Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

An Order by the Office of Insurance Regulation shows one method some Florida insurers may use to “poor mouth” losses to the public and our legislators in Tallahassee while taking millions home through shell accounting techniques. Many of the smaller insurers operate as three corporations--the insurer, a managing general agent, and a holding company. It does not take a financial genius to figure out that investors and managers can siphon off profits by simply charging excessive fees through the managing general agent. The insurance part of the jointly owned enterprise then claims it cannot make any money for various reasons which we have been hearing about in the press and from some insurance lobbyists looking to raise rates and reduce benefits to policyholders.

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"You gotta be kidding me" is probably being repeated by many after reading the title to this post. I wrongfully wrote about Representative Janet Long without giving her an opportunity to explain her concerns and longstanding advocacy for policyholders when she worked as a Deputy Insurance Commissioner in a Florida Department of Insurance Branch office. Before the spotlight of politics and public life subjected her to criticism without an ability to fully explain the purpose of the laws she proposes, her job in the Florida Department of Insurance required her to talk with and help policyholders upset about every imaginable wrong that could possibly befall an insurance consumer. I should have been more diligent in my research of her before jumping to conclusions about the framework for her views in this very public blog.

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Matt Gaetz is running for a seat in the Florida House of Representatives. His chances of getting elected have become better since former Governor Jeb Bush provided his endorsement to Gaetz. Here is Gaetz commenting on the endorsement:

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The poor policyholders whose homes cracked, popped, and dipped as a result of sinkholes induced by citrus farmers spraying their crops to prevent freezing damage should be happy it happened to them this year. Newly proposed anti-consumer sinkhole legislation would limit policyholders to 25% of their coverage limits for the most common sinkhole problems.

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The Florida Senate Banking and Insurance Committee has a number of very intelligent and very well meaning members. Two of them, Senator Rhonda Storms and Mike Fasano stood up yesterday to the insurance lobbyists who know little about insurance, but a lot about propaganda and politics. Full time and professional insurance lobbyists have one agenda--achieve their clients agenda. They have an army of lawyers, a ton of money, and their message is "spin" at its finest. No wonder so many public servants can get snowed by the misinformation and insurance industry proposed laws.

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If you are a policyholder, don’t expect prompt payment of replacement cost benefits and payments for damage to older roofs if Florida Senate proposed legislation passes. A proposed bill filed as a substitute that will be heard in the Florida Senate and Banking & Insurance this Wednesday was just released this afternoon. I have not had an opportunity to review it in detail, but a number of anti-consumer provisions are contained within this proposed legislation.

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Julie Patel of the Sun-Sentinel published Battle Brewing Over Public Insurance Adjusters which was preceded by Florida Cabinet Tables Insurance Fee for Hurricane Claims: Fraud Suspected and a St. Petersburg Times article "State Delays Bond Sale for Hurricane Wilma Claims.” In each of these, the message from the insurance industry was clear:

The Florida Insurance Council, Property Casualty Insurers Association of America and the Florida Property Casualty Association issued statements Wednesday backing bills filed this week by Sen. Mike Bennett, R-Bradenton, and Rep. Janet Long, D-Seminole. They say public adjusters -- who represent homeowners in claims disputes with their insurer -- inflate claims, driving up costs for all policyholders.

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(*Chip Merlin's Note: This guest blog is by Frank Artiles, candidate for the Florida State House of Representatives)

“Determine never to be idle…It is wonderful how much may be done if we are always doing.”
      -Thomas Jefferson  

Thank you for hosting a Forum that informs and educates so many regarding insurance industry trends and concerns. I feel privileged to work in a part of the insurance industry dedicated to helping people. I am humbled that you have asked me to write about a topic that is so important and that I feel strongly about.

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Some public adjusters were calling me asking about the recent proposed legislation of Florida House Bill 1181. This extraordinarily anti-consumer legislation was filed by a Democrat, Janet C. Long. My impression is that this legislation is a potential nuclear bomb for policyholders and public adjusters.

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(Note: This Guest Blog is by Tina Nicholson, an attorney with Merlin Law Group in the Houston, Texas, office. This is part of a series she and fellow attorney Javier Delgado will be writing on Texas property insurance issues).

Everyone knows what to do when disaster looms. When the disaster is a hurricane, you gas up the car and buy batteries. When it’s a tornado, you get in the closet with a flashlight and a radio. When a winter storm approaches, you buy food and firewood.

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The Florida Association of Public Insurance Adjusters (FAPIA) is sponsoring a fundraiser for public adjuster Frank Artiles, candidate for the Florida State House of Representatives. The event is being held next Tuesday, March 2nd in Coral Gables at the Anacapri Restaurant. Here is the notice:

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United Policyholders has a wonderful website. I strongly encourage others to sign up for its emails and newsletters. For example, United Policyholders sends a monthly "Claims Tips" via email which contains useful tips for policyholders.

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As you read this post, consider these life lessons:

You can’t always get what you want
But if you try sometimes, well,
You just might find you get what you need

and

DON QUIXOTE
Hand over that golden helmet!

BARBER
But this is a shaving basin!

DON QUIXOTE
Shaving basin! Know thou not what this really is?
The Golden Helmet of Mambrino!
When worn by one of noble heart, it renders
him invulnerable to all wounds!
(to the Barber whacking the barrel with his sword)
Hand it over!

Thou Golden Helmet of Mambrino,
With so illustrious a past,
Too long hast thou been lost to glory,
Th'art rediscovered now at last!
Golden Helmet of Mambrino
There can be no hat like thee!
Thou and I now, ere I die now,
Will make golden history!

BARBER
(aside to Sancho)
I can hear the cuckoo singing
In the cuckooberry tree...

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Amy Bach and others with United Policyholders provide a longtime and steadfast consumer protection organization devoted solely to the interests of policyholders. With extensive experience and appreciation of how much legislation can impact insurance coverage and claims, Bach provides a unique perspective with expertise on a national level concerning insurance policy and insurance regulation. Policyholders need more Amy Bachs to counteract the extraordinary coordinated efforts by insurers to make laws and regulations one sided in the insurers favor.

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All adjusters, whether company, independent, or public, have significant ethical obligations in Florida. Indeed, these adjusters even have an obligation to turn each other into the Department of Financial Services. The failure to do so is, by itself, a breach of the adjuster’s ethical obligations:

(g) An adjuster shall promptly report to the Department any conduct by any licensed insurance representative of this state which violates any provision of the Insurance Code or Department rule or order.

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The Florida legislator is full of "flip flop" legislators that are reversing laws made in 2005 and 2006 which supported lower insurance rates and protected insurance consumers from unscrupulous insurers. Governor Charlie Crist ran on a platform of helping Floridians keep insurance rates down and he is sticking to that promise even as other politicians who once voted for such laws are now firmly supporting the opposite measures. These "flip flop" politicians are filing laws that would allow rates to go as high as the insurance industry can make them and laws that take benefits away from consumers following disaster. Crist seems to be standing tall against the insurance industry and for the people, unlike other politicians who are currently getting their responses and "speaking points" from insurance lobbyists.

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Three consumer advocates published a letter, Property Insurance Deregulation Too Costly, which claims that currently proposed Florida legislation calling for no regulation of insurance rates is bad for Floridians "because the average consumer does not have the resources or information to determine when a rate is excessive, the opportunity for the [insurance] company to abuse consumers exists." I agree, and for many more reasons than just that.

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I appreciate all the comments to posts from readers with various perspectives on insurance coverage and the insurance claims industry. I read them all, try to respond when I can, and honestly consider the viewpoint of those writing. This morning, I came across a comment worthy of consideration by all of us regarding mediation and alternative approaches to insurance claims dispute resolution.

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Why do so many of our politicians play to the lobbyists and support laws that harm the average person and voter? This is exactly what has happened with important laws sponsored by the insurance industry lobbyists and then proposed by Florida Senator Mike Bennett of Bradenton and Representative Bill Proctor of St. Augustine. These politicians and other Florida political leaders have sponsored a law that would allow insurance companies to raise the rates of Florida policyholders as much as they want. Indeed, the law they support allows for insurance companies to collude with each other, since it calls for the complete deregulation of rates. As the insurance industry is exempt from anti-trust regulation, based on a bargain it made with the federal government in which it agreed to state regulation of rates, the insurers would be legally exempt from all regulation. Is this stupid or what? Do the Florida political leaders supporting this law think people will be happy when their rates go up 100% in a couple of years, or is this just a payback to the insurance industry and their lobbyists funding certain political action committee dollars? Or, giving them the benefit of the doubt, do they really understand the issue?

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There are times when I am troubled about what I write on this blog. This is one of them. I know that many people are going to read this who have very different viewpoints. When a number of people tell you in advance that they look forward to what you are going to write, there is some tendency to write for the readers rather than having the courage to just place what is in your heart on paper. There is no way I can write about all my thoughts, but I will share points.

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The appraisal clause should not be removed from Florida insurance policies. The concerns of insurers and policyholders can be addressed if we simply do two things:

1.  Mandate that the appraisal clause remain in all property insurance policies.

2.  Pass legislation which provides the safeguards for a fair procedure while allowing the parties to make the process as formal as they need to insure due process and still reflect the desire to avoid the time and expense of litigation.

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(Note: This Guest Blog is by Tina Nicholson, an attorney with Merlin Law Group in the Houston, Texas, office. This is the fourth in a series she and fellow attorney Javier Delgado will be writing on Texas property insurance issues).

Most Texas policyholders do not know what the law requires of insurance companies in regard to responding to a claim. The “Prompt Payment of Insurance Claims” statute in Chapter 542 of the Texas Insurance Code imposes certain deadlines on insurers for responding to, investigating, and accepting or rejecting claims. An insurer that violates the statute must pay, in addition to the amount owed on the claim, the insured’s attorney fees as well as “damages” of 18% per annum. In order to recover attorney fees and the 18% interest, the policyholder must show that (1) the policyholder had a claim under the policy; (2) the insurer is liable for the claim; and (3) the insurer failed to comply with a requirement of the statute. The purpose of the statute is to “promote the prompt payment of insurance claims pursuant to policies of insurance.” Tex. Ins. Code Ann. §542.054.

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This Wednesday will be the Roundtable discussion regarding appraisal. It will be significant and I urge anybody with an opinion or interest to write to Sean Shaw, the Insurance Consumer Advocate. You can also watch the roundtable at WFSU Florida Channel and call into the conference at 1-888-808-6959 Code: 4132880.

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Miami Herald reporter, Bea Garcia, wrote a very important story, Tackling Contentious Insurance Issues, concerning Insurance Consumer Advocate Sean Shaw. It appears the Roundtable meeting I wrote about in Alternative Resolution Roundtable: Appraisal is the Hot Topic and Is There Any Chance that Appraisal Will Stay the Same in Florida?, is going to be an important last meeting before Shaw takes stances on how Florida legislators should deal with current insurance consumer issues:

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In a post last September, State Farm Agents are Fighting State Farm for Economic Survival, I wrote:

"Again, for many different reasons, I hope McCarty and State Farm can work out a deal."

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In a blow to policyholders, Florida’s Fifth District Court of Appeals found that Citizens is not subject to bad faith lawsuits. The Court concluded:

In summary, we hold that Citizens is immune from first-party bad faith claims pursuant to section 627.351(6)(r)1. Likewise, we hold that Citizens is not subject to bad faith liability under section 624.155(1)(b)(1), as that statute is not applicable to it.

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The Florida Office of Insurance Regulation (OIR) has entered a Consent Order today resolving the attempt by State Farm to leave the Florida property insurance market.

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Floridians currently have legislators that are in the pockets of and doing business for insurance companies. Virtually all states regulate insurance rates because insurance companies have been historically notorious for over charging customers following losses, as well as for under charging customers before declaring bankruptcy.

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Julie Patel, of the Sun Sentinel, reported that Florida officials and State Farm appear to be working towards a mutual solution to keep State Farm selling property insurance in Florida:

Insurance Commissioner Kevin McCarty told the Florida Cabinet Tuesday that State Farm may not leave the state's property insurance market as planned and the state is developing a report card on insurers to help consumers and increase competition.

“We’d like them to be a good neighbor so long as they are a fair neighbor," Gov. Charlie Crist said about McCarty's prediction that State Farm will stay in Florida in a smaller form.

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Does anybody think that TWIA is doing a "good job" of adjusting hurricane claims other than the private member insurance companies on TWIA's Board of Directors? In a prior post, TWIA Insurance Claims Under Investigation by Regulators and Media, I noted that the Texas Department of Insurance attorneys are conducting an investigation into activities of TWIA's claims conduct. The Houston Chronicle’s Purva Patel has been doing her own outstanding investigative reporting which is providing shocking and needed transparency into the real world activities that have gone on in the field concerning TWIA's claims conduct and the motives behind it.

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Suppose you knew that your insurance company had started a new claims practice program called “Quantum Leap” to increase corporate practices by making certain no claim was overpaid—would you buy that insurance? Would you feel peace of mine if you knew that secret program was in place and had such a claims philosophy?

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Florida Senator Mike Fasano, a public servant ever vigilant about consumers of regulated industries getting ripped by the amounts they have to pay for mandated services and products, forwarded a recent news article, “Group Backs Florida Property Insurance Rate Hike.” When the Florida legislators and Governor were concerned about the severe escalation of property insurance premiums following the 2004 and 2005 storm seasons, they froze the rates charged by Citizens Property Insurance Corporation. Governor Charlie Crist ran for elected office on a platform of preventing the severe escalation of such prices. At that time, many of Florida’s legislators ran their political campaigns suggesting they were no friend of the insurance industry that was raising rates in an extraordinary manner. While Governor Crist proved he is a man of his word by vetoing legislation which would have allowed major insurers to charge whatever they want, only a few elected legislators seem to remember the promises they made to their electorate. Associated Industries supports those politicians that are more concerned about insurers profits than the promises to their constituents—except when elections are around the corner.

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The Minnesota Attorney General had enough of insurance companies failing to live up to the promise of putting policyholders back into the same position they were before the loss. Currently, the situation is the same throughout the nation, where insurers say they will do one thing, but have their attorneys argue out of the bargain based on obscure policy wording. Matching the damaged portion of the structure to the remaining parts of a structure is one such issue, and we literally tracked down this State action by the Minnesota Attorney General because we feel the issue is that important.

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Yesterday, Chad Hemenway, associate editor of BestWeek, reported that State Farm and Florida’s Office of Insurance Regulation jointly moved to delay the administrative hearing that will address State Farm’s move to leave Florida’s property insurance market.  The saga continues....

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Imagine if we had truly knowledgeable advocates for insurance consumers in our legislatures. Many politicians advertise they are for policyholders as election day approaches, but they refuse to push any agenda other than the insurance industry’s the rest of the time. In Florida’s past legislative session, Florida Senator Don Gaetz, sponsored three significant pieces of insurance consumer legislation protecting the rights of policyholders regarding the fair treatment of claims. The person helping to write that legislation, his son Matt Gaetz, is now running for the Florida House of Representatives and he deserves support from those who want strong laws protecting Floridians from slow, frustrating, and wrongful insurance claim handling.

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I enjoy good lawyering. Corporate America has the best lawyers defending their actions and figuring out how they can be unaccountable for their bad acts. A formidable New York Ivy League trained lawyer, Sheila Birnbaum, is one of those lawyers. I give her, Corporate America, and especially State Farm, all the credit they deserve for showing that they can beat State Farm’s customers and their attorneys in the appellate courts of America. Birnbaum implied that large corporations have greater influence over federal courts of appeal in her webinar with the Washington Legal Foundation last year.

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I would pay to be a fly on the wall during the discussions the Florida Office of Insurance Regulation is having with State Farm regarding its withdrawal from the Florida property insurance market. As I noted in State Farm Must Love the Clash, many of us suspect that State Farm’s bullying and threatening tactics demonstrate that it does not want to leave Florida, but uses such tactics to get what it wants from Florida’s politicians and regulators.

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A lawsuit was filed by three public adjusting firms seeking to enjoin the State of Florida from enforcing the 48 hour solicitation ban and the fee caps public adjusters may charge to policyholders. The mastermind behind the lawsuit is lawyer turned public adjuster, Pat Catania of East Coast Public Adjusters. The lawsuit is not a surprise. Many public adjusters have been complaining that their business has been significantly impacted by these laws as insurance restoration companies act as surrogate public adjusters since the 48 Hour Ban does not prohibit insurance contractors from actively soliciting work from policyholders immediately after a loss.

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Why has there been an explosion of contractors specializing in insurance disasters and losses over the past fifteen years? Most would probably say that the motivation to enter that trade is very profitable. My experience from depositions and discussions of those in the business has been that it is. Often, profits range from forty to fifty percent of the total billed. I have been legal counsel to numerous policyholders caught in the middle where the retained insurance contractor is in a dispute with the insurer over the scope and amount of billing for work allegedly performed. I am concerned about situations where an insurance restoration company is hired without competing bids from other contractors; it is often nothing other than a losing proposition for the insurer and the policyholder.

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When somebody starts talking with you over dinner about which part of the brain makes you worry that something bad may happen to you and talks with sentences that seem to have "cognition" interspersed frequently with "cortex," you know to skip cocktails. The person speaking with me was Alaska attorney, Don Bauermeister. He is a person of study and reflective brilliance. We discussed how the techniques of insurance claim settlement and trial presentation can be studied and implemented for the purpose of helping our policyholder clients.

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Where are our insurance consumer advocates? Are they publicly wanting to appear one way to get their constituents’ votes, but then voting another way behind closed doors? This is my concern, because otherwise the last bill placed before Governor Crist would never have appeared. My powerful, worthy, much richer, and able State Farm lobbyist, Mark Delegal and other similarly powerful interested insurance industry lawyers show how the insurance industry has already set out its agenda on the insurance consumers of Florida in a recent article:

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Dan Luby of the Florida Insurance News forwarded a Blog, Alex Sink's Cold War with the Insurance Commissioner, by Gary Fine regarding a possible “riff” between Alex Sink and Kevin McCarty. I find this curious because the two of them are leading consumer advocates for policyholders. I have never found Bill McCollum, Sink’s opponent for Florida Governor next year to be a supporter of policyholders. He is clearly the insurance industry’s candidate. Yet, the Blog noted:

“Interestingly enough, Attorney General Bill McCollum - and Sink's likely rival for the governor's office in 2010 - praised McCarty's report, saying that Floridians should be "very pleased" with the amount of surplus lines coverage since it has helped decrease the need to have commercial coverage picked up by state-created insurers.”

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Two significant pieces of information show a continued trend in the property insurance business and suggests that insurance customers should not rely on the loyalty of their insurance companies. An article by Bea Garcia in the Miami Herald, Florida May Gut Discounts for Hurricane Shutters highlights the industry wide issues raised by State Farm’s requests to eliminate discounts and “recalibrate” the terms of previously granted discounts for measures taken to protect structures from hurricane damage.

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I was thinking about the question of property insurance trade associations and lobbying while reading today’s St. Petersburg Times article, At what Cost Care? The article was a question and answer discussion with Wendell Potter, who was a public relations executive for two major health insurers. Potter has given an inside view into the political and social power of the health insurance industry in a manner most Americans probably deplore. I wonder if property insurers are different? I doubt it.

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State Farm is a tenacious opponent. "If you at first you don't succeed, try, try again" is a motto which must be emblazoned in bold letters somewhere in its Bloomington, Illinois, headquarters. But, down in the Sunshine State, some are criticizing State Farm for its creative methods of raising rates.

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Amy Bach of United Policyholders commented on yesterday's post, The Obligation of Good Faith Claims Handling and Policyholders' Perceptions of Why it Does Not Happen, She wrote:

"As usual, great point Chip. I helped write and pass a law in California that allows claimants to obtain claim related documents during the adjustment process. We tried to get a similar law passed in Louisiana after Katrina - and I've been thinking this would be a good concept to work on exporting nationwide...."

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Yesterday, we filed an amicus curiae brief on behalf of United Policyholders in the Florida Supreme Court. This type of legal argument is often called a “Friend of the Court” brief because it is not filed by a party to the lawsuit, but it is filed by a person or entity with an interest in the outcome of the case. In theory, amicus briefs provide courts with information needed to reach the right decision. Usually, amicus briefs address the public policy or state or nation wide effects of a legal decision, while the parties to the case focus solely on how the outcome will affect them.

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Don't you think Madoff would agree that society should throw a financial swindler in jail? I imagine most insurance executives think there should be consequences if they do the same thing. Shouldn't they agree that claims management practices which intentionally underpay must be punished by law as a matter of public policy? Who would not agree--unless you were part of a system that wanted cheating of policyholders to be "business as usual?"

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The Insurance Journal ran an article, Florida Domestic Insurers Urge Veto of 'Dangerous' Deregulation Bill, which indicates a significant portion of Florida's insurance industry opposes State Farm, State Farm agents, and the other big insurers trying to get a competitive advantage from this legislation. The article outlined many of the competing views and stated in part:

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Governor Crist has signed the flawed Surplus Lines Bill (HB 853) into law. The story was reported today by the Insurance Journal in an article, Gov. Crist Signs Florida Surplus Lines Regulation Bill:

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Congressman Paul Kanjorski, Chairman of the Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, announced that his Subcommittee will hold a hearing to protect insurance consumers from risks in the insurance system and to prevent insurance companies from posing a systemic risk and threatening the American financial system. This systemic risk may be the federal government’s only legitimate concern when it comes to regulating insurance.

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The issue whether Florida will join the majority of states recognizing an insurer's duty of good faith at common law is squarely before the Florida Supreme Court. In Citizens Property Ins. Co. vs. Louis Bertot, the Third District Court of Appeal noted the issue before it:

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The Texas Windstorm Insurance Association (TWIA) has a new operations plan and laws that affect it, assuming Governor Perry signs the legislation. The good news for TWIA policyholders is that the consumer protections of Chapter 541 are still in place. The bad news is that I predict rates are going to increase substantially.

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The Consumer Advocate for the Florida Public Interest Research Group,  Brad Ashwell, wrote a letter published in the Gainesville Sun calling on consumers to urge Governor Crist to veto the State Farm bailout legislation. He clearly explained how the bill will harm Floridians:

"The problem is that this bill would remove consumer protections by no longer allowing the OIR to protect Floridians from excessive or discriminatory rate hikes as Kevin McCarty and his office have successfully done time and time again.

If HB 1171 becomes law, major insurance carriers would not only be able to charge whatever they like, they would also be able to game the system by manipulating rates, quoting excessive premiums to coastal homeowners, then dropping those policies if they choose to so they can maintain and grow inland policies where there is less exposure. The lack of predictability this would create is exactly what we don’t need in a state with an already fragile and overstrained property insurance market.

And perhaps the most troublesome provision is that the bill would help further grow the surpluses of these larger insurers while preventing small Florida-based carriers from doing the same. In this way the bill aims to provide an unfair competitive advantage to larger companies by discouraging across the board competition with smaller carriers. This would ultimately harm consumers and businesses by fostering an insurance market offering fewer choices in terms of dependable insurers. It’s also important to recognize that there’s no guarantee these large companies will continue writing policies in Florida.

Rather than deregulating the market, which hasn’t worked out in the past, we should be working on policy goals that support a more competitive insurance market that provides consumers with more affordable options. In short, we need more Florida-based companies competing, not fewer large insurers who dominate the market, essentially holding homeowners hostage, charging any rate they choose."

He is right, and nobody disputes his facts. Proponents of the bill argue it gives consumers the “choice” to pay excessive rates if they want. The legislators who voted for the bill did so because of political pressure, without understanding the consequences, or because they like the incentives offered by insurance companies for their votes. Either way, the “choice” is just a way to justify this bad legislation.

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There has to be a better way for Texas to make laws. Well meaning people who become legislators generally want to make things better. It is obvious that the Texas legislature is not functioning in a way that allows good intentioned people to make good law.

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What happened to the time when a significant insurance coverage decision arrived and everybody in my line of work analyzed that topic for several years? Now, the insurance industry is writing so many new and differently worded forms, it is hard to rely upon case decisions as being of widespread significance. If a case decision is made which insurance companies want to avoid, they re-write the policy or the insurance industry lobbies legislators to change the statutory law "gaming" the insurance business to outcomes predetermined in the insurer's favor. Accordingly, I spend more time researching trends of politics. I also review insurance trade journals to contemplate how my policyholder clients may be impacted.

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An article in the Austin American Statesman, Late surprise: Windstorm insurance passes, provides insight regarding the ethics of some in the Texas legislature. Most would agree that laws and rules are to be followed, but maybe that does not apply to the Texas Senate:

“By Senate rules the vote was to have occurred before midnight Wednesday, but a Senate sergeant at arms unplugged the clock at the back of the Senate just before midnight.

By a 27-4 vote, senators voted to amend House Bill 4409 to include the provisions of Senate Bill 14, that was passed in April to address the looming crisis in the Texas Windstorm Insurance Association.

“This is our last hope to be able to work on this issue,” said state Sen. Mike Jackson, R-LaPorte, the Senate sponsor of the House legislation.

For nearly a half hour, during the debate on the issue, the Senate clock read 11:58.”

Our understanding is that the anti-consumer language is not included, but the version on the Web site has the bad language and struck the consumer protections. It is buried at page 47 of 84 of the pdf version.  We will keep those in Texas posted on the bill.

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The Texas legislature has its hands full this week with an omnibus biill regarding TWIA. Florida Governor Charlie Crist has to decide whether to veto various measures regarding insurance legislation. Additionally, three federal bills were just filed which may impact the landscape of how insurance is made available and sold.

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The politics of insurance is tough for consumer champions. The insurance lobby has many faces and methods of forcing its position. In Florida, the dirty campaign against those governmental officials who stand up to State Farm and the big insurance industry has begun in earnest. Florida has one of the most respected insurance commissioners in the country, Kevin McCarty. Mike Bennett, a relatively unknown state Senator, is attacking McCarty simply because McCarty voiced the opinion that Bennett’s insurance “choice” bill would hurt Floridians.

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I was reading a blog by Steve Piontech, Editor-in-Chief of the National Underwriter Life & Health. His remarks seemed to add another valid reason why federal charter and the choice of a sole federal regulator needs to be avoided:

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The legislative process has been called something akin to watching sausage being made. In Austin last night, it was very old and molded meat as the ingredient. The story was reported by the San Antonio Express News:

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This morning’s post, Proposed TWIA Law Smacks Hurricane Ike Claimants, deserves follow-up and some suggestions for action. I am no politician, but I encourage everybody to participate in our process of government. It is the American way, and I am convinced that many positive changes happen because some of us speak our minds about important matters.

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The Florida Consumer Action Network (FCAN) has urged Florida Governor Charlie Crist to veto recently passed legislation that would allow insurers to raise rates without approval by the Office of Insurance Regulation. FCAN is probably Florida’s largest consumer action group. The Bradenton Herald quoted foes of the legislation who refer to the bill as "the State Farm bailout bill." I agree.

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As I noted in a blog post last week, House Bill 853, legislation intended to exclude surplus lines insurance carriers from an entire Chapter of the Insurance Code, was poised to pass both chambers of the legislature -- with only the hope that time would run out before they could agree on the wording.

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Numerous newspaper articles have discussed this session’s bills which impact the insurance industry. The anti-consumer bill, which provides for deregulation of insurance rates, passed. I expect Governor Crist will veto that bill as was previously reported.

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Democratic Senator Jon Tester of Montana is standing up to the insurance industry, opposing the industry’s push for federal charter of the property and casualty industry. In an article in the National Underwriter, Tester noted that state regulation has worked regarding the insurance industry:

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Florida Insurance Commissioner Kevin McCarty is working tirelessly for fair treatment of insurance consumers. It is amusing that the Florida legislature may give into State Farm's bullying and even allow higher insurance rates, which McCarty says are unnecessary. Some of our legislators are pandering to State Farm and the Florida insurance industry by using the usual "word spin" games. Deregulating rates under the guise of "consumer choice" will simply lead to higher premiums.

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Richard Dietz, a former claims supervisor with Farmer's Insurance Group, has taken to the airwaves to confess the sins of his former employer, co-workers and himself. His video is being broadcast in the state of Washington in support of a consumer protection referendum which would provide financial penalties for insurers that wrongly delay or deny claims.

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I wrote about surplus lines insurance companies in an earlier post, Surplus Lines Insurers, Sinkholes, and the Law of Mars. I explained how an attorney in our firm, Donna DeVaney, was able to get a favorable ruling in a sinkhole case involving a surplus lines policy due to a recent Florida Supreme Court case, Essex Ins. Co. v. Zota, 985 So. 2d 1036 (Fla. 2008).

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Most insurance opponents find it amusing when I explain how many places I have been in a week. If they only knew how many matters I have "touched" in a day they would fully appreciate how hard I work to protect policyholders. This morning at breakfast, a Zurich attorney asked about my daily schedule and I responded as I normally do, that I am "busy." The truth is that I was up at 5:45 am, in Tampa, flew to Destin, Florida, and picked up a client which lead to strategy on her case, then on to New Orleans where I met with new potential clients, met with the Zurich counsel, went to a Condominium Conference, worked on the paperwork of a seven figure hotel settlement, etc.,---- I am in the "muck" of insurance disagreements and want to help, which is why you should listen to the following suggestions.

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Most of the time, I battle large corporate insurers in David vs. Goliath like battles. I find it amusing that State Farm's attorneys are struggling in this fight, given State Farm’s enormous size and power. Today, State Farm's lawyers, lead by the very able Mark Delegal, are lobbying Florida's leaders on a very anti-consumer bill. This bill would allow State Farm to charge whatever rate it wants. Florida Governor Charlie Crist is reportedly prepared to veto such legislation.

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Recently, Allstate has accused other insurers of investing in credit default swaps. Does Allstate have knowledge of insurers engaging in this illegal activity? Or are these allegations a facade for the new federal oversight that would place Allstate under control of the federal government. My view on this topic is pointed:

Allstate and other major insurers are seeking federal charter to avoid state consumer protection laws and to gain an economic advantage over other property and casualty insurers. The federal legislation offers no specified safeguards for consumers, and provides for the same inept federal regulation that allowed the collapse of our financial system.

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I was recently retained by a hotel management company regarding problems associated with their Hurricane Ike insurance claim. Yesterday, during an Examination Under Oath taken in that matter by Liberty Mutual Insurance Company, the CEO of the management company handed me an article indicating that the property and casualty insurance company had a profitable year, despite the economy and catastrophes such as Hurricane Ike. He had previously thought the insurer’s slow and low payments might be the result of economic difficulties. Even large corporate clients like the hotel wonder why they must hire an attorney just to get what the insurance company owes them.

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The April 6 Edition of BestWeek ran a story, Insurers Have Faith in 'Bad Faith' Victories, which indicates insurance companies are winning the legislative battle against consumer protection statutes. The story notes that the insurance industry's lobbying propaganda claims that consumer protection statutes make insurance more costly at a time when people can least afford it.

But how affordable is "cheap insurance" that does not pay or pay on time?

Insurers are using the premiums paid by their customers to sponsor pro-insurance industry laws that do not hold insurers accountable when they wrongly delay or deny payments. The same premiums pay for lobbyists to do everything they can to defeat proposed legislation that provides meaningful remedies to customers who have been harmed by an insurer's shoddy claims practices.

Last year, Washington passed laws that made it unlawful for insurers to "unreasonably" deny insurance claims, and allows treble damages when an insurer does so. The Washington Insurance Commissioner stated "the law is encouraging insurers to be more responsible."

What those insurers want are consumer protection laws with no teeth. They want illusory laws that mandate "good faith" claims handling without meaningful accountability. That type of law would be akin to prohibiting murder, but not giving the police the power to make an arrest.

Honest insurers and those that act in good faith should have no problem with strong consumer protection laws. Those companies already play by the rules. The only reason insurers would lobby against strong consumer protection laws is because they want to cheat their customers. This forces otherwise good and honest carriers into dishonest practices so they can compete. A legal system that fails to hold entities and people accountable for breaking rules is tantamount to a society without rules.

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If you love dealing with your group health insurance bills and claims, you will be overjoyed with the new legislation proposed in Congress allowing property insurance companies to apply for a Federal Charter. This proposed legislation is the most unfair and anti-consumer federal legislation filed in recent years.

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The Windstorm Insurance Network held a symposium last week in Houston. Tina Nicholson of our firm and Shannon O'Malley from the Dallas office of the insurance defense firm Zelle Hofman made a presentation regarding Texas Bad Faith Law. I met Shannon when Zelle Hofman was defending Factory Mutual in the Port of New Orleans litigation following Hurricane Katrina.

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(*Note:  This Guest Blog is written by Javier Delgado, an attorney with Merlin Law Group in the Houston, Texas office).

Texas Windstorm Insurance Association says you only have 30 days to appeal its determination of damage to your property! DO NOT RUSH TO APPEAL before you learn what TWIA is not telling you; you will give up valuable legal rights and remedies.

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Congratulations to Kevin McCarty and Chip Merlin, who were recently honored by the LexisNexis Insurance Law Center‘s Person of the Year Awards. Chip received Honorable Mention in the category of Policyholder Attorney of the Year. Explaining the basis for the award, the Insurance Law Center noted:

“Chip Merlin’s dedicated and ethical work on behalf of policyholders is a true measure of success that merits an honorable mention in this Policyholder Attorney category.”

Kevin M. McCarty, Florida’s Commissioner of Insurance Regulation, won the award for Regulator of the Year. As you might remember from previous blogs (A Fantastic Regulatory Settlement; State Farm's Fitness and Trustworthiness to Conduct Business Questioned), Chip predicted that McCarty would not cow to State Farm and other big insurers. This is one of the reasons Lexis chose to honor McCarty:

“Kevin McCarty’s impact on Florida and the nation’s insurance marketplace is undeniable. He has proven himself as a force to be reckoned with. In his steadfast role as “agitator in chief” of the property and casualty marketplace in the Sunshine State, he has irritated homeowners’ insurance companies for the benefit of consumers to the point where large carriers have threatened to exit the marketplace.”

You can read more in Julie Patel’s article in last Tuesday’s Sun Sentinel.

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We all know that the insurance industry is one of the biggest lobbyists around. However, as Brian Albright’s recent article, New legislation challenges ‘bad faith’ claims practices, notes, New Jersey, Connecticut and Montana are considering legislation that significantly improves consumers’ legal rights against insurers who act in bad faith. Colorado is considering legislation that could prohibit insurance companies from rewarding employees for making claims determinations against their customers. Let’s hope this is a trend, and that legislators throughout the country find the integrity to enact similar legislation.

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Mark Phillips recently posted a comment in Surplus Lines Insurers, Sinkholes, and the Law of Mars, which would probably terminate his employment as an adjuster for telling the truth if he were still an Independent Adjuster:

"I handled numerous loss adjustments for a South Florida MGA broker who had arranged his own "excess surplus lines" authority overseas. Due to this flexible "hand-shake" authority and with his own customized and approved manuscripted policy designs, he was actually controlling the underwriting data and policy issuance. He was bold and daring enough to "check off" certain boxes misrepresenting building characteristics and histories inaccurately on applications, so that, at time of loss investigation he could promptly deny coverage when it was noted in the adjusting routine that certain building events and maintenances had not occurred as were required to be validated in order to acquire the policy coverage and issuance. He could thus accurately void the contract on grounds of misrepresentation, and have the underwriting questionnaire in the file to back up the denial. His incentive was of course to sustain his flexible contract arrangement and limit his loss ratios, thus enriching his commission contingencies. Worth noting is that many of the insureds represented a class of Hispanic consumers who had no ability to know what was authentically being stated on their final application and were thus caught by surprise when struggling to communicate in English, back to me the adjuster, that they had not confirmed certain property realities that had been "checked off" on their application.

Another compromised policyholder left at the curb." 

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An article in the Insurance Journal, National Flood Insurance Program Set to Expire Tomorrow, caught my eye. I think the threat of expiration is political gamesmanship, as indicated in the piece: 

“John Prible, government affairs for the Independent Insurance Agents and Brokers of America, says the omnibus bill funding is currently being debated in the Senate but there's "a little game of chicken" happening between the House and Senate on any changes that may be made to the omnibus bill in the Senate. The debate could potentially derail the bill, he said.”

I wonder whether Mississippi Congressman Gene Taylor will try to use this opportunity to get the Multiple Peril Insurance Act of 2009, into law. I am not holding my breath, but stranger things have happened in the political arena lately. Taylor’s website has a summary of what he hopes his proposed legislation will accomplish: 

“The Multiple Peril Insurance Act would allow coastal homeowners to buy comprehensive insurance and know that hurricane damage will be covered without lengthy legal disputes over how much damage was caused by wind and how much was caused by flooding.

After Hurricane Katrina, insurance companies overbilled taxpayers and underpaid homeowners by blaming flooding for some damage that had been caused by hurricane winds and wind-driven debris.

The bill will reduce future property damage by requiring participating communities to adopt International Building Codes.”

I recommend Slabbed’s excellent article, HR 1264 - One policy. One premium. One claims adjuster. Protecting America’s home & business owner. Protecting America’s taxpayers, which explains Taylor’s Bill.

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Surplus lines insurance companies are a different breed of insurance cat. They are not admitted carriers in the state in which they do business. Thus, most states have consumer protection laws specifically regarding how surplus lines insurance carriers can do business.

Surplus lines carriers are very important to the insurance marketplace. They will often insure the risks many admitted carriers find too risky or novel. For example, when a property owner buys surplus flood insurance or a complex Difference in Conditions policy, it is often sold through the surplus lines market.

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State Farm's announcement to leave the Florida property insurance market has plenty of media attention. It is obvious that State Farm's view of its actions is far different than that of its customers.

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In Tampa, Super Bowl festivities abound. Parties, celebrities, and fancy dinners for all. My beautiful and too-good-for-me wife. should be with them, but she accompanied me to a quiet dinner with friends who took us to the Tampa Yacht Club.

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I really suck at politics. It is why I have not one, but two, lobbyists help me. Jon Moyle and Chris Floyd stick out in Tallahassee because they are two of the few lobbyists who are trying to help consumers. Most lobbyists are the "bad guys" from the consumer's standpoint, although insurance lobbyists create propaganda to convince consumers and politicians otherwise. I guess insurance company lobbyists are "sneaky bad guys" with a lot of money.

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