NAMIC Outlines Florida’s Initial No-Fault, Property Reform Bills

February 14, 2006

Although the start of the Florida Legislature is still three weeks away, lawmakers have released preliminary bill drafts on two major issues they will face during the upcoming legislative session: reenacting the PIP/no-fault system and reforming the property insurance market.

On Monday, the Senate Banking and Insurance Committee unveiled Senate Bill 7094, which proposes major changes to the existing no-fault insurance system.

The current law is scheduled to sunset in 2007 unless the Legislature reenacts it. Insurers are divided over whether no-fault should be allowed to continue with most National Association of Mutual Insurance Companies member companies preferring to see it sunset.

Among some of the changes proposed in SB 7094 are: A Board of Health rule that would list diagnostic tests deemed not medically necessary for use in treating persons sustaining bodily injury covered by personal injury protection (PIP) benefits; and a provider’s attorney’s fees shall not be recoverable pursuant to s. 627.428 if the provider did not accept a valid assignment of benefits.

The House Insurance Committee presented its draft, PCB IN 06-01, to fix the state’s property insurance market.

The committee is proposing, among other things, to require Citizens Property Insurance Corporation to have separate accounts for homestead and non-homestead properties.

Rates for homestead properties, which under current law are defined as permanent residences, would be subject to a 50-year Probable Maximum Loss event. Rate adequacy for non-homestead properties would be set at a 250-year Probable Maximum Loss event.

A NAMIC staff analysis of the bill makes the following observation on separating homestead and non-homestead properties.

“Peeling off the non-homestead properties from the main part of Citizens substantially reduces the potential size of the losses that could ultimately result in assessments on the general public.

Additionally, to the extent that the current system constitutes a subsidy that transfers money from property owners generally to high-risk coastal property owners, this approach has the advantage of limiting that subsidy to a person’s primary residence and excluding vacation homes of non-residents and Florida residents alike.”

The preliminary bills outlined here are likely to undergo amendments once the legislative session formally begins on March 7. The session is scheduled to run through May 5.

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