Insurance company executives were thrilled that Rick Scott won the Florida Governor’s office. I can appreciate that any politician may run on a platform that, upon further reflection, seems absurd or not what they meant. From my impression, many voted for Scott because they were fed up with the status quo. Floridians may be even more upset if they learn that their newly elected governor is supporting a plan which will result in higher property insurance rates and laws that would provide immunity to insurers who treat their customers in bad faith.

Here is what Rick Scott has to say about the property insurance marketplace:

Florida’s current property insurance system is broken and is putting us all at risk. Driving out solvent private insurers from our state and forcing homeowners into a government run company that is not financially sound is a huge gamble that has put homeowners and taxpayers at risk. Politics as usual has driven out private insurers and placed Florida in a position that, if hit by one big hurricane, could bankrupt all insurers, further damaging – perhaps beyond repair – our economy. I want to open the property insurance market back up in Florida so that financially solvent private insurers can compete, allowing consumers to choose what they want from a free market. I want to ensure that Floridians have that choice and not force them into a system that may ultimately not be there to protect them.

This means that Rick Scott supports allowing insurance companies to charge as high a price as possible. The problem is that history has proven insurance markets are not regulated or truly "free,"  insurance companies had times of boom followed by bust. It did not work over a hundred years ago, and there has been no academic study to suggest a different result today. While Americans love the concept of free markets, we have all learned in basic economic classes and from experience that many poorly regulated markets have destroyed commmunities and financial stability.

The insurance industry lobby obviously wrote Rick Scott’s program to change bad faith laws:

In Florida, individuals can sue their insurer if they believe the insurer acted fraudulently or in “bad faith” when defending or settling a claim or if their insurance company’s actions resulted in additional damages and legal costs.

The law is intended to encourage insurers to behave responsibly by making them liable for the financial damage that is caused by their breach of good faith duties. It is important to retain a system which gives affected individuals access to the courts. However, the application of the bad faith law’s by Florida courts have allowed these claims to be brought by policyholders and third party plaintiffs who are not insured by the company. As a result, Florida’s bad faith laws now serve to expose perceived deep pockets to unexpected and remotely connected parties to an insurance contract for coverage, which necessitates higher premiums and costs for all Florida consumers and businesses. Plaintiffs’ lawyers can abuse the current law by making unreasonable demands on payment, insisting on unattainable time lines, vaguely describing damaged property or refusing to settle even while taking settlement proceeds. Reforms should include:

  • Limiting the ability for parties to bring a bad faith cause of action to a right of policyholders and not one that extends to third parties.

  • Applying logical and well-defined time frames within which an insurer must be responsive to a party before it is found to have acted in bad faith.

  • Establishing time frames to give insurance companies a reasonable opportunity to investigate a claim before making a settlement decision.

  • Defining reasonable standards as to what constitutes bad faith on the part of an insurer.

By establishing these common sense standards, Florida’s bad faith law will be good news for Florida consumers. Such reforms will continue to protect them by providing some well-defined guidelines for insurers that will help eliminate some of the factors responsible for higher insurance costs.

My impression is that he is referring mostly to is third party bad faith cases. Still, the proposed laws do nothing for the insurance consumers and allow insurace companies to benefit from dishonest and wrongful conduct by eliminating the only true deterrent. Further, since most property insurance policies also incude liability coverage, these change in laws can impact consumers of insurance by making them financially liable for an insurer’s otherwise wrongful conduct. The insurance industry will now try to re-write what "unreasonable" conduct is through the legislature to provide immunity to insurers that delay, deny and don’t pay legitimate claims.

Rick Scott also appears to take the insurance industry’s postition regarding sinkhole coverage and claims:

Sinkhole claims are currently a major cost driver in insurance rates as they are the most costly of claims filed. Many sinkhole claims being paid involve minor cracks in a wall or floor of a home, not an actual hole. The current claims process for sinkholes is ineffective and riddled with abuse. Presently, for an insurance company to reject a sinkhole claim, an expert must verify with 100% certainty that a sinkhole did not cause the damage. There must be structural damage for an insurance company to be required to pay a claim, however, “structural damage” is not currently defined in state law.

According to Florida’s own Insurance Commissioner, sinkholes are one of the top 5 cost drivers causing huge financial losses in the property insurance market. Despite the fact that they are the most costly of all claims filed, a recent review indicated that only 27% of policyholders with claims paid as a result of a ‘sinkhole’ actually had repairs made to their property. Since 2007, Citizens has paid $247 million in sinkhole claims and has reserved an additional $106 million to settle others. Unless we change this claims process, these numbers will continue to rise, costing everyone. The $715 million in bonds recently approved to be issued were largely a result of these sinkhole claims.

As Governor, I will promote policies to reduce the abuse and fraud that is driving our insurance costs up by proposing an objective measure of sinkhole damage and defining structural damage.

I seriously doubt many read Rick Scott’s 7-7-7 Plan The Blueprint to Secure our Economic Future: Insurance & Tort Reform before the election. His views mimic those from the insurance industry. I am certain many voted for Scott merely because they were voting against Sink and felt like anybody new was better than a currently elected official. The problem is that "anything new" or "anybody different" does not lead to a better government or better laws. Time will tell, but I predict this governor will support the insurance industry view of what Florida’s insurance laws should be rather than protect Florida’s insurance consumers and Florida businesses.

  • Insurance Veteran

    Although I firmly support an insureds right to full policy benefit when a claim is presented I feel that certain unscrupulous Players have led many to believe that it’s open season on insurers. As the owner of a Florida based independent adjusting firm I see examples of the “I won the lottery mentality” when handling claims. The present system isn’t working. Sometimes change is needed more than welcomed.

  • Sean Shaw

    Chip, I could not have said it any better. This is a very scary plan for Florida’s insurance consumers and those who advocate on their behalf.

  • Mark Cram

    It seems to me that the present use of the CRN, statues and time allowances covers the bullet points 2,3 and 4.

  • Insurance Veteran,

    Thanks for your viewpoint.

    My perception is from the consumer’s point of view. Assuming that you have a legitimate insurance claim, why shouldn’t the insurer pay for that claim fully, promptly and so that all benefits afforded are provided as quickly as possible?

    Even with a legitimate third party claim, why should insurers be allowed to delay or deny that claim knowing that the only response is lengthy and costly litigation to obtain fair payment?

    And to be fair, I have heard of “gamesmanship” where adjusters did their best but simply could not get a third party claim settled. Thereafter, they were then sued for “bad faith.”

    The “lottery” from the consumer’s standpoint is where the insurer does not settle a claim and an excess judgment for potentially millions and financial disaster befalls the business or consumer.

  • Sean,

    Especially coming from a bright Princeton graduate, thanks for the compliment.

    It is scary because history has demonstrated that this proposed plan has not worked and made the insurance situation worse. Most politicians are not experts in insurance history nor appreciate why a “free market” with limited consumer protection has caused severe financial catastrophe. To go back and recreate a system that has not worked and caused harm in the past is insane.

  • E.J.Rega

    I think both Candidates were in bed with the Carriers. Perhaps Scotty boy will be remembered for what he acomplishes and be judged by the Floridian Public..

    In Four years in office, Floridians will experience a lot of suffering, Too Bad we could not produce a better candidate..

    Let us lean on our newly elected Senate and Congressional people who were put there to do a better job for the people!!

  • Chip, You said it well. The Gov and the Legislature have a problem though. Letting everyone’s insurance premiums double for the sake of their ideology won’t be popular with the voters. Not at all. I don’t think they can do their radical deregulation plan.

    Instead, I think they’ll ask for “flex rates” again, which means they will raise rates 10% a year forever plus the tort “reform” and bad faith “reform” you mention. Then we’ll see how or if the insurance market responds as they predict. And we’ll see how consumers respond to losing their rights.

    Unfortunately, the number of voters that need to exercise their rights because of bad behavior by their insurance company is small. Most people think it won’t happen to them. But wait till the bad faith barrier is lifted, and getting a settlement will be a thing of the past.

    Other “loser pays” proposals will also be discussed. If something like that passes, it will be very hard to get an attorney and corporations that injure or damage consumers would be off the hook in many cases.

  • Ed,

    A number of people have the same impression regarding Alex Sink. I was amazed to hear it because Rick Scott’s platform was not secret. I simply think people have not studied the situation.

    A number of public adjusters were thrilled that Alex Sink lost. Maybe had they understood where Rick Scott stood on consumer issues they would have behaved and voted differently. When it came to insurance issues, only one candidate had a platform close to the consumers. It was not Rick Scott.

    Now, having said that, I wish the Governor elect and all our new leaders luck and enlightennment. Hopefully, he is intellectually honest and will change positions that were based on the wrong premise.

    Human nature being what it is, most people refuse to accept reality and admit mistakes–even if it results in stupid behavior. I pray and hope Rick Scott is strong enough and bright enought not to fall into that trap.

    Thanks for taking the time to comment. As I said, I think quite a few people share your view.

  • Alabama Adjuster

    It will be interesting to see what a man, whom previously was behind one of the largest insurance fraud schemes, will do to reduce so called fraud. I thought we all had a procedure process to go through to get claims paid. The carriers have the option to deny coverage on a loss and quote the specfic language that applies.

    The appraisal provision contains a procedural process in which a third party makes a decision. It’s been my experience the thrid party [umpire] is typically a highly experienced insurance adjuster and has worked for many years for the insurance companies. I have never received a public adjuster as an umpire.

    How do we create sinkhole fraud? I thought we needed to prove it through a neutral engineer. I have yet to see a public adjuster dig a 20 by 30 hole under their clients house and then have them call their insurance company.

    My question is “Where is the fraud?”. Just because the insurance companies don’t like the outcome, doesn’t mean its fraud.

    Recently, I do not even disclose that I am a public adjuster to the insurance companies. I feel like the minute they hear “Public Adjuster”, they prejudge the claim as inflated or fraudlent, and its unfair to my client. If I call in a new claim to Citizens, I feel they go to as far as asking me “What kind or underwear were you wearing at the time you inspected?”

    I do not know what he is going do, but it is not going to be helpfull. Maybe he should look to the insurance companies litigation expenses

  • Alabama Adjuster,

    Thanks for the comment. I had not considered the issue raised in your first sentence.

    I often think that many insurance lobbyists overplay the amount of insurance fraud in public to gain sympathy from politicians and the media. Insurance fraud is wrong no matter what. Yet, by making up the amount of it going on, it can be used by propagandists to justify whatever insurance industry legislation is needed.

  • Bill,

    Thanks for the kind words. Your organization has its work cut out for it.

    Good luck.

  • Alabama Adjuster

    Chip,

    I think Artiles should have the legislature re-write

    Further, I wonder what Rick Scott would do if the foundation of his house began cracking; filed a claim with is insurance provider; the claim was looked at as fraud; the insurer delayed and eventually denied the claim; and then sent him a 50% premium increase. Later his house became deemed unsafe by the city and he had to move. Eventually foreclosed on the property and it ruined his life for the next 10 years. This seems ridiculous, but I see these kind of scenarios all of the time. It wouldn’t happen to Scott because he already received his insurance money in the form of Medicare payments which will last him his whole life. It typically happens to the poorest people of this country.

  • Jeremy Tyler

    Every economist I have read has differentiated between traditional markets for goods and services, and economic systems. They all agree that the two are different. Free markets work and are ideal for goods and services, but economic systems, like banking and insurance, must be regulated to remain stable. If an economic system collapses, it has the power to bring down even the most efficient market for goods and services.

  • SHIRLEY HEFLIN

    Aside from politics, I believe Mr. Scott gets kudos for obtaining his goal in becoming Florida’s Governor! So we have a businessman at the helm now, I think it’s great. It would not matter who was elected, they could not make 100% of the population happy 100% of the time.

    SHIRLEY HEFLIN

  • Chip Merlin

    Shirley,

    Rick Scott is a lawyer. He became involved in investment banking and embroiled with allegations of insurance fraud.

    Alex Sink was the business person. She was also a one term politician.

    I hope Rick Scott becomes a great leader for the people. I wish him God’s speed and enlightenment.

    He needs to hear from supporters like you, but you should read about his background. By doing so, you may find his ear and help steer the best course for Florida.

  • Theresa L. Mancini

    I would like to express my viewpoint related to “scheme to defraud” the insurance industry including Public Adjusters, Attorney’s, Insurance Transactions, Insurance Policy, Claims and Application Fraud. Including any person who knowingly and willfully assists in a conspiracy with the intent to deceive.

    I have become the victim of the legal system, unable to capitalize on the laws dealing with Identity Theft, C.L.U.E. Report -Comprehesive Loss Underwriting Exchange or CLUE database and report provides information to insurance companies and to consumer (by request) regarding the insurance claims filed and ISO Report related to a hurricane insurance claim in which I did NOT file.

    I have suffered significant financial ramifications (past, current, future) of the pitfalls of the legal system stacked against me.

    Being forced to become involved in expensive litigation with uncertain outcomes and potentially costly settlements.

    I respectfully requested the Florida Department of Financial Services (DFS) to initiate an investigation.
    They did not offer the quality of assistance as claimed to be offer to the people of Florida.

    I complained to the state Office of Insurance Regulations, a division of the Department of Financial Services.
    Contacted Barry K. Lanier, FLMI, CLU, Chief Bureau of Investigation.

    Hundreds of complaints like mine fill the files of the Office of Insurance Regulation of unscrupulous business practices.

    I have contacted state officials of my issues “I got basically no HELP from the State of Florida.

    The House Banking and Insurance Subcommittee are deluged with facts and figures showing Florida dubiously near the top ranks in the nation when it comes to the severity of FRAUDULENT claims.

    It’s the state’s duty, however, to supervise and regulate.

    Perhaps Chief Financial Office Jeff Atwater and newly elected Gov. Rick Scott will contact me