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

A controversial bill that would eliminate a state tool designed to keep property insurance rates in check was written for lawmakers by the insurance industry, the Herald-Tribune has learned.

 The bill includes a number of provisions argued for by private insurers to stop Citizens Property Insurance, the state-run carrier, from competing with them for business. It aims to keep Florida homeowners from flocking to Citizens and would force them to buy policies in the private market even when rates are higher and the carriers less stable. 

Authors of the draft bill initially told the Herald-Tribune the legislation introduced by Rep. Jim Boyd, a Bradenton insurance agent, and Sen. Alan Hays, an influential member of the Senate insurance committee, is nearly identical to what was drawn up in private by industry lobbyists. 

The insurance industry is very well organized and financed, and insurance lawyers play a prominent role in drafting such legislation for the insurance industry. A memo we recently obtained establishes this fact. It was addressed to Sam Miller, of the Florida Insurance Council, and contains American Strategic Insurance General Counsel’s proposed sinkhole legislation: 

Section 4. Sinkhole Tail Claim 

(1) Essential elements of a sinkhole tail claim are: 

            a.         “Structural Damage” to the insured property; and

            b.         Evidence that Structural Damage to the insured property was caused by covered “sinkhole activity”; and

c.         Proof the loss occurred during the policy or endorsement period. 

(2) A person may not report or file a sinkhole claim in the absence of a prima facie showing that the essential elements exist and are part of the proposed claim. The prima facie showing must include all of the following: 

a.         A clear and accurate sworn proof of loss establishing that the claim was a result of structural damage to the insured property;

b.         A clear and accurate sworn proof of loss identifying the components of the structure (i.e. foundation, walls, rafters, roof, etc.) damaged as a result of loss from the covered “sinkhole activity”;

c.         A clear and accurate sworn statement by the insured attesting to the date the damage that is the subject of the proposed claim was discovered;

d.         A clear and accurate sworn statement by a professional engineer as defined in section 627.706(2)(d) certifying that the structural damage to the insured property occurred during the policy or endorsement period as a result of sinkhole activity. 

The point is that when the insurance industry is writing the bills that become law without change by those who are elected to represent the people, many start to wonder who the Representatives and Senators are representing. Insurance companies cannot vote. They do not live, eat or breathe. Yet, they can be more influential that a Legislator’s constituents; many people work for these legal entities and carry out legal activities, such a lobbying for laws that may harm the people our Legislators are supposed to represent.

Pearce joins FIC from the American Insurance Association, where he served in Atlanta as vice president for the Southeast Region. Much of his work for AIA has been focused on legislative and regulatory issues here in Florida.

This will be Pearce¹s second tenure as FIC chief operating officer. He was FIC president from 1996 to 2002.

The Florida Insurance Council is the largest insurance trade association in the state of Florida, representing some 200 insurers...AIA is an active member in the Council.

Pearce serves on the Board of Directors for the Associated Industries of Florida (AIF)...

His prior experience includes...vice president of the Florida Association of Insurance Agents; and positions with the Independent Insurance Agents of America...

Mr. Pearce began his career in 1977 working on the House Insurance Committee of the Illinois General Assembly. He also worked for Allstate Insurance Company as a field Underwriting Manager. (emphasis added)

The reason that I emphasized Associated Industries of Florida is because I believe the insurance industry dominates and uses that lobbying organization as well. Pearce is chair of its insurance lobbying arm, which is known as the Financial Services Council. Its web page notes the following:

Ignoring the economic reality of Florida’s hurricane risk, the state has dramatically placed greater responsibility for hurricane losses previously covered by private insurance companies on the backs of taxpayers. In response to this risky proposition, Associated Industries of Florida formed the Financial Services Council (FSC) to address property insurance concerns, as well as other financial issues, and develop long-term, market-based solutions and public-policy recommendations on behalf of the business community.

The Council’s top priority will be developing public policy recommendations on property insurance and providing an opportunity for business leaders across the state to focus on key financial service issues facing Florida consumers and businesses...
...

In the near term, the Council will mainly focus on advocating for reforms in the property insurance arena so as to bring back a healthy private property insurance market in Florida -- returning Citizens to an insurer of last resort and returning Citizens’ assessment base to only residential insurance. (emphasis added)

From the policyholder's view and based upon the efforts and positions of Associated Industries' very able and experienced lobbyist, Gerald Wester, here is the Reader's Digest version of how policyholders should view the lobbying agenda and what a "healthy private insurance market" means:

1. Pass laws and regulations that allow insurers to charge as high a rate as they can.
2. Pass laws and regulations that reduce required benefits to policyholders.
3. Pass laws and regulations that reduce consumer protections from improper claims practices.

Based on the past several years’ legislative agenda of these organizations, this is what these organizations do, at the expense of insurance consumers. They try to achieve these anti-consumer goals by giving money to politicians that favor their positions, developing strategies that make these positions appear to be in the best interest of the public, meet with staff of the our political leaders and regulators to establish a personal relationship and explain these positions, and then draft the legislation for the politicians and provide "talking points" about why the legislation is needed. The people working on these projects also try to attack whoever is against the three items I listed in the agenda. I wonder who could be on that list?

There is nothing illegal about any of this. The lobbyists working for the insurance industry are bright and hardworking. I am certain they have convinced themselves that what they are doing is "good" for the general public or do not care because it is "good" for the people that sign their checks. They are professional lobbyists and public relations types trying to make laws and regulations that make Florida more profitable for their insurance clients.

Since there is no professional lobby for insurance consumers in Tallahassee, the people who buy insurance must rely upon the values and common sense of our politicians, their staff and the people getting paid to regulate the insurance industry to see through the insurance industry’s propaganda and spin. Consumers also have to rely upon the press and media to understand that the public relations strategies and tactics these individuals use are quite sophisticated and hide the true agenda. The press and media have to work harder to find the truth, and that is becoming ever more difficult as the professional press is dealing with financial turmoil.

It is important to know who is working for and supporting the insurance industry’s agenda. It is equally important to know which politicians support or are leaning towards the insurance industry’s agenda. If you look at the Associated Industries current home page, you can be sure that Alex Sink is not the Governor the insurance lobby wants.

With some of these political thoughts simmering in our minds on a hot Friday summer afternoon in Florida, how about this fun song:
 

The article does not surprise me and demonstrates that the insurance industry lobby is quite strong in Tallahassee. It noted in part:

A property insurance bill passed by the Florida Legislature this spring was scaled back and rewritten by industry lobbyists, new state e-mails show.

The bill, originally intended to crack down on companies that used a loophole in state law to pad profits, was largely rewritten by a lawyer working for the insurers -- at the behest of the state agency that regulates insurers, the e-mails show.

...

Records released last week show that in the final days of the session, the deputy commissioner in the Office of Insurance Regulation, Belinda Miller, asked industry insiders to draft language for the bill.

She approached several industry consultants, including Claude Mueller, an attorney and former state insurance regulator whose clients in the past year included property insurers who ran afoul of state solvency requirements. One of them, American Keystone, was ultimately shut down.

On April 5, the day before a Senate committee was scheduled to meet to consider the bill, Miller pressed the consultants to provide draft legislation. "Are you going to have language tonight?" she wrote in an e-mail to Mueller and a lobbyist at Meenan & Blank, a Tallahassee firm whose insurance clients include the Tower Hill group.
...

The draft bill that Mueller delivered three hours later contains much the same language lawmakers put into the bill, some of it verbatim.

The new language prevented regulators from seeing a company's actual financial books and instead allowed them to review only summary reports. Even those reports could be required only of companies in the worst financial shape.

The one key difference between Mueller's suggestion and what got written into the bill was what measure to use to determine financial weakness. (emphasis added)

While the article noted that Claude Mueller had ties to the Office of Insurance Regulation as a "former state insurance regulator," my impression was that much of the insurance industry's lobbying success came from another insurance regulator turned stellar insurance lobbyist, Timothy Meenan, whose law firm was cited in the article. His law firm biography sets out his significant experience with insurance regulators and his insurance clients:

...Mr. Meenan oversaw Florida's four billion-dollar State Treasury and three other divisions of the Florida Department of Insurance, including the Division of Risk Management. He also served for three years as the executive assistant to the Florida Insurance Commissioner, where he helped formulate and implement legislative and regulatory proposals for the Department.
...
Mr. Meenan's legal practice focuses on regulatory law before numerous state agencies, with an emphasis on insurance company and agent regulation. He has assisted insurers and other regulated entities to obtain licensure, has represented life and health insurers and health maintenance organizations with various regulatory problems, and has helped numerous property and casualty insurance companies resolve their disputes with the Florida Department of Financial Services, Office of Insurance Regulation.

If I owned an insurance company and wanted laws passed favoring the insurance industry, I would hire Tim Meenan as well. He is hardworking and an excellent attorney advocating on behalf of his clients. The problem is. there are a lot of attorneys in the full-time professional insurance lobby who are just as capable as Tim Meenan, but there are few representing the consumers, as I noted in Sean Shaw is a Refreshing and Intelligent Advocate for Floridians--We Deserve This Type of Representation.

My view is that Governor Crist should veto this bill, as expressed in Is the Proposed Property Insurance Bill Bad for the Average Florida Insurance Consumer? Still, reasonable minds could have a different opinion.

My hope for the future is that our legislators remember that, unlike insurers, consumers do not have a full time team of lobbyists. Insurance companies may have an extraordinary amount of financial and political power, but insurance companies are not voters. We should ask our legislators to remember that they swore to protect "we, the people" when confronted with the strategic and well thought out rhetoric from the insurance lobbyists -- before deciding what position they will take.

No matter what the fate of this year's insurance legislation, it has been a learning experience for me. I need to be a more effective advocate for insurance consumers in the future. I hate writing about insurance companies beating me at anything.

The article was more of a review, but this is what he wrote:

Are there ethical obligations to communicate the insurance industry’s legislative and lobbying positions to your clients? Should insurers and agents impose their political views on customers because they believe the changes are ultimately in the best interests of clients?

The majority of those responding to these questions see no ethical responsibility to communicate legislative positions to clients—although many think it is a good idea to do so. However, the majority also believe lobbying should be done only when the proposed changes directly benefit clients.
...

A good summary was provided by an agent from Massachusetts, who wrote that “lobbying is part of the American way to educate elected officials on the effects of pending legislation. I have had many legislators tell me they cannot possibly know all about the issues with which they deal. If we in the insurance business do not help explain the ramifications of pending legislation, who will?”

This agent added that “we better understand the problems that can be created or solved with regard to insurance issues. It is always better to be part of the solution than to have to deal with the results after the fact. Conveying information to customers and getting them involved is ethical. They can decide whether or not to get further involved.”

In review, most believe there is no ethical obligation to communicate lobbying efforts and legislative positions to customers. However, there is an ethical and professional obligation to improve public understanding of insurance.

In addition, lobbying—if conducted in the best interests of customers—is ethical, but it wouldn’t hurt to keep clients informed and give them full and complete reasoning for positions taken on pending legislation.

I do not believe that most insurance executives want to acknowledge Dr. Kensicki's last paragraph. My hunch is that he has a purpose in writing this article for an insurance industry magazine. Insurance executives should honestly explain to their customers what their lobbyists are doing --especially if the customers may consider the activities adverse to their interests.

The Florida Insurance Council provided a press release on it website that continued the insurance industry mantra:

The Florida Insurance Council shares concerns expressed by three Cabinet members today about unending claims from Hurricane Wilma and the pending 30 percent increase in a statewide surcharge on all Floridians. FIC today formally endorsed legislation (HB 1181, SB 2264) filed by Rep. Janet Long, D-St. Petersburg, and Sen. Mike Bennett, R-Bradenton, requiring hurricane claims to be filed within three years of landfall instead of five years as in current law.

"As Chief Financial Officer Alex Sink noted, three years is more than enough time for a homeowner to know if they have had damage from a hurricane," said Guy Marvin, President of the Florida Insurance Council. "We will work with Rep. Long and Sen, Bennett."

"We share concerns of SBA members that many of the more recent Wilma claims are illegitimate and involve inappropriate activities by public adjusters," Marvin said. "We share concerns that with the statewide assessment going up, millions of Floridians are paying more on their insurance because of improper claims by some homeowners and some public adjusters in south Florida."

My post, Policyholders and Public Adjusting Under Attack in the Florida House of Representatives, had a number of comments. I replied that I suggest many public adjusters take to heart and then make a commitment on behalf of themselves and most importantly, the policyholders they help:

Everybody reading this should remember a few important aspects about our democratic process, the need to participate, and the need to reform when criticism is warranted:

1. Most elected officials truly want to make the "world, country, state" a better place to live and work. They are not corrupt, but are truly well meaning people.

2. Politicians viewpoints on issues are often ignorant because nobody knows everything. If full-time insurance lobbyists show propaganda to these elected officials that only shows that policyholders are getting something they do not deserve and that public adjusters are fleecing insurance companies and policyholders, you do not need to be a genius to appreciate their impressions and viewpoints.

3. Many insurance companies require and train their employees and agents to speak with elected representatives about issues in such a way to slant impressions to elected representatives about the need for laws that protect insurance company interests over consumer interests. They often have these scripted out as talking points so that the propaganda actually makes it sound like the proposed law is in favor of the policyholder---usually through the promise of lower rates which then never materialize or do so at the cost of not having coverage.

4. Unless interested people take an active role to visit with, write, and support representatives that appreciate the truth and the need for policyholder protection, the full time lobyists and employees of the insurance industry will prevail with their message.

5. You have to participate if you want justice to work in a democracy because large corporate interests have already figured this out and spend massive money and time coordinating special interests by industry.

6. Public adjusters have made numerous changes in the law and have made more suggestions for improving their trade and preventing abuses by some. This reform within the public adjuster trade through leaders in FAPIA and NAPIA needs to be explained and continue.

7. Show up and support representatives that appreciate the consumer side of insurance. You need to encourage and provide financial support to consumer organizations and FAPIA's legislative efforts, including showing up next Tuesday for Frank Artiles in Coral Gables.

8. If you want justice, you cannot just sit back and expect others to do it all for you. You have to work at it with your time and money. Make a commitment and stick to it. If it is important enough, make a big commitment and encourage others. One person can make a difference.

9. Do not get discouraged. I have visited with and provided information to various representatives for a number of years. Sometimes, I have felt like it is just me, a few lobbyists I have personally hired because I have to work on my cases, and just a handful of others in Tallahassee trying to push for laws that favor consumers and explaining the important role of public adjusters. I feel as if I have wasted a significant amount of money and time while some other colleagues simply do nothing and provide no support. And, I still keep at it.

In contrast, the insurance lobbying effort is massive, professional, and full time. They can outspend and provide greater numbers of individuals in their efforts.

And, policyholders cannot give up because the alternative is unjust laws. Those well meaning political representatives understand the enormous wealth and resources of corporations. Contrary to popular rhetoric and demeaning criticism, most elected representatives are not "paid off" or "corrupt." They will listen if you can present a credible and persuasive impression that is based on genuine and authentic truth of an issue.

Would the insurance companies and their lobbyists ever be honest and completely transparent regarding their legislative agendas, motives, and goals? Could you imagine if our elected representatives demanded honesty as a prerequisite to legislation? Given that some are mutual insurance companies and owned by the policyholders (like State Farm), you would think they would never have a legislative agenda that would harm consumers by raising rates or avoiding consumer protection statutes.

So, why not require insurance companies to show their internal records regarding their motives in influencing legislation? After all, insurance is a business involving the "public trust."

After some reflection on these matters, I owe an apology and correction to some in my prior Blogs. My typical experience with most elected officials on a personal basis is that they want to help the people they represent.

I probably slammed many well meaning public servants too harshly. That deserves correction.

Insurance seems simple, but is very complex. I can appreciate some legislators simply not understanding the full impact of proposed bills and voting for laws they think are good but in reality, harm their constituents.

For obvious reasons, the insurance industry does not fully explain the impact of their proposed laws. Sometimes, I can tell in discussions that insurance lobbyists do not understand the full implications of what they do and say. They are just trying to make a living selling the company line.

It is hard for a person like me to keep up with legislation as it is being made. I have a full time job helping customers of insurance companies get paid what they deserve. I help run a very busy law practice. My expertise and understanding of these issues goes far beyond most legislators because I am involved with insurance consumers and these issues on a daily basis. It is my life’s work.

I feel for those trying to be a good representative and making decisions without fully appreciating the legal subtleties before them. I should cut them some leeway.

Insurance is one of the most important social products mankind has developed. There are thousands of knowledgeable agents peddling these valuable products which provide us with financial security and the peace of mind that if something catastrophic happens, a financial safety blanket is there. Businesses and people want to or are obligated to purchase insurance. While I know that many joke about avoiding their insurance agents, their services and products are significant investments all of us should make.

This Florida legislative session still leaves me troubled. I have difficulty understanding what so many of these hardworking, well-meaning representatives were thinking when voting for unregulated rates. Unregulated rates will result in rates higher than what the regulators would permit-even though the regulated rates give insurers a fair profit on their investment.

It sounds so stupid. Can you imagine this scenario:

Edna, I am really excited about this new law. The old fair rate approved by the Office of Insurance Regulation has been wiped off the books by our genius Florida legislators. Next year, we will get the same insurance, and it will cost as much as our carrier wants to charge us. This is because our insurance carrier no longer has to worry about applying for a fair rate.

The Palm Beach Post hit the nail on the head with Monday's editorial calling on Governor Crist to veto this awful legislation.

Additionally, I am going to represent a number of very disgruntled surplus lines policyholders. Many of them are business owners, and I will point to the political guys that damned them this session. I predict the new surplus lines law is so poorly conceived that even the surplus lines carriers and admitted carriers will be joining policyholders asking for it to be modified.

It is not fair that surplus lines carriers are free from all Chapter 627 consumer protections while admitted carriers have to comply. This law gives the surplus lines carriers a market advantage over the admitted carriers in Florida. Agents are going to find ways to get clients looking for "cheap" insurance into the surplus lines market. Less coverage will be offered, but at less price. Why the admitted carriers with approved forms and rates allowed that to happen is beyond me.

So, with the prospect of more legislative bargaining next year, maybe these insurance lobbyists were just creating job security. But, at what cost to the public?