Michael Moline – Page 4 – Florida Politics

Michael Moline

Michael Moline is a former assistant managing editor of The National Law Journal and managing editor of the San Francisco Daily Journal. Previously, he reported on politics and the courts in Tallahassee for United Press International. He is a graduate of Florida State University, where he served as editor of the Florida Flambeau. His family’s roots in Jackson County date back many generations.

Irma confounds already straightened state budget prospects, committee learns

Florida’s tax structure will produce only $52 million in gains on existing state spending during the coming fiscal year, and will leave lawmakers more than $1 billion in the hole during each of the two budget years after that.

That doesn’t count what the state needs to spend to recover from Hurricane Irma.

The news came Thursday as the Senate Appropriations Committee began sorting through the many demands on the government’s pocketbook.

“It’s grim,” Appropriations Chairman Jack Latvala said.

“We don’t really have any extra money. We’ve had some money spent on our behalf lately that’s even making it a little tighter,” he said. “There’ll probably have to be a cut exercise, just like always.”

He referred to hurricane emergency spending ordered by Gov. Rick Scott.

Amy Baker, coordinator of the state Office of Economic and Demographic Research, reported to the committee on the budgetary picture.

“The budget they were building for next year had enough revenue for them to keep doing what they’ve been doing,” Baker said.

“But big problems in the following years, and growing,” she said. The Year 2 projection was for a $1.1 billion deficit and a $1.6 billion shortfall in Year 3.

And that didn’t account for “black swans” like Irma. Since the storm hit, Scott has used his executive authority to spend more than $141 million on hurricane response, including $25 million for emergency loans to citrus growers whose crops were wiped out.

Meanwhile, Monroe County, to name one example, likely will have to rebuild one of three hospitals in the Florida Keys. It’ll need a new or improved emergency operations center too — responders had to abandon the building because it couldn’t resist a Category 5 hurricane.

The full cost of Irma remains unclear. Visit Florida President Ken Lawson sketched out the agency’s plan to keep the tourists coming. Meanwhile, no one knows yet the full extent of the damage to state and local infrastructure, or whether the federal government will come through with emergency aid.

This, too: State pension investments are bringing in less cash. And the demands on the school system will grow, especially with the influx of new residents from Puerto Rico.

“Between what happened to the retirement system, and what they’ve already spent on Irma, you’re $140 million down,” Baker said.

“We’re going to be December before we have any confidence that we have good estimates,” she said.

“Some of these costs are certainly legitimate to be paid for from our reserves. We call it a Rainy Day Fund,” Latvala said. “And like Sen. (Joe) Negron said yesterday, if this wasn’t a rainy day, what is?”

As far as Latvala’s concerned, taxes increases are “off the table.”

As for opioids, Scott has called for $50 million to tackle the epidemic, with about half of that representing federal money.

Latvala wasn’t prepared to pass judgment on the request. “This is the very first week of committees, the very first meeting that this has been discussed. We have a lot of work to do before we make opinions like that,” he said.

He did note that he’d asked for an emergency $20 million to get opioid responders through the fiscal year.

“I’m still waiting, People are still dying. Nobody’s dying because oranges fell off of a tree. We need to treat the opioid crisis just like we’re treating the economic crisis from the hurricane, and move on it. He has the same ability on the opioid crisis, to deal with that through an executive order, as he has on the hurricane.”

Latvala did complain that Scott’s executive budget amendments circumvent the Legislative Budget Commission, a House-Senate panel empowered to authorize mid-year spending.

“I’m hopeful that we’ll be able to get back into a regular process,” he said.

“In past hurricanes we’ve had legislation that has gone into direct capital efforts like that to restore communities. I’m hopeful we’ll be able to do that this time, as well.”

 

House insurance chairman hopes to take up AOB, workers’ comp reform again

Hurricane Irma recovery clearly will dominate the 2018 Legislative Session, but the chairman of the House Insurance & Banking Subcommittee hopes to find time to address a few of the state’s other problems.

Like assignment of benefits abuse, for example.

“I fully expect that to be a policy discussion,” Rep. Danny Burgess said following an extended briefing on Irma response.

At last count, Irma had generated 703,671 claims with an estimated value of nearly $4.6 billion — and both numbers will increase in the months ahead, Insurance Commissioner David Altmaier told Burgess’ committee.

With that many claims, and legions of repair contractors in the field, the potential for AOB abuse seems clear.

“We’re still waiting to get a lot of the numbers in relation to Hurricane Irma, and seeing if the AOB issue has increased, as some of us maybe expect it will,” Burgess said.

He foresees moving an AOB bill off the floor in 2018, as the House did during the 2017 Legislative Session.

Regarding workers’ compensation, the Office of Insurance Regulation approved a 14.5 percent average premium increase last year. Since then, the National Council on Compensation Insurance has proposed an average 9.3 percent reduction in rates.

Burgess still considers the matter “one of the most important, if not the most important” problems confronting the state long term.

“Thankfully, they have what appears to be a temporary reduction. It’s not a complete reduction. There’s still about a 5 percent increase. There’s still the unknown of an increase down the road.”

Republicans see Irma as an opportunity to review energy regulations

House leaders see the recovery from Hurricane Irma as an opportunity to investigate whether state regulations are getting in the way.

The issue came up Wednesday during hearings before the Energy & Utilities Subcommittee.

“Are there any regulations, whether laws that we’ve passed or administrative procedures the PSC might have put in place, that might be slowing down the recovery time or restoration time?” Republican Jason Fischer asked Florida Power & Light’s Bryan Olnick.

“And if there are, could you identify what some of those might be? I’d be willing to work with you to pull some of those back.”

Olnick thought not.

“Right now, I really don’t think that there are necessarily any rules or regulations I would say are a major hindrance when it comes to restoration strategy, restoration philosophy, prioritizing how we restore. I wouldn’t really say there are any major roadblocks,” Olnick said.

Speaker Richard Corcoran’s new Select Committee on Hurricane Response and Preparedness definitely will look into the state’s regulatory climate, said Panama City Republican Jay Trumbull, chairman of the energy panel and a member of the select committee.

“We are absolutely going to be looking at those things in that select committee, as well,” Trumbill said.

That Florida has recovered as well as it has is largely due to regulations the Legislature ordered the Public Service Commission to write after Hurricane Andrew and the storms of 2004 and 2005. That’s judging by testimony from PSC officials and executives of three investor-owned utilities before Trumbull’s committee, and before a Senate panel on Tuesday.

The House committee also heard from a representative of the Florida Electric Cooperatives Association.

“This committee is going to focus on how we can get power to folks in Florida at the lowest price possible, and looking at the way policy is driven in the state,” Trumbull said of his subcommittee. “The select committee is going to focus on specific issues relating to hurricanes. And a lot of those things are going to flow from that committee to us. Because the majority of those things probably had to do with power.”

Trumbull, in his inaugural hearing as chairman of the energy panel, said he wants to see how well the existing regulations helped.

“Did all those things work? Did they stand up to Irma’s power? And how can we fix those things in the future?” he said.

It’s too early to know what regulatory reforms might be called for, Trumbull said, but a review would be in line with the Republican Party’s philosophical attachment to smaller government.

“We’re going to allow the select committee to really drill down on some things, and them absorb them as they come out,” he said.

The select committee was scheduled to meet for the first time Thursday at 1:30 p.m.

Senators eagerly waiting hard facts on how the power grid stood up to Irma

Will Hurricane Irma inspire the Legislature to light a fire under the Public Service Commission’s (PSC) efforts to buttress the electric grid against powerful storms?

Likely. But it’s too soon to know what changes might help.

That picture emerged during hearings before Tuesday before the Senate Committee on Communications, Energy, and Public Utilities: Regulators won’t have digested the data situation in time for opening day in January.

Chairman Aaron Bean put the question directly to Cayce Hinton, the PSC’s director for industry development and market analysis, during a presentation on that agency’s 10-year infrastructure “hardening” efforts.

“How did we do? Cut to the chase. Did it turn out? Did we get our money’s worth?”

The PSC has opened a docket to look into that very question, Hinton replied. This year marked the first time the improvements were really put to the test, he said.

“So we don’t know yet?” Bean said.

“We don’t know yet.”

“From what I’ve seen, there appears to have been some improvement as far as restoration times,” Hinton said. “The utilities, right now they’re the ones who have the stats.”

Representatives of three investor-owned utilities were on hand to brief the committee — Duke Energy Florida, Florida Power & Light, and Tampa Electric Co. Each reported that his company’s response was vigorous, considering the extent of the damage.

Bryan Olnick, VP for distribution operations for Florida Power, for example, said it took 18 days to restore power to all customers following Wilma, but only 10 after Irma. Half the company’s customers saw power restored within one day post-Irma; it took five following Wilma.

More information here.

Following the hearing, Bean said some senators are eager to improve the grid.

“Session’s just around the corner. If we need to move or act, we need to do it sooner than later,” he said.

And if the PSC can’t make recommendations in time?

“I’m going to gently nudge them.”

Senate begins search for consensus on AOB reform

Assignment of benefits reform was among the first topics tackled by the Senate Banking & Insurance Committee Tuesday as it began preparing for the 2018 Legislative Session.

A panel of interested parties, invited to debate points of contention, appeared to agree that so-called AOB agreements ought to be in writing, and that a deadline should be imposed for delivering them to insurance carriers.

Working out the details could be tricky, however, not least over which parties could sign AOB contracts. The policyholder, certainly. But what if a divorcing couple holds the policy jointly? Should mortgage-holders have a say?

“That’s why we’re doing this rather methodically — putting the issues out, giving everybody their time,” committee chairwoman Anitere Flores said following the hearing. “There is more that the sides agree on than they disagree on. So let’s try to get something passing.”

The House Insurance & Banking Committee used the same approach during the 2017 Legislative Session, and produced a bill that cleared the floor. The Senate’s AOB legislation never came before the full chamber.

Flores said she asked committee staff to review legislation proposed during the past three years to narrow the major bones of contention.

“And then maybe at some point … we’ll have a nice menu of issues the committee agrees on, and then we can have a bill,” she said. “It’s obviously going to take us several weeks. But we’d rather do it right and take our time than just rush and hear Bill X or Bill Y.”

Regarding sign-offs on AOB, Orlando trial attorney Lee Jacobson complained some carriers already are submitting agreements to mortgage lenders — without authority under state law, he asserted.

Angel Conlin, head of legal affairs and compliance for American Strategic Insurance, said that assertion is being tested in a case before the 2nd District Court of Appeal. She argued the practice is justified.

“The mortgage company is my insured,” Conlin said. “If the divorced couple, if they’re both listed on my policy, they both have rights under my contract and I have duties to both. If I were to pay only one person, because only one of my insureds signed an assignment of benefits, I have failed in my obligations to everyone that I had that contract with.”

The Office of Insurance Regulation has projected policyholders can expect rate increases of around 10 percent in each of the next five years, largely because of inflated costs due to AOB.

Personnel note: James Kotas exiting FCCI for role with Darden restaurant chain

James Kotas is leaving FCCI Insurance Group to lobby for Darden Concepts Inc., a national restaurant chain with brands that include The Capital Grille, LongHorn Steakhouse, and Olive Garden.

He becomes a manager of state and local government relations for 23 eastern states. The department will comprise three employees, including Kotas’ counterpart on the West Coast.

“It was a job opportunity that was too hard to turn down,” Kotas said.

The new job begins next week. Kotas plans to move to Tampa initially, but eventually to Orlando, where Darden is headquartered.

“You’re dealing with a lot of complex issues,” Kotas said.

“You’ve got labor laws. Because of all the locations, you’ve got to deal with real estate. You deal with licensing for alcohol, food and beverage. You’ve got state, federal and you’ve got local ordinances to deal with. Tax implications.”

Kotas joined FCCI about 3 1/2 years ago, as a government relations specialist.

Earlier, Kotas was chief of staff to Sen. Aaron Bean and Rep. Dana Young when she served in House leadership.

Citizens Insurance faces $1.2 billion in Irma claims; total insurance hit is $3.7 billion

Citizens Property Insurance Corp. faces $1.2 billion in losses following Hurricane Irma, Board of Governors chair Christopher Gardner reported Wednesday.

“Please recognize that this is an early estimate, and this number will probably change,” Gardner told board members during a telephone conference call.

The Florida Office of Insurance Regulation, meanwhile, reported 577,918 claims against all insurers as of Tuesday evening, involving residential, commercial, flood, and additional lines. Some 12.6 percent of those claims had been closed.

The estimated value of all claims was near $3.7 billion.

Citizens had fielded 45,651 claims as of Tuesday evening, Gardner said. Fifty-six percent came from the “Tri-County” region — Miami-Dade, Broward, and Palm Beach Counties.

The number of claims could rise to 70,000 during the next 18 to 24 months, he said.

The Florida Keys, where Citizens controls 60 percent of the wind-damage insurance market, represented 15 percent of the claims filed thus far.

Citizens has moved 100 adjusters into Key West. Additional adjusters have been stationed in Key Largo, Florida City, Naples, North Miami Beach, Marathon, and Big Pine Key.

The company has issued $836,000 in cash advances to more than 1,200 policyholders to date.

“We believe our resources are adequate, and all vendors responded effectively, providing in excess of 800 adjusters” statewide, Gardner said.

The Florida CAT fund will cover $193 million of the company’s losses. Gardner estimated Citizens’ reserves after losses $6.4 billion, plus reinsurance coverage.

“Even after Hurricane Irma, Citizens’ capital position is strong,” he said.

However, “given the magnitude of reported losses, we are sure to encounter unforeseen challenges,” Gardner said.

Irma-related claims now over $2 billion

Insurance claims from Hurricane Irma now have surpassed $2 billion, the Office of Insurance Regulation announced Tuesday.

As of 4 p.m. Monday, 372,281 claims represented $2,168,674,31 in dollar losses.

A little more than 6 percent of those claims have been closed already. Insurers rejected another 8,300. You can drill down into the data here.

The additional data were sufficient to push Clay County into the second-highest tier for claims — between 5,001 and 10,000.

The top tier — 10,001 and up — comprised a crescent of South Florida counties ranging from Lee to Palm Beach (excepting Monroe, which remained in tier two).

Also in the top tier were Central Florida counties extending from Polk and Osceola to Lake and Volusia, plus Duval County.

Citizens Property Insurance Corp., Florida’s state-backed insurer of last resort, reported 32,000 claims as of Tuesday morning, but could not provide a dollar value.

State: Insurance losses post-Irma near $2 billion

State regulators have received notice of more than 335,000 insurance claims since Hurricane Irma hit Florida, mostly concentrated in Central and South Florida, with losses nearing $2 billion.

The bottom line as of 4 p.m. Sunday was 335,347 claims, according to the Office of Insurance Regulation. Total estimated insurance losses were $1,954,947,889.

The data were based on claims information provided by insurers, and the office had yet to audit or verify the figures.

Thirteen counties accounted for more than 10,000 claims each. They included Broward, Collier, Lee, Miami-Dade, and Palm Beach. Monroe County, although hard hit, posted between 5,001 and 10,000 claims.

In Central Florida, the bulk of the claims came from Brevard, Lake, Orange, Osceola, Polk, Seminole, and Volusia counties. Highlands, Hillsborough, and Pinellas counties reported between 5,001 and 10,000 claims.

In North Florida, Duval County also reported more than 10,000 claims.

Meanwhile, Citizens Property Insurance Corp. said it had received 27,970 claims as of 9 a.m. Monday.

Statewide, insurers had already paid off 9,420 claims involving residential, commercial, private flood, business interruption, and other lines, the insurance office said.

Fred Karlinsky predicts insurers will turn to international sources for Irma payouts

You probably don’t have to worry about your insurance company’s ability to pay claims arising from Hurricane Irma.

Do worry about a shortage of adjusters to help them calculate your losses. That could inflate the cost of managing claims.

Fred Karlinsky, co-chairman of the insurance regulatory and transactions practice at Greenberg Traurig, said Florida insurers can draw on robust reserves and an international reinsurance market to pay claims.

“The losses are not borne just in Florida. They’re borne in Bermuda; they’re borne in London,” Karlinsky said during an interview in Tallahassee Friday. “Those insurers retrocede reinsurance out to other people. It really is worldwide support for the state of Florida.”

On the other hand, there’s an adjuster deficit — despite the Department of Financial Services’ efforts to streamline the licensure process. “That’s just the graying workforce,” Karlinsky said.

“What we have here — no pun intended — is the perfect storm,” he said.

“You have a storm that hit Texas, in Harvey. And you have an already-stressed system in the lack of adjusters. Then you have a storm in Florida, and you see a bidding war for these adjusters. So the expenses for adjusters have gone up significantly. That, in and of itself, creates a problem for the insurance marketplace.”

Karlinsky surveyed that market one week after Irma made landfall in Florida.

As bad as the storm was, it easily could have been much worse.

“Fortunately, Irma’s path took it to the west, so it didn’t go right up the spine of the state. The physical damage was not nearly what it could have been as a category 4 coming on land in some of the more populous areas,” Karlinsky said.

“If the worst-case scenario would have happened last week, it would have been a challenging event for the marketplace and for the state,” he said. “But I can tell you, on the whole, the state fared much better than anyone had hoped. We caught some lucky breaks and we dodged a bullet.”

Florida’s insurance market has changed dramatically since Hurricane Andrew in 1992. National insurers — unwilling to weather the storm-vulnerable state’s high risk to their shareholders and other policyholders — largely have left Florida to domestic insurers.

But those in-state companies appear healthy. Insurers that might have held reserves of $10 million 10 years ago now have “$50 million, $75 million, $100 million, $200 million in surplus,” Karlinsky said.

The Moody’s rating service on Sept. 11 declared that Citizens Property Insurance Corp., Florida’s insurer of last resort, appeared prepared to weather a big hurricane. The company and the Florida Hurricane Catastrophe Fund — a state-supported reinsurance pool — “effectively saved for a rainy day,” Karlinsky said.

“The CAT fund has in excess of $17 billion. Citizens has $13.3 billion. Part of that is cash on hand; part of that is reinsurance. The bottom line is, those entities have a significant amount of cash available. So I am hopeful they won’t have to go down the pay-me-later route of assessing people for Irma losses.”

Florida’s integration into a global insurance pool has a downside in a dangerous world — trouble elsewhere could consume reinsurance resources.

“If you have a power plant that goes down in Turkey, that affects pricing in Florida. When you have a situation in Russia that is covered with insurance, that could affect pricing in Florida. It’s all correlated. It just goes to show you the world is a much smaller place,” Karlinsky said.

“When you have an extinction event for companies is when their reinsurance towers get blown away — when worldwide marketplace support is basically finished,” he said.

Still, “my sense is that either all or almost all of the companies’ losses will be within their retention or within their reinsurance towers,” he continued.

“That’s what they model for. That’s what these companies are built to survive for. They’re not built necessarily to survive multiple large storms, multiple Cat 5s. In fact, there almost isn’t enough surplus out there in the marketplace to help rebuild a direct hit to downtown Miami, that goes though Tampa, that comes up through other parts of the state. That could be a very significant effect — not only for Florida but for the United States and worldwide markets.”

Ultimately, insurance is a guessing game.

“Hope for the best, but prepare for the worst. That means to build houses up to code or better. Florida has the strongest building code in the nation. Florida is the best-equipped state to handle these types of events. Having said that, there’s a reason they’re called disasters, and there is no playbook for something like we’ve gone through here.”

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