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.