Earlier this week, Florida lawmakers from the House of Representatives and the Senate unanimously voted to strip policyholders of their ability to hold unruly insurance companies accountable.
It is no secret that Florida is experiencing an insurance crisis, with six insurance companies going bankrupt in 2022 alone, and many other insurance companies pulling out of Florida altogether. This – among other things – has resulted in an increase in insurance premiums up to as much as 33%.
What is the Real Reason Your Insurance Premiums Continue to Rise?
The supermajority legislature is blaming the “skyrocketing number of lawsuits”, “exorbitant amount of attorney’s fees being paid out by insurance companies”, and “Assignment of Benefit (AOB)/Roofer Fraud” as the main culprits of this insurance crisis, yet none of these reasons were cited for any insurance companies downfall, dating back to 2018. Rather, insurance companies who distributed large stock dividends and providing astronomical compensation packages in years with no hurricanes is likely the bigger culprit.
Heritage Property & Casualty Insurance Company
Heritage Insurance’s former chairman, Bruce Lucas, collected $27.2 million in compensation and cashed in on $19 million in stock in one year. Between 2013 to 2020, Lucas received over $78 million in compensation. Since Lucas stepped down in 2020, he has become the CEO of Slide Insurance, a startup which was able to raise $105 million in a Series A fundraising round.
United Property & Casualty Insurance Company
United Property & Casualty Insurance Company/United Insurance Holdings Corp. paid out $10 million in dividends each year, including $4 million in dividends to its CEO, Daniel Peed, who owns 40% of the company’s common stock. Greg Branch, a director and former chairman of United, makes about $550,000 a year in dividend payments. UPC was accused of altering estimates following Hurricane Irma claims, and told its adjusters to deny every single Hurricane Irma claim that was not timely reported or was reopened with an attorney on the file, despite clear evidence of damage. Instead of facing liability, UPC decided to pull out of Florida, blaming “losses to its financial books” as the reason.
Universal Property & Casualty Insurance Company
Universal Property & Casualty Insurance Company provided payment packages as large as $14-25 million to its former CEO, Sean Downes, where he averaged roughly $13.7 million during his time as CEO, and continued to receive compensation in 2020 and 2021 as his role as executive chairman. Universal also pays $25 million in dividends each year.
Profit Formula of Insurance Companies
Everyone knows that insurance companies are for-profit businesses. The entire business model behind an insurance company – whether homeowners, automobile, or health – is essentially to bet against whatever is being insured (i.e., the property, vehicle, or person), and their likelihood of filing a claim to collect against those insurance benefits. The higher the ratio of collected premiums to paid-out insurance proceeds, the more profitable an insurance company is. But the trend lately – at least in Florida – has been to cut corners, wrongfully “deny, delay, and defend” against valid claims, and force policyholders to “lawyer up”.
And now, after these bad actors are finally being exposed, they turn to the legislative branch to plead for a stop to the policyholder “abuse” that is causing them to pay exorbitant attorney’s fees, instead of looking in the mirror to realize that the only need for policyholders’ attorneys is because the insurance companies refuse to pay for valid claims.
How Will Your Rights as a Policyholder Be Impacted?
Removal of “One-Way” Attorney’s Fees
As the law presently stands (that is, until Governor Desantis signs the bill that was unanimously passed by both the House and the Senate), the insurance company must pay the attorney’s their reasonable attorney’s fees if it turns out that the policyholder was able to collect additional monies in a lawsuit after successfully challenging the insurance company’s denial or underpayment. The law has been this way for more than 100 years. The purpose of the fee statute was to discourage insurance companies from dragging out lawsuits and forcing the homeowner to retain an experienced attorney to change its position on a covered claim.
But once this law goes into effect, the policyholder will lose that right. Now, if an insurance company wrongfully denies or underpays a policyholder’s claim, the policyholder will be forced to retain that same experienced attorney – at his/her OWN expense – to battle the insurance company lawyer who bills the insurance company hourly, regardless of how long the lawsuit takes. In turn, if a policyholder has minimal damages – take a $20,000 plumbing loss, for example – the policyholder will be hard-pressed to find any attorney who would sign up that case and file a lawsuit. By the time the attorney pays the filing fee and retains an engineer, the policyholder is responsible for reimbursement of those expenses from whatever recovery the attorney may receive on the policyholder’s behalf. Not to mention that the attorney’s recovery is limited to a percentage of whatever recovery he/she may obtain on behalf of this policyholder, and at a certain point, it does not become cost-effective to litigate a claim like this.
No More Assignment of Benefits
As of the date this bill is signed, there will be no more Assignment of Benefits. This means that a homeowner who has a roof leak, a pipe that bursts inside their home, or any similar damage which requires remediation services, will be forced to pay for these services fully out of pocket, up front, before any insurance recovery is made (if any), or be forced to let the damages inside their home worsen.
All insurance policies require the policyholder mitigate the damages, or protect the property from getting worse. With an AOB, a policyholder could assign a portion of the claim to the contractor to perform mitigation work without collecting payment from the policyholder directly, allowing the mitigation to move forward immediately. Now, if a policyholder cannot afford those services out of pocket, they will not be able to comply with the policy’s terms and obligations – another win for insurance companies.
Mandatory Binding Arbitration Provisions
Policyholders will now be given the option to include Mandatory Binding Arbitration provisions, a dispute resolution process, in their policies in exchange for a premium discount; however, nothing in the bill indicates how much this premium discount will be. An arbitration provision requires the policyholder attend an arbitration instead of filing a lawsuit. This arbitration costs money, and the policyholder will be forced to split the cost of the arbitration with the insurance company, up front, before there is any insurance recovery made – and this does not even guarantee that the policyholder will obtain a recovery – another win for insurance companies.
Allows Virtual Inspections of Your Property
Somehow, the insurance company will be able to perform virtual inspections, by reviewing photographs or videos of your damages in order to complete their obligations to assess the damages. This means that no person may ever step foot into your home on behalf of the insurance company – another win for insurance companies.
Drastically Eliminating Your Ability to Claim “Bad Faith” Against the Insurance Company
When an insurance company has been proven to act in “Bad Faith” in its normal course of dealing, a policyholder can collect additional damages, as a means to limit this conduct. With this new bill, a policyholder will be forced to provide a breach of contract before they can move for Bad Faith, which means Bad Faith won’t ever arise unless a policyholder takes their case all the way through trial and successfully obtains a jury verdict in its favor. This will encourage the insurance companies to deny, delay, and underpay your claim with no recourse, and then invoke appraisal or arbitration to prevent you from claiming they acted in Bad Faith – another win for insurance companies.
Citizens’ Policyholders Now Bear the Burden of Proof for Recovery
“Burden of Proof” is a legal standard that requires a party to provide evidence to demonstrate that a claim is valid. Generally speaking, in Florida, a policyholder merely needs to prove that they sustained a direct, physical loss during the policy period, at which point the burden of proof shifts to the insurance company to prove that the loss is not covered under one of the exclusions in the policy.
With this new law, Citizens’ Policyholders will be required to prove that water damage is from wind damage rather than the burden on the insurance company to prove that it was from flood damage. This legal standard is being imputed onto policyholders, who will now have to front the cost of their own attorney, should Citizens claim that the policyholder did not meet its burden – another win for insurance companies.
Citizens’ Policyholders Required to Purchase Flood Insurance
Everyone insured with Citizens will be required to obtain flood insurance on their properties. This means that your already-expensive homeowners’ policy will now require an additional premium for flood coverage, even if you are not in a flood zone.
If Hurricane Ian taught us anything, it’s that everyone should own a flood policy, but it should not be a requirement if one does not want to – or does not have the means to – purchase additional policies.
Has This Article Angered You?
There were several amendments to this proposed bill that would have provided additional relief for policyholders, but all were shut down unanimously. With the House and Senate bills almost identical, and no amendments allowed, it is clear that this was a joint venture that was decided long before the Special Session began. This 105-page bill was also dropped the Friday before the Special Session, and placed onto the floor and voted on in under two days’ time.
With no guarantee in rate reductions or stabilizations, the only thing that is going to happen is the insurance companies are going to get richer, and their bad behavior will become unhinged, even more than it already has.
If you are unhappy about the ramifications of this new bill, I implore you to talk to your local representatives, elected officials, and Governor Desantis about your opposition to this bill. This very well may be the demise of our state, an increase in a housing crisis, with people’s homes going to foreclosure in being unable to front the burden of making insurance companies do right.
If you have property damage and would like to schedule a free consult, feel free to give The Gelber Law Group a call at 954-320-0100.