A Comprehensive Insurance Bill Analysis from Ross at Brightway…..

My initial impression is that this statute is a large step in the right direction, as it eliminates one-way attorney fees and assignment of benefits (AOB), though we are expecting that it will take approximately 18-24 months until the full benefits of this law are realized. The one aspect of this law that will present a challenge is the requirement that all Citizens policyholders obtain flood insurance. While this does present an opportunity to provide more Floridians with flood coverage, the aggressive timeline for consumers in designated flood zones means that certain customers will likely be looking to leave Citizens before the market fully stabilizes and affordable private options are available.

Below is a summary of the statute from the FAIA.

From the FAIA:

Reinsurance

Senate Bill 2A creates the Florida Optional Reinsurance Assistance (FORA) Program within the Florida Hurricane Catastrophe Fund (FHCF). The FORA Program provides four layers of optional reinsurance at “reasonable rates” (50–65 percent rate online), starting at the FHCF attachment point and proceeding downward.

Claims Filing Deadline

Senate Bill 2A reduces the claims filing deadline from two years to one year of the date of loss for new or reopened claims. The bills provide 18 months for supplemental claims.

Office of Insurance Regulation (OIR) Regulations

Senate Bill 2A provides additional authority to the OIR to subject any authorized insurer to a market conduct examination.

Insurance Company Duties

Senate Bill 2A amends the prompt-pay statutes to ensure timely claims handling. This is accomplished by:

• Reducing the time that an insurer has to make a determination of coverage from 90 to 60 days;
• Reducing the time for insurers to review and acknowledge a claim communication from 14 to seven days;
• Reducing the time for an insurer to begin an investigation from 14 to seven days;
• Reducing the time for an insurer to conduct a physical examination from 45 to 30 days; and,
• Requiring insurers to send any adjuster’s report estimating the loss to the policyholder within seven days after it’s created.

Attorney Fees

Senate Bill 2A repeals the one-way attorney fee statutes for litigated property (commercial and personal lines) insurance claims. The bill also provides other legal reforms addressing abusive litigation tactics.

Assignment of Benefits

Senate Bill 2A prohibits the use of assignment of benefits, in whole or in part, of any post-loss insurance benefit under any property (commercial and personal lines) insurance policy issued on or after January 1, 2023.

Citizens Reforms

Senate Bill 2A includes several provisions addressing the growth and exposure of Citizens. Additionally, SB 2A provides a phased-in flood requirement for Citizens’ policyholders. These provisions include:

• Increasing the eligibility threshold for Citizens’ renewal personal lines policyholders.
  • Citizens’ policyholders are ineligible for Citizens’ coverage at renewal upon receiving an offer of comparable coverage from an authorized insurer for a premium that is not more than 20 percent greater than the Citizens’ renewal premium.
• Increasing the eligibility threshold for Citizens’ new policies for commercial residential coverage from 15 to 20 percent. The new business threshold is consistent with the current threshold for new policies of personal residential coverage.
• Requiring that Citizens’ rate be non-competitive with the approved rates charged in the admitted market pursuant to the existing glide path.
• Removing the glide path rate limitation for any new or renewal personal lines policy for non-primary residences written on or after November 1, 2023.
  • The rate for these policies must be no more than 50 percent above and no less than the established rate for Citizens that was in effect one year before the date of the application.
  • The bill defines primary residence as the dwelling that is the policyholder’s primary home or is a rental property that is the primary home of the tenant and which the policyholder or tenant occupies for more than nine months of each year.
• Requiring applicants or insureds of Citizens for personal lines residential coverage to obtain flood insurance for new policies starting in March of 2023. The phased-in flood requirement establishes:
  • For risks located in areas designated by the Federal Emergency Management Agency as special flood hazard areas, flood insurance must be secured for new Citizens policies with an effective date on or after April 1, 2023, and at renewal for Citizens policies that renew on or after July 1, 2023.
  • For all other risks, the requirement to obtain flood insurance at policy issuance or renewal is effective:
    • March 1, 2024, for policies insuring property to a limit of $600,000 or more.
    • March 1, 2025, for policies insuring property to a limit of $500,000 or more.
    • March 1, 2026, for policies insuring property to a limit of $400,000 or more.
    • March 1, 2027, for all other policies.

Continuation of Coverage

At the request of FAIA, the Legislature included a provision that provides the insurance commissioner discretion to extend the 30-day cancellation period of policies of an insolvent insurer to 45 days to provide more time for agents to replace coverage for consumers.