Lawmakers seek to beef up insurer oversight after tort reforms

Travis Hutson benefits from one generous address.

Property insurers would face increased fines for mishandling claims and regulators would have greater authority to conduct investigations into their companies under a bill passed by a Senate panel.

The move comes after the Legislature already passed HB 837 last month, which is designed to cut the number of lawsuits and claims payouts faced by insurers.

Sen. Travis Hutson, an Elkton Republican who is sponsoring SB 7052, said it’s an effort to make sure insurers are doing right by consumers.

“If we stop the out-of-hand litigation, we want to make sure that we’re protecting the taxpayers of Florida, the insured and the consumer,” Hutson said. “It’s a healthy balance of trying to make sure we’re threading that needle.”

The bill passed unanimously through the Senate Banking and Insurance Committee on Wednesday, although some Democrats expressed concern that while it cracks down on companies, it wouldn’t resolve issues for homeowners who had a claim unfairly rejected or underpaid by their insurer.

“There’s nothing that compensates the claim holder for the bad actions of the insurance company,” said Sen. Geraldine Thompson, a Windermere Democrat. “These are the people who’ve been impacted by the conduct of the carriers.”

The bill would increase most fines for insurers by 250%, and up to 500% for fines stemming from violations during a state of emergency after a hurricane, require the Office of Insurance Regulation (OIR) to do market conduct examinations of insurers found to deny or underpay large amounts of claims after a storm and require insurers to submit their claims handling practices manual to the OIR.

Also, the measure bans altering a claim adjuster’s report without noting who made the change and explanation of the changes. The Washington Post reported last month that some insurers were changing adjusters’ reports before denying or underpaying claims for victims of Hurricane Ian. Insolvent companies would also be banned from paying bonuses to executives under the bill.

Gov. Ron DeSantis signed HB 837 on March 24. The new law eliminates one-way attorneys fees in property insurance lawsuits and assignment of benefits in property insurance claims, which insurers said was driving rampant litigation and losses, which had soared to $1.5 billion over the last three years.

Supporters of that law said it was necessary to stabilize a beleaguered industry that has seen seven companies fail since the start of 2022. But critics, mostly Democrats and trial attorneys, contend it went too far, and gave insurance companies the upper hand in all legal disputes over claims, making it easier for them to unfairly deny or underpay claims without consequence.

The tort reforms also came on the heels of two Special Sessions in 2022, including one in December, in which lawmakers approved two tranches of taxpayer-funded reinsurance pools for insurers totaling up to $3 billion. Small domestic insurers have struggled to obtain affordable reinsurance after global financial giants pulled away from the Florida market in recent years, leaving many of them without the required coverage to pay claims.

Ratings agency Demotech threatened to downgrade 17 companies last summer over the matter. The three companies they eventually downgraded went bust later in the year.

The tort reforms were also supposed to lower rates over time — or at least slow the pace of rate hikes — supporters claimed. Yet in the immediate aftermath of the bill, several companies are seeking double-digit rate hikes from regulators, including KIN Interinsurance Network, which asked OIR for a 61.5% statewide average increase during a public rate hearing last week.

“We want to make sure if anybody’s going in for rate filings that they’re looking at the current market,” Hutson said. “We’ve passed a lot of stuff in Special Session plus we’ve passed tort reform so they need to take that into consideration if they’re trying to do any rate increases.”

Hutson said the House will likely unveil a similar bill in the coming weeks and noted he’s been in contact with DeSantis’ office about the measure.