When Florida Gov. Rick Scott signed SB 408 today, he said, “A healthy, stable and competitive private insurance market is critical to the success of Florida, given the hazards we face. I commend the Florida Legislature, especially Sen. Richter and Rep. Wood, for bringing this important legislation forward.”
The bill, which addresses cost drivers in an attempt to reform Florida’s unsteady property insurance market, became effective upon the governor’s signature. As it made it way through the legislative process it faced strong opposition from various quarters, most notably from Sen. Mike Fasano, R-New Port Richey. Fasano fought many of the bill’s provisions and as recently as this week was urging Scott to veto it.
A synopsis by Thomas J. Maida and Paul Lowell of Foley & Lardner LLC details a number of the significant reforms in the legislation, including:
- Expanding exclusions from losses covered by the Florida Hurricane Catastrophe Fund to include losses caused by perils other than a covered event, such as fire, theft, flood or rising water, as well as amounts paid for waivers of deductibles and bad faith awards.
- Limiting public adjuster compensation for reopened or supplemental claims to 20 percent of the claim payment (10 percent for Citizens Property Insurance Corp. claims) and requiring additional disclosure statements and notices to certain parties.
- Requiring insurers to provide two replacement cost coverage options for payment of personal property insurance claims. The first option pays the full replacement cost without reservation. The second option pays the depreciated value and holds back the remainder of coverage until the policyholder provides receipts.
- Requiring a policyholder to file windstorm and hurricane claims within three years.
Rates were addressed in several portions of the legislation. SB 408 reinstates the requirement that carriers submit rate change requests using the file-and-use process until May 1, 2012. In file-and-use, an insurer must receive approval from the Office of Insurance Regulation (OIR) before changing its rates. The bill allows carriers to seek rate increases up to 15 percent to adjust for reinsurance costs; the OIR has 45 days to approve or disallow the request.
The bill increases the minimum surplus requirements for new residential property insurers (those approved on or after July 1, 2011) from $5 million to $15 million. For insurers that hold a certificate of authority prior to July 1, 2011, the surplus requirement gradually increases to $15 million over the next decade.
SB 408 also addresses sinkhole claims, which have proliferated in Florida in recent years. Carriers sought to have the mandatory coverage language deleted but settled for language specifically defining “structural damage” to narrow the definition of a sinkhole loss. Additionally, the new bill requires a policyholder to pay 50 percent of sinkhole testing costs up to $2,500 if the policyholder requests testing after an insurer denies the sinkhole claim; sinkhole claims must be filed within 2 years of the covered loss.