None of the combatants in the trenches of Florida’s property insurance crisis is celebrating the results of the special legislative session. Winners: Consumers and insurers. Losers: Plaintiff lawyers, contractors.
There’s that old saw you hear in the halls of capitals: “If no one is happy, then it must be good legislation.”
To an extent, you can say that about the property insurance legislation adopted in the special legislative session two weeks ago in Tallahassee. None of the day-to-day combatants in that world — Florida-based insurance companies, the international reinsurance companies, insurance agencies, trial lawyers, roof contractors or independent insurance adjusters — is doing a happy dance over the outcome.
About the only ones pleased were Gov. Ron DeSantis; Sen. Jim Boyd, primary author and chief advocate of the legislation; and most of the Republican lawmakers who voted for it.
DeSantis is pleased because he needed a big win to counter his Democratic opponents in the November elections. As a politician would, he spun it as “the most significant reforms to Florida’s homeowners insurance market in a generation.” That’s a bit of a stretch — especially to those legislators and governors who were in Tallahassee after the 1992 mega-disaster of Hurricane Andrew; after the $50 billion damage from the 2004-2005 hurricanes; and after Hurricane Charlie Crist’s policies committed Florida taxpayers to carrying the risk for a $36 billion catastrophe and made taxpayer-owned Citizens Property Insurance the largest insurer in Florida.
DeSantis’ hyperbole aside, Sen. Boyd has good reason to be pleased.
Boyd, longtime owner of a Bradenton insurance agency, knew intimately the gravity of the situation. If the Legislature failed to do anything, the hemorrhaging patient — Florida’s property insurance companies, in particular, and the Florida real estate market — wouldn’t make it out of the ER. What’s more, after seeing how Speaker Chris Sprowls denied the House from considering Senate legislation in the most recent regular session, Boyd was not all that optimistic heading into the special session.
Nonetheless, he took the approach of asking lawmakers to back reforms that were even bolder than what the House rejected in the past two sessions.
But to Boyd’s surprise, all of his provisions in the legislation prevailed — a rare and major legislative victory and credit to Boyd. “I had hoped my colleagues would realize the importance of this issue.”
Clearly, let’s just say, Gov. DeSantis made it clear that it was in Speaker Sprowls’ interest to side with the governor and not the trial bar.
Winners & losers
From purely a legislative standpoint, Florida’s lawmakers passed what typically comes out of this process: Something for everyone, always less than perfect. Rarely do they go as far as they could or should, and this was one of those occasions. Lawmaking is all about compromise and making deals.
As always, there are winners and losers. From the perspective of creating a framework for a thriving, competitive, consumer-friendly property insurance market, you can say the Republican lawmakers tipped the scales in favor of consumers and insurance companies.
Yes, consumers. While all assessments say consumers won’t see their property insurance premiums go down immediately or for the next 12 months, any time legislation can reduce lawsuits, that is consumer friendly.
Lawsuits add to the cost of everything, and those costs are always passed on to customers. (See box on why the new laws benefit consumers and insurance companies.)
That’s why Florida’s homeowners insurance premiums are so outrageous. It doesn’t take a genius to understand that when more than 100,000 damage-claim lawsuits are sucking in more than a $1 billion a year in legal fees and roof replacements, insurance companies can’t and won’t just absorb those costs.
In fact, here’s what most Floridians don’t realize: The Office of Insurance Regulation determines insurance rates. And those rates are based on the insurers’ costs, to which, by the way, the insurance companies’ management must attest under oath that those costs are real — or go to jail if they lie.
As Locke Burt, founder, chairman and CEO of Ormond Beach-based Security First Insurance Co., puts it: “Every time you get a free roof or hire a lawyer, that goes into your rates. If you want the price to go down, you have to address the cost drivers. … Cost reduction under law must be passed on to the consumer.”
That was the intent of Boyd’s legislation. And that’s why the losers in the session were the plaintiff attorneys, contractors and public adjusters.
You probably already heard members of the trial bar rail how the new legislation is anti-consumer. That’s how they couch any law that creates barriers for lawsuits or that makes it tougher for lawyers to win high legal fees, which the new legislation does. Anti-lawsuit is anti-consumer in their book.
Likewise, you probably also know roofers and contractors don’t like the legislation. The Restoration Association of Florida has filed two lawsuits in Leon County to negate certain provisions that surely will cut into the lucrative niche of automatic roof replacements.
Winners not thrilled
But even as the losers try to color the legislation as bad for Floridians, some of the winners — insurance company representatives — are not all that thrilled. In a webinar June 3 during which a panel of insurance company executives, their lawyers and lobbyists shared their assessment of the special session, no one was smiling.
Many panel members commended DeSantis, Boyd and Sen. Jeff Brandes, R-St. Petersburg (he triggered the special session). And Fred Karlinsky, co-chair of Greenberg Traurig’s insurance regulatory practice, spread good cheer at the start of the session: “What they did was transformational.” But from there the tone proceeded to go down. More common refrains among the panel members were: “A baby step” … “a good first step.”
Always direct, Bob Ritchie, owner and CEO of Tampa-based American Integrity Insurance, said: “[T]wo steps forward, one step backward … A thumbs down from a reinsurance perspective.”
Wesley Todd, founder and CEO of Tampa-based CaseGlide, developer of litigation management software, characterized the legislation as throwing everything at the problem — except at the one problem everyone knows and that matters most: One-way attorney fees.
Eliminate three issues
One-way attorney fees are the lung cancer of property insurance.
State law requires insurers to pay legal fees for the insured party if the insurer loses in court and/or settles out of court. But if an insurer wins, it doesn’t have its fees covered.
So if you’re a plaintiff’s attorney, there’s little risk of not being paid.
And that drives the insurance companies nuts. If they had a magic wand, they would wave it to eliminate three issues that stand in the way of curing the property insurance patient:
- One-way attorney fees
- Assignment of benefits (when consumers turn over the management of their claim to a contractor or lawyer)
- The 50% below market rates of the state-owned Citizens Property Insurance.
The special session addressed the first two in ways that will help curb attorney fees and curtail the filing of damage-claim lawsuits. But as Sen. Brandes said in his Senate floor speech:
“Get rid of one-way attorney fees, get rid of assignment of benefits like North Carolina and Texas have done. You do those two things on the litigation side, the world will change overnight. Florida will become a competitive market again, and we will end the scourge of litigation …”
For lawmakers to have the courage to go that far and create what would be an all-out war with Florida’s trial attorneys, they would need the support and encouragement of their constituents.
But for that to occur, insurance companies have another huge obstacle. They must reverse the perception that the trial bar has mastered: Painting insurance companies as the big, bad, money-grubbing profiteers. Exactly what you can say a small group of plaintiff lawyers and contractors have gamed the system to become.