

Changes lawmakers will consider this week

Civil remedies reform

• Contingency Fee Multiplier – attorney fees x hours x multiplier – limited to rare and exceptional circumstances.
• Eliminates Attorney Fee Awards in AOB (assignment of benefits); eliminates attorney fee awards in litigation involving a property insurance claim that is assigned to a third party (usually a contractor).
• Bad Faith: Policyholders must establish that their property insurer breached the insurance contract before they can prevail in a bad faith lawsuit.

Roof reform

• Insurers unable to refuse to write or renew policies on homes with roofs that are less than 15 years old solely because of the roof’s age.
• For a roof that is at least 15 years old, insurers must allow homeowners to have a roof inspection before requiring the replacement of the roof as a condition of writing or renewing the homeowner’s insurance policy.
• Insurers unable to refuse to write or renew a homeowner’s insurance policy solely because of the roof’s age if an inspection shows that the roof has five years or more of useful life.
• If insurers want to inspect damage in person, insurers must send an adjuster within 45 days of a non-hurricane claim.
• Allows property insurers to require a separate roof deductible (with an opt-out provision) that may not exceed the lesser of 2% of the policy dwelling limits or 50% of the roof replacement costs.
• Roof deductible provision must be clear and allow policyholders to opt-out of the separate roof deductible.
• Roof deductible does not apply to:

1. Total loss to the primary structure that is caused by a covered peril.
2. A loss caused by a hurricane.
3. A roof loss resulting from a tree fall or other hazard that damages the roof and punctures the roof deck.
4. A roof loss requiring repair of less than 50% of the roof.

• Policyholders who select a roof deductible must receive a premium credit or discount.
• Requires disclosure to policyholders that:

1. Prominently displays the actual dollar value of the roof deductible at issuance and renewal on the declarations page.
2. Provides notice that a roof deductible may result in high out-of-pocket expenses to the policyholder on a separate page behind the declarations page.

• Specifies that when a roof deductible is applied, no other deductibles may be applied.
• Allows an insurer to limit payment on a roof claim to actual cash value until the policyholder pays the roof deductible.

Roofing contractor disclosures

• Prohibits written contractors’ solicitations that encourage consumers to make a property insurance claim for roof damage unless the solicitation provides notice that:

1. The consumer is responsible for the payment of any deductible.
2. It is insurance fraud punishable as a felony for a contractor to pay or waive an insurance deductible.
3. It is insurance fraud punishable as a felony to intentionally file an insurance claim containing false, fraudulent or misleading information.

Consumer choice on roof repair

• Creates a statutory exception to the Florida Building Code so that roofs that are more than 25% damaged but already comply with the 2007 Florida Building Code may be repaired instead of being required to be replaced.

Cat Fund reform

• Authorizes $2B for a new Reinsurance to Assist Policyholders (RAP) program for insurers. This reinsurance coverage is provided at no cost to the insurer.

1. This program allows insurers to obtain reimbursement for hurricane losses earlier than they normally would under the Florida Hurricane Catastrophe Fund (Cat Fund).
2. Insurers that participate in RAP for 2022 are required to reduce their policyholder’s rates by June 30, 2022, to reflect the savings from RAP. Insurers that defer using RAP until 2023 must reduce policyholder rates to reflect savings by May 1, 2023.

Home hardening grants to Florida homeowners

• Effective July 1, $150M is appropriated to provide hurricane mitigation inspections and matching grants to help Floridians afford home hardening improvements to their homestead single-family residences with an insured valued at $500,000 or less (home must be located in a wind-borne debris region and the application for initial construction must have been made prior to 2008).
• The program provides $2 in grant funds for every $1 provided by the homeowner. Applicants may receive up to $10,000 in program money.
• Builds on but is different from the sales tax exemption on impact-resistant windows, doors, and garage doors that is now law.

Greater claim transparency for policyholders

• Requires insurers to notify policyholders that they may request a copy of any detailed estimate of the amount of the loss generated by an insurer’s adjuster. After receiving the request, insurers must send the detailed estimate to policyholders within 7 days.
• Requires insurers to provide a reasonable explanation in writing to the policyholder of the basis for the payment, denial or partial denial of a claim. If the insurer’s claim payment is less than specified in any insurer’s detailed estimate of the amount of the loss, the insurer must provide a reasonable explanation in writing of the difference to the policyholder.

Insurer solvency, stability oversight and Office of Insurance Regulation (OIR)

• Creates an Insurer Stability Unit to aid in the detection and prevention of insurer insolvencies
• Requires an analysis of the causes and business practices of any insurer deemed insolvent
• Requires numerous new reports regarding homeowners insurance related to market conditions

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