‘Mixed Feelings’ Result as Fla. Legislature Passes SB 1486; Carriers’ Burdens Could Increase Overall Costs

The Florida Legislature debated SB 1486, an 83-page insurance bill, until the early morning hours on Saturday and approved a document that makes major changes in how claims will be handled, starting with the next storm. The Legislature passed the bill to Gov. Jeb Bush to sign.

Julie Pulliam, a spokesperson for the American Insurance Association said that initially AIA has mixed feelings on the property legislation.

“We’re glad that legislators understood the importance of approving a legislative fix to the valued policy law court decision,” Pulliam said. “However, the bill also includes new administrative requirements and regulatory burdens on carriers that will increase the cost of doing business in Florida — and that is not good for consumers or insurers.”

Allstate Floridian lobbyist George Grawe told the Fort Lauderdale Sun-Sentinel the bills failed to address the major problem facing the industry — the lack of capital to pay hurricane claims.

Grawe tried to convince lawmakers to change the Florida Hurricane Catastrophe Fund to make it easier for companies to tap in the event of a series of major storms.

Among the key changes:

* Consumers will get cash up front for their damages. Insurers will no longer be allowed to withhold part of the check until repairs are complete.

* Insurers won an exemption from paying policy limits when flooding or storm surge — normally covered under federal flood insurance — contributes to the destruction of a home. Hundreds of 2004 hurricane victims with current claims are protected from the exemption. They’ll have to continue to fight for those contested payments in court, a venue that includes class action lawsuits against four of Florida’s largest insurers.

* Policy content changes including large-type warnings about the flood gap, itemized lists of what’s covered, policy discounts and the dollar value of their hurricane deductible.

* A rate cap on the state-sponsored insurer of last resort, Citizens Property Insurance, was removed. So was a provision requiring insurers pay uncontested claims in 30 days.

* A checklist to explain clearly what’s covered and not in their insurance policies.

* A low-interest loan program to help pay for retrofitting property to meet stronger building codes.

* More choices for hurricane deductibles.

“Even though we can’t legislate against hurricanes, we can do everything possible to prepare this state and our homeowners for the worst,” House Banking and Insurance Chairman Dennis Ross, R-Lakeland told the Sun-Sentinel.

Policyholders are promised they can still seek policy limits if they prove wind would have destroyed their homes even without flood. Insurers are guaranteed that when consumers do that, they don’t collect more than it costs to rebuild.

It also means the insurance industry will see changes to the Florida Hurricane Catastrophe Fund, from which companies buy coverage to help them pay claims after a hurricane.

Companies will now be able to draw from the fund for smaller storms that resulted in $1 billion or more in losses, provided the two worst storms of the season caused at least $4.5 billion apiece in damage.

“This is not a perfect product, but it’s probably a combination of some very good consumer oriented provisions that will make it a good product,” Sen. Walter “Skip” Campbell, D-Tamarac, said as he praised Sen. Rudy Garcia, R-Hialeah, for his work on the legislation.