Insurance reform package sails through Legislature — will it fix the crisis?

Florida lawmakers stepped up during a special session on property insurance in Tallahassee in late May, agreeing on a legislative package that capped what attorneys can charge and increased consumer protections in an effort to slow ballooning rate increases and stabilize a teetering market.

The bipartisan legislation, Senate Bill 2D, was co-sponsored by Sen. Jim Boyd, R-Bradenton, who runs an insurance firm, and signed, almost immediately, by Gov. Ron DeSantis.

According to the governor’s office, the new law “enacts pro-consumer measures to help alleviate rising insurance costs, increases insurance claim transparency and cracks down on frivolous lawsuits which drive up costs for all Floridians.”

Among the provisions included in the package are measures creating a new standard for the application of attorney fee multipliers and limiting the assignment of attorney’s fees in property insurance cases. Those are designed to help cut down on frivolous lawsuits.

The package also provides $2 billion for reinsurance relief through the Reinsurance to Assist Policy program, $150 million for homeowners to get grants for hurricane retrofitting and requires insurance companies to give a “reasonable” explanation on why a claim was denied.

DeSantis, in a statement, calls the measures “the most significant reforms to Florida’s homeowners insurance market in a generation.”

Capping attorney fees and limiting lawsuits has long been seen as a way to stabilize Florida’s insurance market, which multiple experts in the public and private sectors agree is on the brink of collapse. These fees have helped drive up property insurance prices for consumers, drive out insurance companies unable to compete in the state and drive others into insolvency.

When calling for a special session, DeSantis said Florida accounted for 79% of the entire country’s insurance lawsuits over claims while making up only 9% of actual insurance claims. The Florida Association of Insurance Agents says that between 2013 and 2020 insurance carriers in Florida paid out $15 billion in claims costs. Of that, only 8% was paid to consumers. Attorneys got 71%.

The cost of litigation has led property insurance rates to skyrocket as insurance companies ask and receive approval to hike prices. Others insurance companies are simply leaving because of the high cost of doing business in Florida.

All of this puts an incredible strain on the state’s Citizens Property Insurance Corp., which was designed to be the carrier of last resort when it was created in 2002. Citizens is only allowed to raise rates 11%, which leaves many policyholders to choose it to at least mitigate some of the rising costs.

Citizens has seen an increase of 399,822 policies since the start of 2020 and is on track to have more than one million policies by year end.

Without any reforms, the fear is that Florida’s insurance industry is one catastrophic storm away from total collapse, leaving taxpayers and homeowners on the hook for the damage. Citizens’ issues weren’t directly dealt with in the legislation, though changes to the industry will have an impact.

Only time will tell, though, if these measures will keep the worst from happening in the short and long term or if they are simply a Band-Aid applied to a gaping wound.

Addressing attorney fees was a major goal for the governor and others with an interest in the insurance market heading into the special session.

The legislation passed despite concerns lawmakers would again fail to pass meaningful legislation as they did during the regular session earlier this year. Instead, lawmakers bucked critics by overwhelmingly passing the reform. SB 2D passed 30 to 9 in the Senate and 95 to 14 in the House.

That lawmakers passed the reform was cheered both by industry and government leaders who say changes to Florida’s insurance industry were deeply needed.

Florida’s Insurance Commissioner David Altmaier thanked lawmakers in a statement for “tackling market challenges head on to enact historic and comprehensive insurance reform.”

“This legislation strengthens protections for Florida insurance consumers, provides greater tools to hold insurance companies accountable and promotes the long-term stability of our market.”

And Florida Surplus Line Association president Kathy Colangelo says the legislation “addresses exploitative litigation and offers common-sense reforms that help promote insurance availability and affordability from surplus lines and admitted carriers alike.” 

“As we head into Hurricane Season, the importance of preparing for weather events underscores the need to stamp out man-made problems that harm property owners and inhibit their ability to procure necessary coverage,” FSLA says.

Surplus lines aren’t controlled by Florida Office of Insurance Regulation. But many of the companies are well capitalized and those looking for substantial change say if guardrails are in place to ensure the best of these carriers come in, it would help fix the problems.

Lawyers, on the other hand, are not as happy.

Amy Boggs, a St. Petersburg attorney at the Boggs Law Group and chair of the Florida Justice Association’s property insurance section, which had opposed the capping of attorney fees, says in a statement that the reform “comes at the expense of protections for Florida consumers.”

She says the legislation cuts coverage to roofs, limits homeowners’ access to the courts when an insurance company underpays or denies a claim and removes protections. “In one broad stroke, the Florida Legislature is immunizing insurance companies from bad faith.”

“What does this mean for consumers? Insurers will now be empowered to always present a lowball offer, they will have to spend more of their own money for (an) appraisal when they have already suffered a catastrophic loss and we can expect to see blue tarps forever in the state of Florida.”