Tallahassee - Tuesday May 24, 2022: Legislation aimed at easing the property insurance crisis facing the state has now cleared both chambers of the Florida Legislature. The proposed reforms are expected to be signed into law by the Governor.
The Florida House gave its OK Wednesday, after the Senate approved SB 2D Tuesday. The bill cleared the Senate Appropriations Committee Monday on the first day of the Special Session called by the Governor to address the problem.
The biggest proposed change in SB 2D, sponsored by Senator Jim Boyd (R-Bradenton), is a provision to establish a $2 billion re-insurance fund to back-up private insurance companies in order to entice them to re-enter the Florida insurance market.
The Governor is hopeful the proposed changes to Florida's property insurance laws will bring some relief to homeowners struggling to meet rising premiums, but he acknowledged it won’t be immediate.
“I think the tell-tale will be are you going to want to have more business wanting to come into Florida and offer policies to people," said the Governor, "and the indications that I’ve seen is that that will be the case. And that’s really the most important first step.”
The measure also puts new limits on insurance lawsuits, one of the major causes of the current crisis, and it allows policies with separate deductibles for roof damage, which will leave homeowners shouldering more of the cost for roof replacements.
DeSantis spoke at a news conference in Havana Florida Tuesday. He cautioned that the proposed legislation won’t result in immediate declines in premiums. “So the idea that people are going to see radical reduction in bills based on what we’re doing, that is not something, if anyone is promising you that. But I think that these reforms are positive. I think that consumers are going to be able to access some of these programs," he said.
One of those programs would make $150 million available to homeowners to help them pay for home improvements. "People who are more middle income, working class, will be able to get grants to make improvements on their home for hurricane preparations," said DeSantis. "That will end up leading to them qualifying for some discounts. You still could have a net increase depending on where you’re at, but I do think relieve some pressure.”
Inflation however he warned will keep the cost of home repairs for residents and insurers high. “We have the worst inflation we’ve had in four decades. Some of the materials have gone up 100%. So that obviously factors in when you’re talking about insurance coverage potentially replacing a roof or things like that.”
In response to the proposals now under consideration, the Governor’s gubernatorial rival, Charlie Crist, issued a statement accusing republican lawmakers of caving in to big insurance companies and "leaving homeowners holding the bag with less coverage and less protection."
Provisions of SB 2D:
Clarifying Options For Roof Repair And Replacement
The legislation allows property insurers to offer homeowner’s policies that include a roof deductible with an actuarially sound premium or credit. Policyholders will have the option to choose the insurance policy that best suits their needs. The bill also includes specific consumer protections that prohibit insurers from refusing to write policies on homes with roofs less than 15 years old.
Provides Homeowners the Option of Roof Deductible Policies
SB 2D allows residential property insurers to require a separate roof deductible that may not exceed the lesser of 2% of the policy dwelling limits or 50% of the roof replacement costs. Policyholders who select a roof deductible must receive a premium credit or discount.
The roof deductible does not apply to: a total loss to the primary structure that is caused by a covered peril; a loss caused by a hurricane; a roof loss resulting from a tree fall or other hazard that damages the roof and punctures the roof deck; or, a roof loss requiring repair of less than 50% of the roof.
Creating More Consumer Choice on Roof Repairs
SB 4D creates a statutory exception to the Florida Building Code so roofs that are more than 25% damaged, but already comply with the 2007 Florida Building Code or a subsequent code, may be repaired instead of being required to be replaced.
Improving Accessibility & Protecting Policyholders From Nonrenewal
Under SB 2D insurers may not refuse to write or renew policies on homes with roofs that are less than 15 years old solely because of the roof age, or for roofs that are at are over 15 years old if an inspection shows that the roof has five years or more of useful life left.
Matching Grants For Home Hardening That Keeps Homes Safe, Reducing Insurance Claims
SB 2D expands the My Safe Florida Home Program to include hurricane mitigation inspections and matching grants for retrofitting of homesteaded single family homes with a value of $500,000 or less, with the goal of making these upgrades financially attainable for more homeowners across Florida. Grants will be awarded on a matching basis with the program providing $2 in grant funds for every $1 provided by the homeowner. Applicants may receive up to $10,000 in program funds.
Enhancing Insurer Access To Reinsurance With Savings Passed On To Consumers
The bill authorizes $2 billion for a new Reinsurance to Assist Policyholders (RAP) program for insurers. This new program allows insurers to obtain reimbursement for hurricane losses below the insurer’s Florida Hurricane Catastrophe Fund retention. Insurers that participate in RAP for 2022 must reduce their policyholder’s rates in a rate filing by June 30, 2022, to reflect the savings from RAP. Insurers that defer using RAP until 2023 must reduce policyholder rates to reflect savings in a rate filing by May 1, 2023.
Increasing Insurer Transparency
SB 2D requires insurers to notify policyholders that they can request a copy of any detailed estimate of the amount of the loss determined by the adjuster. After receiving the request, the insurer must send the detailed estimate to the policyholder within seven days. Further, the bill requires insurers to provide a reasonable explanation in writing of the basis for the payment, denial, or partial denial of a claim. If the claim payment is less than specified in any insurer’s detailed estimate of the amount of the loss, the insurer must provide a reasonable explanation in writing of the difference.
The bill also directs the Office of Insurance Regulation (OIR) to make publicly available data detailing the number of policies, amount of premium, number of cancellations, and other data for each property insurer and specifies that this information is not a trade secret.
Holding Insurers Accountable
Several Florida property insurers have failed in the last year alone, resulting in tens of thousands of canceled policies. Timely analysis and reporting are key to understanding how to prevent future failures. SB 2D requires an analysis of why an insurer failed within four months of the Department of Financial Services being appointed as a receiver in liquidation proceedings.
Additionally, the bill strengthens the OIR’s regulatory oversight. SB 2D creates a new property insurer investigations unit to increase regulatory oversight and requires OIR to provide enhanced monitoring whenever the office identifies significant concerns about an insurer’s solvency, rates, proposed contracts, underwriting rules, market practices, claims handling, consumer complaints, litigation practices and outcomes, and other issues related to compliance with the insurance code.
Reducing Frivolous Litigation
SB 2D codifies that attorney fee multipliers only be awarded in rare and exceptional circumstances, clarifies when a bad faith suit may arise, and prohibits the ability to transfer the right to receive attorney fees in property insurance litigation.
To curb unscrupulous roof claims, the bill enhances reforms passed in in SB 76 (2021), prohibiting written contractors’ solicitations that encourage consumers to make a property insurance claim for roof damage unless the solicitation provides certain notices.