Florida lawmakers on both sides of the aisle agree that any changes they make to the state’s property insurance laws this week should lower rates, but they’re divided on how to get there.
“I haven’t seen anything that would actually lower interest rates for homeowners,” said Rep. Fentrice Driskell (D-Tampa), House Minority Chairman Just Too High.”
The average cost of property insurance in the state is about three times the national average. On average, prices have increased by about 33% each year.
Lawmakers are voting this week on two nearly identical Republican-sponsored property insurance bills tabled in the House and Senate. Each contains several provisions designed to reduce insurance fraud, litigation and reinsurance costs, and to curb the growth of Citizens Property Insurance Corporation, the government’s insurer of last resort.
The Senate is expected to pass its version of the bill on Tuesday. The House will take up its version on Wednesday after the measure passed its final committee freeze.
Driskell tabled a Democrat-backed measure to fix the state’s property insurance market, but was not put to a vote. Democrats also proposed a number of changes aimed at strengthening consumer protections, but all failed.
After the November election, Republicans gained supermajorities in both the House and Senate, giving them the power to pass any policy they wanted.
Republicans say a law would reduce litigation against insurers
Insurance industry leaders have cited “excessive litigation” in the state as a reason for rising interest rates and the closure of property insurance companies, said Mark Friedlander, spokesman for Florida’s Insurance Information Institute, a research organization that tracks industry trends.
“This was the primary reason so many home insurance companies in Florida failed,” Friedlander said. “In fact, six companies have gone bankrupt this year due to litigation costs.”
To discourage lawsuits against insurers, the law would put an end to unilateral attorneys’ fees that property insurance companies must pay when they lose a policyholder in court.
“This is groundbreaking legislation,” Friedlander said. “In fact, it’s the strongest insurance reform package we’ve seen in Florida.”
Republican lawmakers say Florida would become the nation’s 40th state not to allow one-way attorney’s fees if the measure becomes law.
“If the policyholder is awarded a dime or more in a lawsuit, the insurance company will be liable for all legal fees incurred as a result of that lawsuit,” Friedlander said, explaining that the new legislation would end this problem. “It appears that the new leadership of the Florida House of Representatives and Florida Senate understands what is causing our state’s property insurance crisis.”
Critics argue the measure would harm consumers
Several litigators have opposed the measure, arguing that it would bar consumers from the courts.
In addition to ending unilateral attorneys’ fees, the legislation would create conditions that would allow insurance companies to persuade policyholders to sign a “mandatory binding arbitration agreement.”
That would effectively prevent that policyholder from taking the insurer to court if the company is acting in bad faith, said David Murray, a Tampa-based litigator specializing in property insurance litigation.
“I don’t have one of my clients who wants to become a client,” Murray said. “They are a customer because insurance companies are failing to meet their obligations, and this bill gives them further incentive to do so.”
Murray says getting rid of one-way attorney fees is also the wrong approach. “If you deprive the insured of the ability to recover professional and attorney fees and expenses when the insurance company is wrong, you deprive the insured of the right to challenge the insurance company’s determinations as part of the claims process.”
Nothing in the bill requires insurance companies to lower rates by any specific amount. The legislation would require insurers to offer a rate reduction in exchange for signing a mandatory binding arbitration agreement, but does not specify an amount by which rates would decrease.
Still, Republicans and supporters of the bill have said the proposed changes will stabilize the market, thereby driving interest rates lower.
In his opinion, Murray says not everything on the bill is bad for consumers. For example, the legislation would eliminate the assignment of benefits, meaning roofers, plumbers and other home repair companies would no longer be able to take on policies and receive payment for the work directly from the insurer, Murray explained.
“There needs to be a benefit reform,” he said. “I think that’s a good part of this legislation.”
It’s also good for consumers, Murray says, reducing the time property insurers have to respond to claims and pay policyholders.
“There are some good intentions in this legislation, but removing consumer protections is the wrong way to go, especially if you don’t want real interest rate reform.”