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Can Senate Bill 76 Fix the Crumbling Florida Insurance Market?

The year is 2021. The state of Florida is starting to bounce back from the COVID-19 pandemic. The real estate market is booming. However, there is 1 problem… the property insurance market is starting to crumble into pieces.

After years of fraudulent claims and increased litigation, most insurance companies have had to increase rates, tighten up their underwriting guidelines, stop writing insurance completely, or non-renew non-profitable business to stay solvent. As a result we’ve seen a flood of business to Citizens, the state run insurer whose rates have only increased slightly due to current statutory requirements. In 2020 insurers lost over $1.5 billion in a year without a major storm. And 2021 might be worse unless something stops the fraud and litigation. Most of the claims the insurers have seen over the past few years have not been able to be submitted to their reinsurers, so they’ve eroded the carrier’s surplus and financials. Water damage and roof fraud are the biggest issues, but all claims seem to have more costly litigation. So, like in year’s past, we had to sit and wait for help from the Florida legislature.

Senate Bill 76

On April 30, 2021, the Florida Legislature passed Senate Bill 76 with a 35 to 5 vote in the Senate and a 75 to 41 vote in the House. The bill is an attempt to address the issues plaguing the homeowner’s market. However, due to opposition from the trial bar attorney’s the bill had to be immensely changed from its original form. Unfortunately, the section regarding the removal of the attorney fee multiplier had to be removed. This fee multiplier awards plaintiff attorney’s 2 to 2.5 times their normal hourly rate in all property insurance cases, which forces insurers to settle for higher amounts before going to trial. Also removed were the sections that allowed insurers to offer actual cash value (or a depreciated claim settlements) on roofs older than 10 years old.

That being said, the bill did pass some important objectives, including the following to stop some roofing fraud:

  • Makes it illegal for roofers and their representatives from making “prohibited advertisements” to encourage a consumer to file a roofing claim.
  • Makes it illegal to offer anything of value for performing a roof inspection or an offer to interpret an insurance policy or file a claim.
  • Makes it illegal for a contractor to do insurance claim work without submitting a detailed cost estimate of the labor and materials required to repair.
  • Adds a $10k fine for each roofing violation mentioned above

Senate Bill 76 also passed some important objectives to help curb rate increases, including the following:

  • Increases the rate glidepath for Citizens. Prior to 2021, Citizens could not increase rates beyond 10% even if their rates were actuarially unsound. The new legislation allows rate increases of 11% in 2022, 12% in 2023, 13% in 2024, 14% in 2025, and 15% in 2026 and subsequent years.
  • Replaces the one-way attorney fee statute which makes the recovery of attorney’s fees contingent upon obtaining a judgment for indemnity.
  • Reduces the time an insured has to file a claim from 3 years from the date of loss to 2.
  • Requires plaintiffs to file a written pre-suit demand at least 10 days prior to filing a suit. It also allows insurers to offer mediation or other forms of alternative dispute resolution after receiving a notice.

After the passing of the bill, Senator Jeff Brandes told the Insurance Journal that the bill is a “40 percent solution for what is needed in Florida to potentially bend the cost curve.” He went on to say, “hopefully it [Senate Bill 76] stabilizes rates, but really will ultimately do nothing to actually lower them.”

The bill now goes to Florida governor Ron DeSantis for his signature. If signed, the law will take effect July 1, 2021. However, it will take a year or more for carriers to actually see lower losses and litigation.