A House panel adopted a committee substitute for a bill (HB 305) revamping property insurance laws in the state, including changes to policies for Citizens state-run property insurance.
The House Insurance and Banking Subcommittee voted 12-2 to advance the legislation.
The bill’s sponsor, Naples Rep. Bob Rommel, laid out issues he sees with the property insurance market in Florida, saying rates are increasing for consumers, Citizens is growing “at an alarming rate,” and property owners don’t have enough options for insurance.
“We cannot attract insurance carriers to the state of Florida,” Rommel said.
Rommel acknowledged solving the hurricane-prone state’s property insurance issues is a difficult balance.
“It doesn’t seem any of the stakeholders are extremely happy with the bill,” Rommel said.
Citizens was created by the Florida Legislature in 2002 as a not-for-profit, tax-exempt, government entity to provide property insurance to eligible Florida property owners unable to find insurance coverage in the private market.
Under the bill, Citizens would start implementing rate increases in 2022 and continue increasing rates each year thereafter.
Additionally, eligibility for Citizens would change. Currently, property owners qualify for Citizen’s coverage when rates from private insurers are 15% higher than Citizens. Under the bill, the disparity requirement would rise to 20% higher than the Citizen’s rate.
When asked why he would want to erode the difference between the private marketplace property insurance rates and that of Citizens, Rommel leaned on ideology.
“I don’t think it’s a state or a quasi-state’s job to supplement the market because we can’t attract legitimate private companies to come in,” Rommel said.
The bill would also shorten the length of time homeowners have to make a property insurance claim to two years, Currently, homeowners have three or five years, depending on other circumstances.
Those in opposition to the bill said claims can take a long time to file, and this new law would make it harder for homeowners to get paid by insurance companies.
The bill would also allow claims payments for roofing policies based on the life of the roof.
The bill would allow the Office of Insurance Regulation to monitor property insurance claims litigation data filed by insurers.
The bill clarifies the Office of Insurance Regulation has the same authority to examine managing general agents as it has to examine insurers. A managing general agent is a specialized type of insurance agent or broker that has underwriting authority from an insurer.
The bill also aims to reduce property insurance rates in an indirect way, by reducing attorneys’ fees. The bill increases the requirements for using multipliers when calculating attorneys’ fees. Current Florida law allows a contingency risk multiplier of one to two-and-a-half times the lodestar amount. The lodestar amount is considered an objective basis for what the attorney fee amount should be. It’s calculated by taking the number of hours reasonably spent on the case multiplied by the reasonable hourly rate. The contingency risk multiplier is based on the riskiness of the case.
The bill may also result in a reduced incentive for attorneys to litigate property insurance cases. That could cause fewer property insurance cases to be litigated, which might further reduce property insurance rates. However, that could have the unintended consequence of making it more difficult to obtain an attorney for a property insurance case, resulting in the applicability of the contingency risk multiplier when a case is litigated. Under the bill, a risk multiplier would only be allowed in “rare and exceptional circumstances.”
A representative from the Florida Justice Association pushed back on that section of the bill, saying the multiplier is necessary because of the complexity of property insurance cases.
The bill now heads to the Civil Justice and Property Rights Subcommittee, the second of three assigned committee stops.
A Senate companion bill (SB 212) has not moved.
A second Senate companion bill (SB 76) will be heard in the Rules Committee Thursday.