Insurance Claims Bill Advances in House, but Senate Not Cooperating

Sun Sentinel

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It looks like South Florida homeowners should brace themselves for another year of property insurance rate hikes.

A legislative bill aimed at driving down costs for insurance companies, and protecting homeowners from endless rate increases, on Tuesday advanced to a final reading in the state House of Representatives.

But its passage would be largely symbolic because there’s no companion bill up for consideration on the final day committees are scheduled to meet in the Senate.

Barring an emergency measure, that guarantees no reform will be enacted for a fifth-straight year to address an issue the insurance industry says is responsible for widespread rate hikes over the past two years.

Still, insurers say House passage would be a major step forward. So far, no claims-abuse reform bill has been adopted by the full chamber of either legislative branch.

“It would represent a pretty significant advance for this issue,” said Michael Carlson, president of the Personal Insurance Federation of Florida. “It would be the first time we would have a bill pass one chamber with a realistic attorney fee reform provision included.”

The bill, introduced by Rep. James Grant, R-Tampa, would limit plaintiffs attorneys’ ability to collect legal fees from insurers and lead, insurers say, to fewer costly lawsuits and reduced losses for them.

Insurers contend lawsuits have skyrocketed because trial lawyers have discovered how to exploit a law intended to enable property owners to sue their insurer without fear of being forced to pay insurers’ legal costs if they lose.

About a dozen law firms, mostly in South Florida, file hundreds of suits each year on behalf after convincing property owners to sign over the right to claim policy benefits from insurers.

The contractors submit inflated repair bills, then file suit when insurers deny or underpay them. Typically the insurers settle for some amount over the invoice, enabling contractors to recover all legal fees billed for the litigation.

And those fees mount: Lawsuits tied to assignments of benefits have increased from about 400 in 2006 to more than 28,000 by 2016, state Insurance Commissioner David Altmaier has told legislative committees debating the issue.

Seventy-three percent of rate requests by insurance companies filed with the Office of Insurance Regulation last year were approved for increases, Altmaier told the House Commerce Committee last week. The highest rate hikes have been imposed in South Florida, where most of the assignment-related litigation occurs.

Attorneys and contractors, however, contend that it’s the insurance companies that force lawsuits by routinely delaying inspections, challenging reasonable invoices, and denying claims.

While conceding some abuses by “bad actors,” attorneys and contractors favor protecting the existing legal-fee structure while requiring licensing of water damage contractors and notification to insurers of assignments and pending lawsuits.

Grant’s bill ties recovery of legal fees to the difference between the final judgment, or settlement, and the insurer’s initial offer. Contractors and attorneys get no fees unless the difference is wide. If the final award exceeds an insurer’s initial offer by a narrow-enough margin, the insurer could actually be awarded fees from the litigating contractor.

In House debate on Tuesday, members voted down a proposed amendment by Rep. Evan Jenne, D-Fort Lauderdale, that would have required insurers to reduce rates 6.5 percent effective July 1, 2018, and require public hearings for future rate-hike requests.

In an interview Monday, Jenne said he didn’t expect the amendment to succeed, but wanted insurers to back up their contention that assignments were driving costs.

He said he chose the 6.5 percent reduction because state-run Citizens Property Insurance Corp. blamed assignment-related claims costs for 6.4-percent average rate increase approved by state regulators for new and renewing policies this year.

During the House debate, Jenne said, “What’s the point of instituting these reforms if it’s not going to work to reduce rates directly?”

But Grant derided the proposal as “an unfriendly amendment” and contended lowering costs for consumers was the bill’s purpose.

A would-be companion bill in the Senate was drafted with input from the industry, Altmaier and state-run Citizens Property Insurance Corp. But it turned out to be dead on arrival because Sen. Anitere Flores, R-Miami, refused to bring it up for debate in the Banking and Insurance Committee, which she chairs.

Flores later said she wouldn’t consider any reform bill that includes no guarantee of rate reductions for consumers. She urged insurance industry supporters to submit an amended Senate bill with a rate-reduction guarantee, but that hasn’t happened.

Speaking to the Sun Sentinel on Monday, Jenne blamed the continued impasse on “two titans — the insurance industry and trial attorneys — that are both great at lobbying.”

“It’s the legislative equivalent to two rhinos butting heads in the middle of a plain,” he said. “They’re going to fight each other to the death, and neither are willing to give an inch.”

Jenne and Carlson both said they expect the issue to be back next year, with the House-approved Grant bill as a starting point.

Carlson said the House bill “would be a good basis for negotiation with the Senate or a first start for next year, assuming there's continuing interest in this important issue. We need both chambers to engage on this.

“In the meantime, it will be interesting to see what happens with property insurance rates.”